Registration No. 2-93177
File No. 811-4108
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. 31 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
AMENDMENT NO. 27 / X /
OPPENHEIMER VARIABLE ACCOUNT FUNDS
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
(Address of Principal Executive Offices)
303-768-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On _______________, pursuant to
paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / On __________________, pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ X / On May 1, 1998, pursuant to paragraph
(a)(2)
of Rule 485
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FORM N-1A
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
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1 Front Cover Page
2 Overview of the Funds
3 Financial Highlights; Performance of the Funds
4 Front Cover Page; How the Funds are Managed--
Organization and History; Investment Objectives and
Policies; Investment Restrictions
5 How the Funds are Managed; Expenses; Back Cover
5A Performance of the Funds
6 How the Funds are Managed - Organization and History;
The Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objectives and Policies
8 How to Sell Shares
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Funds are Managed--Trustees and Officers of
the Funds
15 How the Funds are Managed-- Major Shareholders
16 How the Funds are Managed
17 Brokerage Policies of the Funds
18 Additional Information About the Funds
19 Your Investment Account - How to Buy Shares; How to
Sell Shares
20 Dividends, Capital Gains and Taxes
21 How the Funds are Managed; Brokerage Policies of the
Funds
22 Performance of the Funds
23 Financial Statements
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* Not applicable or negative answer.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Prospectus dated May 1, 1998
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end
investment company consisting of ten separate funds (collectively, the "Funds"):
OPPENHEIMER MONEY FUND ("Money Fund") seeks the maximum current income from
investments in "money market" securities consistent with low capital risk and
the maintenance of liquidity. An investment in Money Fund is neither insured nor
guaranteed by the U.S. Government. While Money Fund seeks to maintain a stable
net asset value of $1.00 per share, there can be no assurance that it will be
able to do so.
OPPENHEIMER HIGH INCOME FUND ("High Income Fund") seeks a high level of current
income from investment in high yield fixed-income securities. High Income Fund's
investments include unrated securities or high risk securities in the lower
rating categories, commonly known as "junk bonds," which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
securities.
OPPENHEIMER BOND FUND ("Bond Fund") primarily seeks a high level of current
income . Secondarily, this Fund seeks capital growth when consistent with its
primary objective. Bond Fund will, under normal market conditions, invest at
least 65% of its total assets in investment grade debt securities.
OPPENHEIMER STRATEGIC BOND FUND ("Strategic Bond Fund") seeks a high level of
current income principally derived from interest on debt securities and seeks to
enhance such income by writing covered call options on debt securities. The Fund
intends to invest principally in: (i) foreign government and corporate debt
securities, (ii) U.S. Government securities, and (iii) lower-rated high yield
domestic debt securities, commonly known as "junk bonds", which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
securities. Current income is not an objective.
OPPENHEIMER AGGRESSIVE GROWTH FUND ("Aggressive Growth Fund") seeks to achieve
capital appreciation by investing in "growth-type" companies. Prior to May 1,
1998, this Fund was named Oppenheimer Capital Appreciation Fund.
OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital appreciation by
investing in securities of well-known established companies.
OPPENHEIMER SMALL CAP GROWTH FUND ("Small Cap Growth Fund") seeks capital
appreciation. Current income is not an objective. In seeking its objective, the
Fund emphasizes investments in securities of "growth-type" companies with market
capitalization less than $1 billion, including common stocks, preferred stocks,
convertible securities, rights, warrants and options, in proportions which may
vary from time to time.
OPPENHEIMER GLOBAL SECURITIES FUND ("Global Securities Fund") seeks long-term
capital appreciation by investing a substantial portion of its assets in
securities of foreign issuers, "growth-type" companies, cyclical industries and
special situations which are considered to have appreciation possibilities, but
which may be considered to be speculative.
OPPENHEIMER MULTIPLE STRATEGIES FUND ("Multiple Strategies Fund") seeks a total
investment return (which includes current income and capital appreciation in the
value of its shares) from investments in common stocks and other equity
securities, bonds and other debt securities, and "money market" securities.
OPPENHEIMER GROWTH & INCOME FUND ("Growth & Income Fund") seeks a high total
return (which includes growth in the value of its shares as well as current
income) from equity and debt securities. From time to time this Fund may focus
on small to medium capitalization common stocks, bonds and convertible
securities.
Shares of the Funds are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts (collectively, the "Accounts"). The Accounts invest in shares
of one or more of the Funds in accordance with allocation instructions received
from Account owners. Such allocation rights are further described in the
accompanying Account Prospectus. Shares are redeemed to the extent necessary to
provide benefits under an Account.
This Prospectus explains concisely what you should know before investing
in the Trust and the Funds. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the Funds in
the May 1, 1998 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Funds' 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).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
About the Funds
Overview of the Funds
Financial Highlights
Investment Objectives and Policies
How the Funds are Managed
Performance of the Funds
About Your Account
How to Buy Shares
How to Sell Shares
Dividends, Capital Gains and Taxes
Appendix A: Description of Terms
Appendix B: Description of Securities Ratings
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ABOUT THE FUNDS
Overview of the Funds
Some of the important facts about the Funds 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.
o What Are the Funds' Investment Objectives?
Money Fund's investment objective is to seek maximum current income from
investments in "money market" securities consistent with low capital risk and
the maintenance of liquidity. High Income Fund's investment objective is to seek
a high level of current income from investment in high yield fixed-income
securities. Bond Fund's investment objective is to seek a high level of current
income . As a secondary investment objective, Bond Fund seeks capital growth
when consistent with its primary objective. Bond Fund invests mainly in
investment grade debt securities. Strategic Bond Fund's investment objective is
to seek a high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call options on
debt securities. Aggressive Growth Fund's investment objective is to achieve
capital appreciation by investing in "growth-type" companies. Growth Fund's
investment objective is to seek to achieve capital appreciation by investing in
securities of well-known established companies. Small Cap Growth Fund's
investment objective is to seek capital appreciation from investments in
growth-type companies with market capitalization less than $1 billion. Global
Securities Fund's investment objective is to seek long-term capital appreciation
by investing a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which are
considered to have appreciation possibilities. Multiple Strategies Fund's
investment objective is to seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other debt
securities, and "money market" securities. Growth & Income Fund's investment
objective is to seek a total return (which includes growth in the value of its
shares as well as current income) from equity and debt securities.
o What Do the Funds Invest In? To seek their respective investment
objectives, the Funds invest as follows. Money Fund primarily invests in "money
market" securities. High Income Fund primarily invests in high yield
fixed-income securities, including unrated securities or high risk securities in
the lower rating categories, commonly known as "junk bonds." Bond Fund will,
under normal market conditions, invest at least 65% of its total assets in
investment grade debt securities. Strategic Bond Fund primarily invests in
foreign government and corporate debt securities, U.S. Government securities,
lower-rated high yield domestic debt securities, commonly known as "junk bonds."
These investments are more fully explained for each Fund in "Investment
Objectives and Policies," starting on page ___. Aggressive Growth Fund primarily
invests in "growth-type" companies. Growth Fund primarily invests in securities
of well-known established companies. Small Cap Growth Fund primarily invests in
securities of "growth-type" companies with market capitalization less than $1
billion. Global Securities Fund primarily invests in securities of foreign
issuers, "growth-type" companies, cyclical industries and special situations.
Multiple Strategies Fund primarily invests in common stocks and other equity
securities, bonds and other debt securities, and "money market" securities.
Growth & Income Fund invests primarily in equity and debt securities and focuses
from time to time on small to medium capitalization companies.
o Who Manages the Funds? The Funds' investment adviser is OppenheimerFunds,
Inc. (the "Manager"), which (including subsidiaries) advises investment company
portfolios having over $__ billion in assets as of March 31, 1998. Each Fund's
portfolio manager is primarily responsible for the selection of securities of
that Fund. The portfolio managers are as follows: Money Fund, Dorothy Warmack;
High Income , Thomas P. Reedy;
Bond Fund, Multiple Strategies Fund and Strategic Bond Fund, David Negri
(joined by Richard Rubinstein for Multiple Strategies Fund and by Arthur
Steinmetz for Strategic Bond Fund);
Aggressive Growth Fund, Paul LaRocco;
Growth Fund, Jane Putnam;
Small Cap Growth Fund, Jay W. Tracey III and Alan Gilston;
Global Securities Fund, William Wilby; and
Growth & Income Fund, Robert J. Milnamow and Michael S. Levine.
The Manager is paid an advisory fee by each Fund, based on its assets. The
Trust's Board of Trustees, elected by shareholders, oversees the investment
adviser and the portfolio manager. Please refer to "How The Funds Are Managed,"
starting on page ____ for more information about the Manager and its fees.
o How Risky Are The Funds? While different types of investments have risks
that differ in type and magnitude, all investments carry risk to some degree.
Changes in overall market movements or interest rates, or factors affecting a
particular industry or issuer, can affect the value of the Funds' investments
and their price per share. Equity investments are generally subject to a number
of risks including the risk that values will fluctuate as a result of changing
expectations for the economy and individual issuers, and stocks which are small
to medium size in capitalization may fluctuate more than large capitalization
stocks. For both equity and income investments, foreign investments are subject
to the risk of adverse currency fluctuation and additional risks and expenses in
comparison to domestic investments. In comparing levels of risk among the funds
that invest to some degree in equities, Growth Fund is most conservative,
followed by Multiple Strategies Fund, Growth & Income Fund, Aggressive Growth
Fund, Small Cap Growth Fund and Global Securities Fund. Fixed-income investments
are generally subject to the risk that values will fluctuate with interest rates
and inflation, with lower-rated fixed-income investments being subject to a
greater risk that the issuer will default in its interest or principal payment
obligations. In comparing levels of risk among the fixed-income funds, Bond Fund
is most conservative, followed by Strategic Bond Fund and High Income Fund.
Money Fund is the most conservative of all ten Funds in that Money Fund intends
to maintain a stable net asset value, although there is no assurance that it
will be able to do so.
o How Can I Buy , Sell or Exchange Shares? Shares of each Fund are offered
for purchase by Accounts as an investment medium for variable life insurance
policies and variable annuity contracts and other insurance company separate
accounts. Account owners should refer to the accompanying Account Prospectus on
how to buy , sell or exchange shares of the Funds.
o How Have the Funds Performed? Money Fund, High Income Fund, Bond Fund and
Strategic Bond Fund measure their performance by quoting their yields. All of
the Funds with the exception of Money Fund may measure their performance by
quoting 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 performance of all the Funds
except Money Fund can also be compared to broad market indices, which we have
done starting on page ___. Please remember that past performance does not
guarantee future results.
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<PAGE>
Financial Highlights
The tables on the following pages present selected financial information,
including per share data and expense ratios and other data about the Funds, and
are based on each Fund's average net assets. This information has been audited
by Deloitte & Touche LLP, the Funds' independent auditors, whose report on the
Funds' financial statements for the fiscal year ended December 31, 1996 1997, is
included in the Statement of Additional Information. Shares of Small Cap Growth
Fund was not offered during the fiscal year ended December 31, 1997; accordingly
no financial information for that Fund is set forth below.
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<PAGE>
Investment Objectives and Policies. Each Fund's investment objective and
policies are set forth below. Since market risks are inherent in all securities
to varying degrees, there can be no assurance that a Fund will meet its
investment objectives.
Investment Objective and Policies - Money Fund. The objective of Money Fund is
to seek the maximum current income from investments in "money market" securities
consistent with low capital risk and the maintenance of liquidity. The
Securities and Exchange Commission ("SEC") Rule 2a-7 ("Rule 2a-7") under the
Investment Company Act of 1940 (the "Investment Company Act") places
restrictions on a money market fund's investments. Under Rule 2a-7, Money Fund
may purchase only "Eligible Securities," as defined below, that the Manager,
under procedures approved by the Trust's Board of Trustees, has determined have
minimal credit risk. An "Eligible Security" is (a) a security that has received
a rating in one of the two highest short-term rating categories by any two
"nationally-recognized statistical rating organizations" as defined in Rule 2a-7
("Rating Organizations"), or, if only one Rating Organization has rated that
security, by that Rating Organization, or (b) an unrated security that is judged
by the Manager to be of comparable quality to investments that are "Eligible
Securities" rated by Rating Organizations. Rule 2a-7 permits Money Fund to
purchase "First Tier Securities," which are Eligible Securities rated in the
highest category for short-term debt obligations by at least two Rating
Organizations, or, if only one Rating Organization has rated a particular
security, by that Rating Organization, or comparable unrated securities. Under
Rule 2a-7, Money Fund may invest only up to 5% of its assets in "Second Tier
Securities," which are Eligible Securities that are not "First Tier Securities."
In addition to the overall 5% limit on Second Tier Securities, Money Fund
may not invest (i) more than 5% of its total assets in the securities of any one
issuer (other than the U.S. Government, its agencies or instrumentalities) or
(ii) more than 1% of its total assets or $1 million (whichever is greater) in
Second Tier Securities of any one issuer. Under the current provisions of Rule
2a-7, the Trust's Board must approve or ratify the purchase of Eligible
Securities that are unrated or are rated by only one Rating Organization.
Additionally, under Rule 2a-7, Money Fund must maintain a dollar-weighted
average portfolio maturity of no more than 90 days, and the maturity of any
single portfolio investment may not exceed 397 days. The Trust's Board has
adopted procedures under Rule 2a-7 pursuant to which the Board has delegated to
the Manager the responsibility of conforming Money Fund's investments with the
requirements of Rule 2a-7 and those Procedures.
Ratings at the time of purchase will determine whether securities may be
acquired under the above restrictions. The rating restrictions described in this
Prospectus do not apply to banks in which the Trust's cash is kept. Subsequent
downgrades in ratings may require reassessment of the credit risk presented by a
security and may require its sale. See "Investment Objectives and Policies --
Money Fund" in the Statement of Additional Information for further details.
The Trust intends to exercise due care in the selection of portfolio
securities. However, a risk may exist that the issuers of Money Fund's portfolio
securities may not be able to meet their duties and obligations on interest or
principal payments at the time called for by the instrument. There is also the
risk that because of a redemption demand greater than anticipated by the
Manager, some of Money Fund's portfolio may have to be liquidated prior to
maturity at a loss. Any of these risks, if encountered, could cause a reduction
in the net asset value of Money Fund's shares.
The types of instruments that will form the major part of Money Fund's
investments are certificates of deposit, bankers' acceptances, commercial paper,
U.S. Treasury bills, securities of U.S. Government agencies or instrumentalities
and other debt instruments (including bonds) issued by corporations, including
variable and floating rate instruments, and variable rate master demand notes.
Some of such instruments may be supported by letters of credit or may be subject
to repurchase transactions (described below). Except as described below, Money
Fund will purchase certificates of deposit or bankers' acceptances only if
issued or guaranteed by a domestic bank subject to regulation by the U.S.
Government or by a foreign bank having total assets at least equal to U.S. $1
billion. Money Fund may invest in certificates of deposit of up to $100,000 of a
domestic bank if such certificates of deposit are fully insured as to principal
by the Federal Deposit Insurance Corporation. For purposes of this section, the
term "bank" includes commercial banks, savings banks, and savings and loan
associations and the term "foreign bank" includes foreign branches of U.S. banks
(issuers of "Eurodollar" instruments), U.S. branches and agencies of foreign
banks (issuers of "Yankee dollar" instruments) and foreign branches of foreign
banks. Money Fund also may purchase obligations issued by other entities if they
are: (i) guaranteed as to principal and interest by a bank or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by Money
Fund, or (ii) subject to repurchase agreements (explained below), if the
collateral for the agreement complies with Rule 2a-7. In addition, the Fund may
also invest in securities other than those described above that meet with the
requirements of Rule 2a-7. For further information, see "Foreign Securities" and
"Other Investment Restrictions" below. See Appendix A below and "Investment
Objectives and Policies" in the Statement of Additional Information for further
information on the investments which Money Fund may make. See Appendix B below
for a description of the rating categories of the Rating Organizations.
Investment Objectives and Policies - High Income Fund, Bond Fund and
Strategic Bond Fund.
High Income Fund. The objective of High Income Fund is to earn a high level of
current income by investing primarily in a diversified portfolio of high yield,
fixed-income securities (including long-term debt and preferred stock issues,
including convertible securities) believed by the Manager not to involve undue
risk. High Income Fund's investment policy is to assume certain risks (discussed
below) in seeking high yield, which is ordinarily associated with high risk
securities, commonly known as "junk bonds," in the lower rating categories of
the established securities ratings services (i.e., securities rated "Baa" or
lower by Moody's Investors Services, Inc. ("Moody's") or "BBB" or lower by
Standard & Poor's Corporation ("Standard & Poor's")), and unrated securities.
The investments in which High Income Fund will invest principally will be in the
lower rating categories; it may invest in securities rated as low as "C" by
Moody's or "D" by Standard & Poor's. Such ratings indicate that the obligations
are speculative in a high degree and may be in default. Appendix B of this
Prospectus describes these rating categories.
High Income Fund is not obligated to dispose of securities whose issuers
subsequently are in default or if the rating is subsequently downgraded. High
Income Fund may invest, without limit, in unrated securities if such securities
offer, in the opinion of the Manager, yields and risks comparable to rated
securities. Risks of high yield securities are discussed under "Risk Factors"
below. Securities rated by a rating organization represented the following
percentage of High Income Fund's total assets as of December 31, 1996 (the
amounts shown are dollar-weighted average values; securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category):
AAA, ____%; AA, ___%; A, ____%; BBB, ____%; BB, ____%; B, ____%; CCC, _____%;
CC, ____%; C, ____%. Unrated fixed income securities represented ___% of the
Fund's total assets. The Manager will not rely principally on the rating
assigned by rating services. The Manager's analysis may include consideration of
the financial strength of the issuer, including its historic and current
financial condition, the trading activity in its securities, present and
anticipated cash flow, estimated current value of assets in relation to
historical cost, the issuer's experience and managerial expertise,
responsiveness to changes in interest rates and business conditions, debt
maturity schedules, current and future borrowing requirements, and any change in
the financial condition of the issuer and the issuer's continuing ability to
meet its future obligations. The Manager also may consider anticipated changes
in business conditions, levels of interest rates of bonds as contrasted with
levels of cash dividends, industry and regional prospects, the availability of
new investment opportunities and the general economic, legislative and monetary
outlook for specific industries, the nation and the world.
Bond Fund. Bond Fund's primary objective is to earn a high level of current
income by investing primarily in debt securities. As a secondary objective, Bond
Fund seeks capital growth when consistent with its primary objective. As a
matter of non-fundamental policy, Bond Fund will, under normal market
conditions, invest at least 65% of its total assets in investment grade debt
securities, U.S. Government securities and money market instruments. Investment
grade debt securities are those rated in one of the four highest categories by
Standard & Poor's, Moody's, Fitch's or other Rating Organizations or if unrated,
determined by the Manager to be of comparable quality. The Fund is not obligated
to dispose of securities when issuers are in default or if the rating of the
security is reduced. A description of these rating categories is included as
Appendix B to this Prospectus. The Fund may invest up to 35% of its total assets
in debt securities rated less than investment grade or, if unrated, judged by
the Manager to be of comparable quality to such lower-rated securities.
Lower-grade securities include securities rated BB, B, CCC, CC and D by Standard
& Poor's or Ba, B, Caa, Ca and C by Moody's. Lower-grade securities (commonly
known as "junk bonds") are considered speculative and involve greater risk which
are explained under "Risk Factors" below.
Strategic Bond Fund. The investment objective of Strategic Bond Fund is to seek
a high level of current income principally derived from interest on debt
securities and to enhance such income by writing covered call options on debt
securities. Although the premiums received by Strategic Bond Fund from writing
covered calls are a form of capital gain, the Fund generally will not make
investments in securities with the objective of seeking capital appreciation.
The Fund intends to invest principally in: (i) lower-rated high yield
domestic debt securities; (ii) U.S. Government securities, and (iii) foreign
government and corporate debt securities. Under normal circumstances, the Fund's
assets will be invested in each of these three sectors. However, Strategic Bond
Fund may from time to time invest up to 100% of its total assets in any one
sector if, in the judgment of the Manager, the Fund has the opportunity of
seeking a high level of current income without undue risk to principal.
Distributable income will fluctuate as the Fund assets are shifted among the
three sectors.
|X| High Yield Securities. Strategic Bond Fund and High Income Fund may
invest without limitation (and other Funds may invest to a limited extent) in
securities in the lower rating categories of the established rating services,
commonly known as "junk bonds." Such securities are rated lower than "Baa" by
Moody's or "BBB" by Standard & Poor's. These Funds may invest in securities
rated as low as "C" by Moody's or "D" by Standard & Poor's. Such ratings
indicate that the obligations are speculative in a high degree and may be in
default. Risks of lower-rated, high yield, high risk securities are discussed
under "Risk Factors" below. Securities rated by a rating organization
represented the following percentage of Strategic Bond Fund's total assets as of
December 31, 1997 (the amounts shown are dollar-weighted average values;
securities rated by any rating organization are included in the equivalent
Standard & Poor's rating category): AAA, ___%; AA, ____%; A, ___; BBB, ____%;
BB, ____%; B, ____%; CCC, ___%; CC, ____%; C, ____%. Unrated fixed income
securities represented ____% of the Fund's total assets. The Manager will not
rely principally on the ratings assigned by rating services. These Funds are not
obligated to dispose of securities whose issuers subsequently are in default or
if the rating of such securities is reduced. Appendix B of this Prospectus
describes these rating categories. These Funds may also invest in unrated
securities which, in the opinion of the Manager, offer yields and risks
comparable to those of securities which are rated.
Other Fixed-Income Strategies and Techniques. High Income Fund, Bond Fund and
Strategic Bond Fund (collectively, the "Income Funds") can also use the
investment techniques and strategies described below. The Statement of
Additional Information contains more information about these practices.
|X| International Securities. The Income Funds may invest in foreign
government and foreign corporate debt securities (which may be denominated in
U.S. dollars or in non-U.S. currencies) issued
or guaranteed by foreign corporations, certain supranational entities (such as
the World Bank) and foreign governments (including political subdivisions having
taxing authority) or their agencies or instrumentalities. These investments may
include (i) U.S. dollar-denominated 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
Treasury securities having the same maturity, (ii) debt obligations such as
bonds (including sinking fund and callable bonds), (iii) debentures and notes
(including variable rate and floating rate instruments), and (iv) preferred
stocks and zero coupon securities. Further information about investments in
foreign securities and special risks of "emerging markets" is set forth below
under "Other Investment Techniques and Strategies - Foreign Securities," and
"Special Risks of 'Emerging Markets'."
|X| U.S. Government Securities. U.S. Government securities are debt
obligations issued by or guaranteed by the United States Government or one of
its agencies or instrumentalities. Although U.S. Government securities are
considered among the most creditworthy of fixed-income investments and their
yields are generally lower than the yields available from corporate debt
securities, the values of U.S. Government securities (and of fixed-income
securities generally) will vary inversely to changes in prevailing interest
rates. To compensate for the lower yields available on U.S. Government
securities, the Income Funds may attempt to augment these yields by writing
covered call options against them. See "Hedging," below. Certain of these
obligations, including U.S. Treasury notes and bonds, and mortgage-backed
securities guaranteed by the Government National Mortgage Association ("Ginnie
Maes"), are supported by the full faith and credit of the United States. Certain
other U.S. Government Securities, issued or guaranteed by Federal agencies or
government-sponsored enterprises, are not supported by the full faith and credit
of the United States. These latter securities may include obligations supported
by the right of the issuer to borrow from the U.S. Treasury, such as obligations
of Federal Home Loan Mortgage Corporation ("Freddie Macs"), and obligations
supported by the credit of the instrumentality, such as Federal National
Mortgage Association bonds ("Fannie Maes"). U.S. Government Securities in which
the Funds may invest include zero coupon U.S. Treasury securities,
mortgage-backed securities and money market instruments.
Zero coupon Treasury securities are: (i) U.S. Treasury notes and bonds
which have been stripped of their unmatured interest coupons and receipts; or
(ii) certificates representing interests in such stripped debt obligations or
coupons. Because a zero coupon security pays no interest to its holder during
its life or for a substantial period of time, it usually trades at a deep
discount from its face or par value and will be subject to greater fluctuations
of market value in response to changing interest rates than debt obligations of
comparable maturities which make current distributions of interest. Because the
Fund accrues taxable income from these securities without receiving cash, the
Fund may be required to sell portfolio securities in order to pay cash dividends
or to meet redemptions. The Income Funds may invest up to 50% of their total
assets at the time of purchase in zero coupon securities issued by either
corporations or the U.S. Treasury.
|X| Domestic Securities. The Income Funds' investments in domestic
securities may include preferred stocks, participation interests and zero coupon
securities. Domestic investments include fixed- income securities and
dividend-paying common stocks issued by domestic corporations in any industry
which may be denominated in U.S. dollars or non-U.S. currencies.
The Income Funds' investments may include securities which represent
participation interests in loans made to corporations (see "Participation
Interests," below) and in pools of residential mortgage loans which may be
guaranteed by agencies or instrumentalities of the U.S. Government (e.g. Ginnie
Maes, Freddie Macs and Fannie Maes), including collateralized mortgage-backed
obligations ("CMOs"), or which may not be guaranteed. Such securities differ
from conventional debt securities which provide for periodic payment of interest
in fixed amounts (usually semi-annually) with principal payments at maturity or
specified call dates. Mortgage-backed securities provide monthly payments which
are, in effect, a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at lower rates than the original
investment, thus reducing the yield of the Fund. CMOs in which the Fund may
invest are securities issued by a U.S. Government instrumentality or private
corporation that are collateralized by a portfolio of mortgages or
mortgage-backed securities which may or may not be guaranteed by the U.S.
Government. The issuer's obligation to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
Mortgage-backed securities may be less effective than debt obligations of
similar maturity at maintaining yields during periods of declining interest
rates.
The Income Funds may also invest in CMOs that are "stripped." That means
that the security is divided into two parts, one of which receives some or all
of the principal payments (and is known as a "P/O") and the other which receives
some or all of the interest (and is known as an "I/O"). P/Os and I/Os are
generally referred to as "derivative investments," discussed further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the underlying
mortgages. Principal prepayments increase that sensitivity. Stripped securities
that pay "interest only" are therefore subject to greater price volatility when
interest rates change, and they have the additional risk that if the underlying
mortgages are prepaid, the Fund will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general interest
rates fall, and in times of rapidly falling interest rates, the Fund might
receive back less than its investment.
The value of "principal only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon- bearing bonds of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established trading
markets have not yet developed for these securities. Therefore, some stripped
securities may be deemed "illiquid." If any Fund holds illiquid stripped
securities, the amount it can hold will be subject to its investment policy
limiting investments in illiquid securities to 15% of that Fund's assets.
The Income Funds may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the mortgage-backed
securities in which the Funds may invest. The Funds' obligation under the
forward roll must be covered by segregated liquid assets. The main risk of this
investment strategy is risk of default by the counterparty.
The Income Funds may also invest in asset-backed securities, which are
securities that represent fractional undivided interests in pools of consumer
loans and trade receivables, similar in structure to the mortgage-backed
securities in which the Fund may invest, described above.
Payments of principal
and interest are passed through to holders of asset-backed securities and are
typically supported by some form of credit enhancement, such as a letter of
credit, surety bond, limited guarantee by another entity or having a priority to
certain of the borrower's other securities. The degree of credit enhancement
varies, and generally applies to only a fraction of the asset-backed security's
par value until exhausted.
Risk Factors. The high yield, lower rated securities in which High Income Fund ,
Strategic Bond Fund principally invest and in which Bond Fund may invest up to
35% of its total assets are considered speculative and involve greater risk than
lower yielding, higher rated fixed-income securities, while providing higher
yields than such securities. Lower rated securities may be less liquid, and
significant losses could be experienced if a substantial number of other holders
of such securities decide to sell at the same time. Other risks may involve the
default of the issuer or price changes in the issuer's securities due to changes
in the issuer's financial strength or economic conditions. Issuers of lower
rated or unrated securities are generally not as financially secure or
creditworthy as issuers of higher-rated securities. During an economic downturn,
lower rated securities might decline in value more than investment grade
securities. These Funds are not obligated to dispose of securities when issuers
are in default or if the rating of the security is reduced. These risks are
discussed in more detail in the Statement of Additional Information.
Investment Objectives and Policies - Aggressive Growth Fund, Growth Fund, Small
Cap Growth Fund, Global Securities Fund, Multiple Strategies Fund and Growth &
Income Fund .
Aggressive Growth Fund. In seeking its objective of capital appreciation,
Aggressive Growth Fund will emphasize investments in securities of "growth-type"
companies. Such companies are believed to have relatively favorable long-term
prospects for increasing demand for their goods or services, or to be developing
new products, services or markets, and normally retain a relatively larger
portion of their earnings for research, development and investment in capital
assets. "Growth-type" companies may also include companies developing
applications for recent scientific advances. Aggressive Growth Fund may also
invest in cyclical industries and in "special situations" that the Manager
believes present opportunities for capital growth. "Special situations" are
anticipated acquisitions, mergers or other unusual developments which, in the
opinion of the Manager, will increase the value of an issuer's securities,
regardless of general business conditions or market movements.
There is a risk that the price of the security may be expected to decline if the
anticipated development fails to occur.
Growth Fund. In seeking its objective of capital appreciation, Growth Fund will
emphasize investments in securities of well-known and established companies.
Such securities generally have a history of earnings and dividends and are
issued by seasoned companies (having an operating history of at least five
years, including predecessors). Current income is a secondary consideration in
the selection of Growth Fund's portfolio securities. Small Cap Growth Fund.
Small Cap Growth Fund seeks capital appreciation as its investment objective.
Current income is not an objective. In seeking its objective, Small Cap Growth
Fund will emphasize investment in securities considered by the Manager to have
appreciation possibilities. Such securities may either be listed on securities
exchanges or traded in the over-the-counter markets in both the United States
and foreign countries. Small Cap Growth Fund expects a substantial portion of
its assets to be invested in over-the-counter securities.
Small Cap Growth Fund emphasizes investment in securities of growth-type
issuers, including emerging growth companies, described below, with market
capitalization less than $1 billion. Small Cap Growth Fund may continue to hold
investments in issuers whose market capitalization grows in excess of $1
billion, and may from time to time invest in companies with market
capitalization in excess of $1 billion. Small Cap Growth Fund invests primarily
in common stocks or securities having investment characteristics of common
stocks (for example, securities convertible into common stocks).
Global Securities Fund. The objective of Global Securities Fund is to seek
long-term capital appreciation. Current income is not an objective. In seeking
its objective, the Fund will invest a substantial portion of its assets in
securities of foreign issuers, "growth-type" companies (those which, in the
opinion of the Manager, have relatively favorable long-term prospects for
increasing demand or which develop new products and retain a significant part of
earnings for research and development), cyclical industries (e.g. base metals,
paper and chemicals) and special investment situations which are considered to
have appreciation possibilities (e.g., private placements of start-up
companies). The Fund may invest without limit in "foreign securities" (as
defined below in "Other Investment Techniques and Strategies - Foreign
Securities") and thus the relative amount of such investments will change from
time to time. It is currently anticipated that Global Securities Fund may invest
as much as 80% or more of its total assets in foreign securities. See "Other
Investment Techniques and Strategies - Foreign Securities," below, for further
discussion as to the possible rewards and risks of investing in foreign
securities and as to additional diversification requirements for the Fund's
foreign investments.
Multiple Strategies Fund. The objective of Multiple Strategies Fund is to seek a
high total investment return, which includes current income as well as capital
appreciation in the value of its shares. In seeking that objective, Multiple
Strategies Fund may invest in equity securities (including common stocks,
preferred stocks, convertible securities and warrants), debt securities
(including bonds, high yield securities, participation interests, asset-backed
securities, private-label mortgage-backed securities and CMOs, zero coupon
securities and U.S. Government obligations, described above under "Investment
Objectives and Policies - High Income Fund, Bond Fund and Strategic Bond Fund"
and under "Participation Interests" below) and cash and cash equivalents
(described above as the types of instruments in which the Money Fund may
invest).
The composition of Multiple Strategies Fund's portfolio among the
different types of permitted investments will vary from time to time based upon
the Manager's evaluation of economic and market trends and perceived relative
total anticipated return from such types of securities. Accordingly, there is
neither a minimum nor a maximum percentage of Multiple Strategies Fund's assets
that may, at any given time, be invested in any of the types of investments
identified above. In the event future economic or financial conditions adversely
affect securities, it is expected that Multiple Strategies Fund would assume a
defensive position by investing in debt securities (with an emphasis on
securities maturing in one year or less from the date of purchase), or cash and
cash equivalents. Growth & Income Fund. The objective of Growth & Income Fund is
to seek a high total return, which includes growth in the value of its shares as
well as current income from equity and debt securities. In seeking that
objective, Growth & Income Fund may invest in equity and debt securities. Its
equity investments will include common stocks, preferred stocks, convertible
securities and warrants. Its debt securities will include bonds, participation
interests, asset-backed securities, private-label mortgage-backed securities and
CMOs, zero coupon securities and U.S. government obligations (described above
under "Investment Objectives and Policies - High Income Fund, Bond Fund and
Strategic Bond Fund" and under "Participation Interests" below) and cash and
cash equivalents (described above as the types of instruments in which the Money
Fund may invest). From time to time Growth & Income Fund may focus on small to
medium capitalization issuers, the securities of which may be subject to greater
price volatility than those of larger capitalized issuers.
The composition of Growth & Income Fund's portfolio among equity and
fixed-income investments will vary from time to time based upon the Manager's
evaluation of economic and market trends and perceived relative total
anticipated return from such types of investments. Accordingly, there is neither
a minimum nor a maximum percentage of Growth & Income Fund's assets that may, at
any given time, be invested in either type of investment. In the event future
economic or financial conditions adversely affect equity securities, it is
expected that Growth & Income Fund would assume a defensive position by
investing in debt securities (with an emphasis on securities maturing in one
year or less from the date of purchase), or cash and cash equivalents.
o Can the Funds' Investment Objectives and Policies Change? The Funds have
investment objectives, described above, as well as investment policies each
follows to try to achieve its objectives. Additionally, the Funds use certain
investment techniques and strategies in carrying out those investment policies.
The Funds' investment policies and techniques are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a particular
policy is "fundamental." Each Fund's investment objectives are fundamental
policies.
The Trust'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).
Other Investment Techniques and Strategies. Some of the Funds can 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.
o Borrowing for Leverage. From time to time, the Funds (other than Money
Fund) may borrow money from banks to buy securities. The Funds will borrow only
if they can do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." This investing technique may
subject a Fund to greater risks and costs than funds that do not borrow. These
risks may include the possibility that a Fund's net asset value per share will
fluctuate more than funds that don't borrow, since a Fund pays interest on
borrowings and interest expense affects a Fund's share price and yield.
Borrowing for Leverage is subject to regulatory limits described in more detail
in "Borrowing" in the Statement of Additional Information. The Funds may also
borrow in order to facilitate redemptions. As a matter of fundamental policy,
the Funds can borrow only if they maintain a 300% ratio of assets to borrowings
at all times in the manner set forth in the Investment Company Act.
o Investments In Small, Unseasoned Companies. Money Fund, Aggressive Growth
Fund, Multiple Strategies Fund, Growth & Income Fund, Growth Fund, Global
Securities Fund, Small Cap Growth Fund and Strategic Bond Fund may each 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. It is not
currently intended that investments in securities of companies (including
predecessors) that have operated less than three years will exceed 5% of the net
assets of either Growth Fund or Multiple Strategies Fund. Small Cap Growth Fund
intends to invest no more than 20% of its total assets in securities of small,
unseasoned issuers. Money Fund, Aggressive Growth Fund, Growth & Income Fund,
Global Securities Fund and Strategic Bond Fund are not subject to this
restriction.
o Participation Interests. Strategic Bond Fund, Global Securities Fund,
High Income Fund and Multiple Strategies Fund and Growth & Income Fund may
acquire participation interests in U.S. dollar-denominated loans that are made
to U.S. or foreign companies (the "borrower"). They may be interests in, or
assignments of, the loan, and are acquired from the banks or brokers that have
made the loan or are members of the lending syndicate. No more than 5% of a
Fund's net assets can be invested in participation interests of the same
borrower. The Manager has set certain creditworthiness standards for issuers of
loan participations, and monitors their creditworthiness. The value of loan
participation interests primarily depends upon the creditworthiness of the
borrower, and its ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net asset value
of its shares. Some borrowers may have senior securities rated as low as "C" by
Moody's "D" by Standard & Poor's or "D" by Fitch, but may be deemed acceptable
credit risks. Participation interests are subject to each Fund's limitations on
investments in illiquid securities. See "Illiquid and Restricted Securities"
below.
o Foreign Securities. Each Fund may purchase "foreign securities" that is,
securities of companies organized under the laws of countries other than the
United States that are traded on foreign securities exchanges or in the foreign
over-the-counter markets, and each Fund other than Money Fund may purchase
securities issued by U.S. corporations denominated in non-U.S. currencies. Money
Fund may invest in certain dollar-denominated foreign securities which are
"Eligible Securities" as described above. Securities of foreign issuers that are
represented by American Depository Receipts ("ADRs"), or that are listed on a
U.S. securities exchange or are traded in the United States over-the-counter
markets are not considered "foreign securities" for this purpose because they
are not subject to many of the special considerations and risks (discussed below
and in the Statement of Additional Information) that apply to foreign securities
traded and held abroad. Each Fund may also invest in debt obligations issued or
guaranteed by foreign corporations, certain supranational entities (such as the
World Bank) and foreign governments (including political subdivisions having
taxing authority) or their agencies or instrumentalities, subject to the
investment policies described above. Foreign securities which the Funds may
purchase may be denominated in U.S. dollars or in non-U.S. currencies. The Funds
may convert U.S. dollars into foreign currency, but only to effect securities
transactions and not to hold such currency as an investment, other than in
hedging transactions (see "Hedging" below).
It is currently intended that each Fund (other than Global Securities Fund,
Multiple Strategies Fund, Growth & Income Fund or Strategic Bond Fund) will
invest no more than 25% of its total assets in foreign securities or in
government securities of any foreign country or in obligations of foreign banks.
Multiple Strategies Fund will invest no more than 35% of its total assets in
foreign securities or in government securities of any foreign country or in
obligations of foreign banks. Global Securities Fund, Growth & Income Fund and
Strategic Bond Fund have no restrictions on the amount of their assets that may
be invested in foreign securities. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
highly speculative.
The Funds intend to comply with the foreign country diversification
guidelines of Section 10506 of the California Insurance Code, as follows:
Whenever a Fund's investment in foreign securities exceeds 25% of its net
assets, it will invest its assets in securities of issuers located in a minimum
of two different foreign countries; this minimum is increased to three foreign
countries if foreign investments comprise 40% or more of a Fund's net assets, to
four if 60% or more and to five if 80% or more. In addition, no such Fund will
have more than 20% of its net assets invested in securities of issuers located
in any one foreign country; that limit is increased to 35% for Australia,
Canada, France, Japan, the United Kingdom or Germany.
The percentage of each Fund's assets that will be allocated to foreign
securities will vary depending on the relative yields of foreign and U.S.
securities, the economies of foreign countries, the condition of their financial
markets, the interest rate climate of such countries, and the relationship of
such countries' currencies to the U.S. dollar. These factors are judged on the
basis of fundamental economic criteria (e.g., relative inflation levels and
trends, growth rate forecasts, balance of payments status, and economic
policies) as well as technical and political data. Subsequent foreign currency
losses may result in a Fund having previously distributed more income in a
particular period than was available from investment income, which could result
in a return of capital to shareholders. Each such Fund's portfolio of foreign
securities may include those of a number of foreign countries or, depending upon
market conditions and subject to the above diversification requirements, those
of a single country. In summary, foreign securities markets may be less liquid
and more volatile than the markets in the U.S. Risks of foreign securities
investing may include foreign withholding taxation, changes in currency rates or
currency blockage, currency exchange costs, difficulty in obtaining and
enforcing judgments against foreign issuers, relatively greater brokerage and
custodial costs, risk of expropriation or nationalization of assets, less
publicly available information, and differences between domestic and foreign
legal, auditing, brokerage and economic standards. See "Investment Objectives
and Policies - Foreign Securities" in the Statement of Additional Information
for further details.
o Special Risks of "Emerging Markets". Investments in securities traded in
"emerging markets" (which are trading markets that are relatively new in
countries with developing economies) involve more risks than foreign securities
of more developed countries. Emerging markets may have extended settlement
periods for securities transactions so that a Fund might not receive the
repayment of principal or income on its investments on a timely basis, which
could affect its net asset value. There may be a lack of liquidity for emerging
market securities. Interest rates and foreign currency exchange rates may be
more volatile. Government limitations on foreign investments may be more likely
to be imposed than in more developed countries. Emerging markets may respond in
a more volatile manner to economic changes than those of more developed
countries.
o 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. Each of
the Funds (except Money Fund) may invest up to 5% of its total assets in
warrants and rights. That 5% does not apply to warrants and rights that have
been acquired as part of units with other securities or that were attached to
other securities. For further details about these investments, see "Warrants and
Rights" in the Statement of Additional Information.
o Repurchase Agreements. Each Fund may acquire securities that are subject
to repurchase agreements to generate income while providing liquidity. In a
repurchase transaction, the Fund buys a security and simultaneously sells it to
the vendor for delivery at a future date. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on the
delivery date, the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. No Fund will
enter into a repurchase agreement that causes more than 15% of its net assets
(10% of net assets for Money Fund) to be subject to repurchase agreements having
a maturity beyond seven days. There is no limit on the amount of a Fund's net
assets that may be subject to repurchase agreements of seven days or less.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Board of Trustees, the Manager determines the liquidity of
certain of a Fund's investments. Investments may be illiquid because of the
absence of a 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 resale or cannot be sold publicly until it is
registered under the Securities Act of 1933. No Fund will invest more than 15%
of its net assets in illiquid or restricted securities (for Money Fund, the
limit is 10%); no Fund presently intends to invest more than 10% of its net
assets in illiquid or restricted securities. This policy applies to
participation interests, bank time deposits, master demand notes and repurchase
transactions maturing in more than seven days, over-the-counter ("OTC") options
held by any Fund and that portion of assets used to cover such OTC options; it
does not apply to certain restricted securities that are eligible for resale to
qualified institutional purchasers. The Manager monitors holding of illiquid and
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity. Illiquid securities include repurchase agreements
maturing in more than seven days, or certain participation interests other than
those with puts exercisable within seven days.
o Loans of Portfolio Securities. To attempt to increase its income, each
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions. Each Fund must receive collateral for such loans. These loans are
limited to 25% of a Fund's net assets and are subject to other conditions
described in the Statement of Additional Information. The value of securities
loaned, if any, is not expected to exceed 5% of the value of a Fund's total
assets.
o "When-Issued" or Delayed Delivery Transactions. Each Fund (except
Small Cap Growth 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 a Fund if the value of the security
changes prior to the settlement date.
o Hedging. As described below, the Funds (other than Money Fund) may
purchase and sell certain kinds of futures contracts, put and call options,
forward contracts, and options on futures and broadly-based stock or bond
indices, or enter into interest rate swap agreements. These are all referred to
as "hedging instruments." The Funds do not use hedging instruments for
speculative purposes, and have limits on the use of them, described below. The
hedging instruments the Funds may use are described below and in greater detail
in "Other Investment Techniques and Strategies" in the Statement of Additional
Information. None of the discussion in this section concerning Hedging
Instruments applies to Money Fund, which may not use Hedging Instruments.
The Funds may buy and sell options, futures and forward contracts for a
number of purposes. They may do so to try to manage their exposure to the
possibility that the prices of their portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. High Income Fund, Bond Fund, Multiple
Strategies Fund, Growth & Income Fund, Small Cap Growth Fund and Strategic Bond
Fund may do so to try to manage their exposure to changing interest rates. Some
of these strategies, such as selling futures, buying puts and writing covered
calls, hedge the Funds' portfolios against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend to
increase the Funds' exposure to the securities market. Forward contracts are
used to try to manage foreign currency risks on Funds' foreign investments.
Foreign currency options are used to try to protect against declines in the
dollar value of foreign securities the Funds own, or to protect against an
increase in the dollar cost of buying foreign securities. Writing covered call
options may also provide income to the Funds for liquidity purposes or to raise
cash to distribute to shareholders.
o Futures. Global Securities Fund, Small Cap Growth Fund, Aggressive
Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund ,
Strategic Bond Fund, Bond Fund and High Income Fund may buy and sell futures
contracts that relate to broadly-based securities indices (these are referred to
as Stock Index Futures and Bond Index Futures) or to interest rates (these are
referred to as Interest Rate Futures). In addition, the Income Funds may buy and
sell futures contracts that relate to commodities (these are referred to as
Commodity Futures).
o Put and Call Options. The Funds may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by a Fund
will not exceed 5% of the Fund's total assets.
If a Fund sells (that is, writes) a call option, it must be "covered." That
means that the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Funds must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised
Fund.. Up to 100% of a Fund's total assets may be subject to calls.
The Funds may buy puts whether or not it holds the underlying investment
in the portfolio. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Funds will not write puts if more than 50% of the
Fund's net assets would have to be segregated to cover put options.
o 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 Funds (other than Money Fund) use them to "lock-in" the U.S.
dollar price of a security denominated in a foreign currency that a 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. Such Funds may also use "cross
hedging," where a Fund hedges against changes in currencies other than the
currency in which a security it holds is denominated.
o Interest Rate Swaps. Strategic Bond Fund, High Income Fund, Bond Fund
and Growth & Income Fund can also enter into interest rate swap transactions. In
an interest rate swap, a 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. A Fund enters
into swaps only on securities it owns. Each of these Funds may not enter into
swaps with respect to more than 25% of its total assets. Also, each Fund will
segregate liquid assets of any type, including equity and debt securities of any
grade 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 from 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 that
Fund's return. A 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 Funds. There are also special risks in particular hedging
strategies. If a covered call written by a Fund is exercised on a security that
has increased in value, that 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. 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, each 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 Funds could be obligated to pay more under their swap
agreements than they receive under them, as a result of interest rate changes.
These risks are described in greater detail in the Statement of Additional
Information.
|X| Derivative Investments. Each Fund (other than Money Fund) can invest
in a number of different kinds of "derivative investments." The Funds (other
than Money 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 "Hedging").
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 on
which the derivative is based, and the derivative itself may 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 a Fund will realize less income than expected from its
investments, or that it can lose part of the value of its investments, which
will affect that Fund's share price. Certain derivative investments held by the
Funds may trade in the over-the-counter markets and may be illiquid. If that is
the case, the Funds' investment in them will be limited, as discussed in
"Illiquid and Restricted Securities."
The Funds (other than Money Fund) may invest in different types of
derivatives. "Index-linked" or "commodity-linked" notes are debt securities of
companies that call for interest payments and/or payment on the maturity of the
note in different terms than the typical note where the borrower agrees to pay a
fixed sum on the maturity of the note. Principal and/or interest payments on an
index-linked note depend on the performance of one or more market indices, such
as the S & P 500 Index or a weighted index of commodity futures, such as crude
oil, gasoline and natural gas. Another derivative investment such Funds may
invest in are currency-indexed securities. 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 Funds (other than Money 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).
o Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Funds may engage frequently in short-term
trading to try to achieve their objectives.
High turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs for Aggressive Growth Fund, Growth
Fund, Multiple Strategies Fund, Growth &
Income Fund and Global Securities Fund and to a lesser extent, higher
transaction costs for Money Fund, Bond Fund, Strategic Bond Fund and High Income
Fund. The "Financial Highlights," above show the portfolio turnover for the past
fiscal years for each Fund
other than Small Cap Growth Fund, which is not expected to have portfolio
turnover in excess of 100% each year.
Other Investment Restrictions
Each of the Funds has certain investment restrictions which, together with
its investment objective, are fundamental policies. Under some of those
restrictions, the Funds cannot:
o with respect to 75% of its total assets, invest in securities (except
those of the U.S. Government or its agencies or instrumentalities) of any issuer
if immediately thereafter, either (a) more than 5% of that Fund's total assets
would be invested in securities of that issuer, or (b) that Fund would then own
more than 10% of that issuer's voting securities or 10% in principal amount of
the outstanding debt securities of that issuer (the latter limitation on debt
securities does not apply to Strategic Bond Fund);
o lend money except in connection with the acquisition of debt securities
which a Fund's investment policies and restrictions permit it to purchase; the
Funds may also make loans of portfolio securities (see "Loans of Portfolio
Securities");
o concentrate investments in any particular industry, other than
securities of the U.S. Government or its agencies or instrumentalities [Money
Fund, Bond Fund and High Income Fund, only];
therefore these Funds will not purchase the securities of issuers primarily
engaged in the same industry if more than 25% of the total value of that Fund's
assets would (in the absence of special circumstances) consist of securities of
companies in a single industry; however, there is no limitation as to
concentration of investments by Money Fund in obligations issued by domestic
banks, foreign branches of domestic banks (if guaranteed by the domestic
parent), savings and loan associations or in obligations issued by the federal
government and its agencies and instrumentalities.
None of the percentage limitations and restrictions described above and in
the Statement of Additional Information is a fundamental policy unless
accompanied by an express statement that the limitation or restriction is a
fundamental policy.
Unless the prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time a Fund makes an investment, and a
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Money Fund has
separately undertaken to exclude savings and loan associations from the
exception to the concentration limitation set forth under the fourth investment
restriction listed above. Other investment restrictions are listed in
"Investment Restrictions" in the Statement of Additional Information.
The Trustees of the Trust are required to monitor events to identify any
irreconcilable conflicts which may arise between the variable life insurance
policies and variable annuity contracts that invest in the Funds. Should any
conflict arise which ultimately requires that any substantial amount of assets
be withdrawn from any Fund, its operating expenses could increase.
How the Funds are Managed
Organization and History. The Trust was organized in 1984 as a Massachusetts
business trust. The Trust is an open-end, diversified management investment
company, with an unlimited number of authorized shares of beneficial interest.
It consists of ten separate Funds - Money Fund, Bond Fund and Growth Fund, all
organized in 1984, High Income Fund, Aggressive Growth Fund and Multiple
Strategies Fund, all organized in 1986, Global Securities Fund, organized in
1990, Strategic Bond Fund, organized in 1993 , Growth & Income Fund, organized
in 1995, and Small Cap Growth Fund, organized in 1998.
The Trust 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 Funds' activities, review
performance, and review the actions of the Manager. "Trustees and Officers of
the Trust" in the Statement of Additional Information names the Trustees and
provides more information about them and the officers of the Trust. Although the
Trust will normally not hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of any or all of the Funds into two or more classes. The
Board has done so, and the Fund currently has two classes of shares, one without
designation and Class 2. Each class of a Fund invests in the same investment
portfolio. Each class of a Fund has its own dividends and distributions and pays
certain expenses which may be different for each class. Each class of a Fund 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 of a Fund vote as a class on matters that affect that class
alone. Shares are freely transferrable. Further information on how shares are
voted is set forth in the Statement of Additional Information under "How the
Fund is Managed."
The Manager and Its Affiliates. All Funds are managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Funds'
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
Investment Advisory Agreements for each Fund which state the responsibilities of
the Manager. The Investment Advisory Agreements set forth the fees paid by each
Fund to the Manager, and describes the expenses that each Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $___ billion as of March 31, 1998,
held in more than
3.5 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.
The management services provided to the Funds by the Manager and ORAMI,
and the services provided by the Transfer Agent to shareholders, depend on the
smooth functioning of their computer systems. Many computer software systems in
use today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
handling securities trades, pricing and account services. The Manager and
Transfer Agent have been actively working on necessary changes to their computer
systems to deal with the year 2000 and expect that their systems will be adapted
in time for that event.
o Portfolio Managers
The Portfolio Manager of the Money Fund is Dorothy G. Warmack. On May 1,
1996, she became the person principally responsible for the day-to-day
management of that Fund's portfolio. During the past
five years, she has served as an officer of other Oppenheimer funds.
The Portfolio Manager of High Income Fund is Thomas P. Reedy. He is the person
principally responsible for the day-to-day management of the High Income Fund
since January 1, 1998. During the past five years Mr. Reedy has served as a
portfolio manager and officer of other Oppenheimer funds and formerly served as
a Securities Analyst for the Manager.
The Portfolio Manager of Bond Fund, Multiple Strategies Fund and Strategic Bond
Fund is David P. Negri, joined by Richard H. Rubinstein for Multiple Strategies
Fund and by Arthur P. Steinmetz for Strategic Bond Fund. They are the persons
principally responsible for the day-to-day management of those Funds since July
1989, January 1990, July 1989 (April 1991 for Mr. Rubinstein) and May 1993,
respectively. During the past five years, Messrs. Steinmetz, Rubinstein and
Negri have also served as officers of other Oppenheimer funds.
The Portfolio Manager of Aggressive Growth Fund is Paul LaRocco. He has been the
person principally responsible for the day-to-day management of that Fund's
portfolio since January 1994. During the past five years, he has also served as
an Associate Portfolio Manager for other Oppenheimer funds and formerly served
as a securities analyst with Columbus Circle Investors, prior to which he was an
investment analyst for Chicago Title & Trust Co.
The Portfolio Manager of Growth Fund is Jane Putnam. She has been the person
principally responsible for the day-to-day management of that Fund's portfolio
since May 1994. During the past five years, Ms. Putnam has also served as an
Associate Portfolio Manager for other Oppenheimer funds and formerly served as a
portfolio manager and equity research analyst for Chemical Bank.
The Portfolio Managers of Small Cap Growth Fund are Jay W. Tracey III and Alan
Gilston. They are the persons principally responsible for the day-to-day
management of the that Fund's portfolio since May 1, 1998, and have served as
portfolio managers and officers of another Oppenheimer fund. During the past
five years Mr. Tracey formerly served as a Managing Director of Buckingham
Capital Management, prior to which he was a portfolio manager and Vice President
of other Oppenheimer funds and a Vice President of the Manager. During the past
five years Mr. Gilston has served as a Vice President and portfolio manager for
Schroeder Capital Management International, Inc.
The Portfolio Manager of Global Securities Fund is William Wilby. He has been
the person principally responsible for the day-to-day management of that Fund's
portfolio since December, 1995. During the past five years, Mr. Wilby has also
served as an officer and portfolio manager for other Oppenheimer funds, prior to
which he was an international investment strategist at Brown Brothers Harriman &
Co., and a Managing Director and Portfolio Manager at AIG Global Investors.
The Portfolio Manager of Growth & Income Fund is Robert J. Milnamow and the
Associate Portfolio Manager of that Fund is Michael S. Levine. Mr. Milnamow has
been the person principally responsible for the day-to-day management of that
Fund since November, 1995. He is an officer of other Oppenheimer funds. During
the past five years, Mr. Milnamow was a portfolio manager with Phoenix
Securities Group, and Mr. Levine was a portfolio manager and research associate
for Amos Securities, Inc., before which he was an analyst for Shearson Lehman
Hutton, Inc.
Messrs. LaRocco, Negri , Milnamow, Reedy, Tracey, Gilston and Ms. Putnam
and Ms. Warmack are
Vice Presidents of the Manager, Mr. Levine is an Assistant Vice President of
the Manager, and Messrs.
Rubinstein, Steinmetz and Wilby are Senior Vice Presidents of the Manager. Each
of the Portfolio Managers named above is also a Vice President of the Trust.
o Fees and Expenses. The monthly management fee payable to the Manager is
computed separately on the net assets of each Fund as of the close of business
each day. The management fee rates are as follows: (i) for Money Fund: 0.450% of
the first $500 million of average annual net assets, 0.425% of the next $500
million, 0.400% of the next $500 million, and 0.375% of average annual net
assets over $1.5 billion; (ii) for Aggressive Growth Fund, Growth Fund, Small
Cap Growth Fund, Multiple Strategies Fund, Growth & Income Fund and Global
Securities Fund: 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, and 0.60% of average annual net assets over $800 million; and
(iii) for High Income Fund, Bond Fund and Strategic Bond Fund: 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million, and 0.50% of average annual net assets over $1 billion.
During the fiscal year ended December 31, 1997, the management fee
(computed on an annualized basis as a percentage of the net assets of all the
Funds as of the close of business each day) and the total operating expenses as
a percentage of average net assets of each Fund then in existence were as
follows:
Total
Management Operating
Fees Expenses(1)
- ------------------------------------------------------------------------------
Money Fund 0.44% 0.48%
- -------------------------------------------------------------------------------
High Income Fund 0.75% 0.82%
- --------------------------------------------------------------------------
Bond Fund 0.73% 0.78%
Strategic Bond Fund 0.75% 0.83%
- -------------------------------------------------------------------------------
Aggressive Growth Fund 0.71% 0.73%
- -------------------------------------------------------------------------------
Growth Fund 0.73% 0.75%
- -------------------------------------------------------------------------------
Global Securities Fund 0.70% 0.76%
- -------------------------------------------------------------------------------
Multiple Strategies Fund 0.72% 0.75%
- -------------------------------------------------------------------------------
Growth & Income Fund 0.75% 0.83%
- --------------------
(1) This table does not reflect expenses that apply at the separate account
level or to related insurance products, or the fees or expenses of Small Cap
Growth Fund, which had not yet commenced operations.
The Funds pay expenses related to their daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Funds' 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 Agreements is contained in the
Statement of Additional Information.
There is also information about the Funds' brokerage policies and practices
in "Brokerage Policies of the Funds" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Funds'
portfolio transactions. When deciding which brokers to use, the Manager is
permitted by the Investment Advisory Agreements to consider whether brokers have
sold shares of the Funds or any other funds for which the Manager serves as
investment adviser.
o The Distributor. Each Fund's Class 2 shares are sold to insurance company
separate account sponsors and their affiliates that have a participation
agreement with OppenheimerFunds Distributor, Inc., a subsidiary of the Manager
that acts as the Distributor. The Distributor also distributes shares of the
other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary
of the Manager.
o Shareholder Inquiries. Inquiries by policyowners for Account
information are to be directed to the insurance company issuing the Account
at the address or telephone number shown in the
accompanying Account Prospectus.
Performance of the Funds
Explanation of Performance Terminology. Money Fund uses the term "yield" to
illustrate its performance. High Income Fund, Bond Fund and Strategic Bond Fund
use the terms "yield," "total return," and "average annual total return" to
illustrate performance. All the Funds, except Money Fund, use the terms "average
annual total return" and "total return" to illustrate their performance. 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 Funds' total returns and yields
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 and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Funds' performance. Each
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio and expenses.
o Yields. Money Fund's "yield" is the income generated by an investment in
that Fund over a seven-day period, which is then "annualized." In annualizing,
the amount of income generated by the investment during that seven days is
assumed to be generated each week over a 52-week period, and is shown as a
percentage of the investment. The compounded "effective yield" is calculated
similarly, but the annualized income earned by an investment in Money Fund is
assumed to be reinvested. The compounded effective yield will therefore be
slightly higher than the yield because of the effect of the assumed
reinvestment.
Yield for High Income Fund, Strategic Bond Fund or Bond Fund will be
computed in a standardized manner for mutual funds, by dividing that Fund's net
investment income per share earned during a 30-day base period by the maximum
offering price (equal to the net asset value) per share on the last day of the
period. This yield calculation is compounded on a semi-annual basis, and
multiplied by 2 to provide an annualized yield. The Statement of Additional
Information describes a dividend yield and a distribution return that may also
be quoted for these Funds.
o Total Returns. There are different types of total returns used to measure
each 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 Funds'
actual year-by-year performance.
How Have the Funds Performed? Below is a discussion by the Manager of the Funds'
performance during their last fiscal year ended December 31, 1997 followed by a
graphical comparison of each Fund's performance, except Money Fund, to an
appropriate broad-based market index. No performance information or index
comparisons are shown for Small Cap Growth Fund, which did not commence
operations until 1998.
Management's Discussion of Performance. During the Funds' fiscal year ended
December 31, 1997, the U.S. bond markets and the equity markets experienced
overall substantial growth in response to declines in interest rates and strong
corporate profits in the face of slower economic growth. These positive market
factors contributed to Fund performance, as did particular investment strategies
of each of the Funds. Investments in foreign securities contributed far less to
Fund performance, due to substantial volatility, especially in several Southeast
Asian markets, largely in reaction to currency devaluations. During the fiscal
year ended December 31, 1997, the Manager emphasized the following investment
strategies and techniques in the individual Funds. The portfolio holdings,
allocations and strategies of each of the Funds are subject to change.
High Income Fund emphasized lower rated corporate bonds in
telecommunications companies, cable operators and financial services industries,
which were expected to benefit from deregulation. Foreign bond positions were
primary in emerging markets, particularly in Latin America. The Fund invested to
a lesser degree in domestic preferred stocks.
Bond Fund emphasized investments in cable operators, media and commercial
banking industries, due to the same expectation concerning deregulation. The
Fund also took a substantial position in commercial private mortgage securities,
representing pools of mortgages on hotels, shopping malls, apartment buildings
and other enterprises.
Aggressive Growth Fund emphasized investments in small and medium-sized
companies with new products and services. Its largest sector allocation was in
the technology sector, followed by consumer noncyclical companies, industrial
companies and financial services.
Growth Fund emphasized large cap stocks believed to be selling at
below-average valuations with above-average earnings growth. It emphasized
investments in high-growth sectors such as financial services and technology
companies, followed by consumer products.
Multiple Strategies Fund's equity and fixed-income investments were broadly
diversified among sectors. Some of the Fund's largest equity holdings included
banks in Switzerland, Italy, France and Germany, expected to benefit from
improved efficiency. Its fixed-income investments included domestic utilities
and other high-yield corporate bonds issued in the U.S. and in developed and
emerging countries.
Growth & Income Fund's portfolio included substantial positions in
financial stocks expected to benefit from consolidation and strong fundamentals,
and technology companies with promising products.
Global Securities Fund sought to avoid the volatility mentioned above in
certain foreign markets, by seeking capital appreciation from U.S. companies,
and to a lesser extent from companies in developed European countries. Its
largest sector allocations were to financial services, technology companies and
consumer products companies.
Strategic Bond Fund's allocation to high-yield corporate bonds performed
particularly well, due to strong performance by telecommunications companies,
cable operators and financial services companies. The Fund also maintained a
substantial allocation to U.S. Government securities and to foreign fixed-income
securities from developed and emerging markets.
o Comparing each Fund's Performance to the Market. The charts below show
the performance of hypothetical $10,000 investments in each Fund (except for
Money Fund and Small Cap Growth Fund) held until December 31, 1997. Performance
information does not reflect charges that apply to separate accounts investing
in the Funds and is not restated to reflect the increased management fee rates
that took effect September 1, 1994. If these charges and expenses were taken
into account, performance would be lower.
High Income Fund's performance is compared to the performance of the Merrill
Lynch High Yield Master Index, an unmanaged index of fixed-rate, coupon-bearing
bonds with an outstanding par which is greater than or equal to $100 million, a
maturity range greater than or equal to one year and a credit rating which must
be rated lower than BBB/Baa3 (by Standard & Poor's or Moody's, respectively) but
higher than C/D (bonds in default). This index is used as a measure of the
performance of the high-yield corporate bond market - the market in which High
Income Fund principally invests. Bond Fund's performance is compared to the
performance of the Lehman Brothers Corporate Bond Index, which is an unmanaged
index of publicly-issued non-convertible investment grade corporate debt of U.S.
issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond
market.
The performance of Aggressive Growth Fund, Growth Fund and Growth & Income Fund
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.
Multiple Strategies Fund's performance is compared to the S&P 500 Index and the
Lehman Brothers Aggregate Bond Index, a broad-based, unmanaged index of U.S.
corporate bond issues, U.S. Government securities and mortgage-backed
securities, widely recognized as a measure of the performance of the domestic
debt securities market.
Global Securities Fund's performance is compared to the Morgan Stanley World
Index, an unmanaged index of issuers listed on the stock exchanges of 20 foreign
countries and the U.S., and is widely recognized as a measure of global stock
market performance.
Strategic Bond Fund's performance is compared to the Lehman Brothers Aggregate
Bond Index and the Salomon Brothers World Government Bond Index. The Salomon
Brothers World Government Bond Index is an unmanaged index of fixed-rate bonds
having a maturity of one year or more, and is widely recognized as a benchmark
of fixed income performance on a world-wide basis.
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, a Fund's performance reflects the effect
of that Fund's business and operating expenses. While index comparisons may be
useful to provide a benchmark for a Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in the one index.
Moreover, the index performance data does not reflect any assessment of the risk
of the investments included in the index.
Comparison of Change in Value of $10,000 Hypothetical Investments in High
Income Fund Versus
Merrill Lynch High Yield Master Index
[Graph comparing total return of High Income Fund shares to performance of
Merrill Lynch High Yield
Master Index]
Average Annual Total Return at 12/31/97(1)
1 year 5 year 10 year
Total returns and the ending account value in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1)The inception date of the Fund was 4/30/86.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Bond
Fund Versus Lehman Brothers Corporate Bond Index
[Graph comparing total return of Bond Fund shares to performance of Lehman
Brothers Corporate Bond
Index]
Average Annual Total Returns at 12/31/97(1)
1 year 5 year 10 year
Total returns and the ending account value in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1) The inception date of the Fund was 4/3/85. Past performance is not
predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Aggressive Growth Fund
Versus S&P 500 Index
[Graph comparing total return of Aggressive Growth Fund shares to performance of
S&P 500 Index]
Average Annual Total Returns at 12/31/97(1)
1 year 5 year 10 year
Total returns and the ending account value in the graph show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1) The inception date of the Fund was 8/15/86. Past performance is not
predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Growth
Fund Versus S&P 500
Index
[Graph comparing total return of Growth Fund shares to performance of S&P 500
Index]
Average Annual Total Returns at 12/31/97(1)
1 year 5 years 10 Years
Total returns and the ending account value in the graph show change in share
value and reflect reinvestment of all dividends and capital gains distributions.
(1) The inception date of the Fund was 4/3/85. Past performance is not
predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Multiple
Strategies Fund
Versus S&P 500 Index and Lehman Brothers Aggregate Bond Index
[Graph comparing total return of Multiple Strategies Fund shares to performance
of S&P 500 Index and Lehman Brothers Aggregate Bond Index]
Average Annual Total Returns at 12/31/97(1)
1 year 5 years 10 years
Total returns and the ending account value in the graph show change in share
value and reflect reinvestment of all dividends and capital gains distributions.
The performance information in the graph for the S&P 500 Index begins on
1/31/87. (1) The inception date of the Fund was 2/9/87. Past performance is not
predictive of future performance. Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Global
Securities Fund Versus
Morgan Stanley World Index
[Graph comparing total return of Global Securities Fund shares to performance
of Morgan Stanley
World Index]
Average Annual Total Returns at 12/31/97(1)
1 year 5 years Life of Fund
Total returns and the ending account value in the graph show change in share
value and reflect reinvestment of all dividends and capital gains distributions.
The performance information in the graph for the Morgan Stanley World Index
begins on 10/31/90. (1) The inception date of the Fund was 11/12/90. Past
performance is not predictive of future performance. Graphs are not drawn to
same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Strategic Bond Fund Versus
Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government
Bond Index
[Graph comparing total return of Strategic Bond Fund to performance of Lehman
Brothers Aggregate
Bond Index and Salomon Brothers World Government Bond Index]
Average Annual Total Returns at 12/31/97(1)
1 year Life of Fund
- --------------
Total returns and the ending account value in the graph show change in share
value and reflect reinvestment of all dividends and capital gains distributions.
The performance information in the graph for the Lehman Brothers Aggregate Bond
Index and the Salomon Brothers World Government Bond Index begins on 4/30/93.
(1) The inception date of the Fund was 5/3/93. Past performance is not
predictive of future performance. Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Growth &
Income Fund Versus
S&P 500 Index
[Graph comparing total return of Growth & Income Fund to performance of S&P
500]
Cumulative Total Return at 12/31/97(1)
1 year Life of Fund
- -------------------------
Total returns and the ending account value in the graph show change in share
value and reflect reinvestment of all dividends and capital gains distributions.
The performance information in the graph for the S&P 500 Index begins on
6/30/95. (1) The inception date of the Fund was 7/5/95. Past performance is not
predictive of future performance. Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Shares of each Fund are offered for purchase by Accounts as an investment
medium for variable life insurance policies and variable annuity contracts and
other insurance company separate accounts, as described in the accompanying
Account Prospectus. The sale of shares will be suspended during any period when
the determination of net asset value is suspended and may be suspended by the
Board of Trustees whenever the Board judges it in that Fund's best interest to
do so. Shares of each Fund are offered at their respective offering price, which
(as used in this Prospectus and the Statement of Additional Information) is net
asset value (without sales charge).
Classes of Shares. The Funds offer an investor two different classes of shares,
one without designation and Class 2 shares. The different classes of shares
represent investments in the same portfolio of securities of a Fund but may be
subject to different expenses and will likely have different share prices.
|X| Service Plan for Class 2 Shares. The Trust has adopted Service Plans
for Class 2 shares of each Fund to reimburse the Distributor for a portion of
its costs incurred in connection with the personal service and maintenance of
shareholder accounts that hold Class 2 shares. Reimbursement is made quarterly
at an annual rate that may not exceed 0.25% of the average annual net assets
(currently set at 0.10% of the average annual net assets) of Class 2 shares of
each Fund. The Distributor uses all of those fees to reimburse insurance company
separate account sponsors quarterly for providing personal service and
maintenance of accounts of their customers that hold Class 2 shares and to
reimburse itself (if the Trust'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 other things, answering customer
inquiries about the Funds, assisting in establishing and maintaining accounts
holding Class 2 shares and providing other services at the request of the Trust
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 2 shares held
in accounts of the insurance company separate account sponsors. The payments
under the Plan increase the annual expenses of Class 2 shares. For more details,
please refer to "Service Plans" in the Statement of Additional Information.
All purchase orders are processed at the offering price next determined
after receipt by the Trust of a purchase order in proper form. The offering
price (and net asset value) is determined as of the close of The New York Stock
Exchange, which is normally 4:00 P.M., New York time, but may be earlier on some
days. Net asset value per share of each Fund is determined by dividing the value
of that Fund's net assets by the number of its shares outstanding. The Board of
Trustees has established procedures for valuing each Fund's securities. In
general, those valuations are based on market value. Under Rule 2a-7, the
amortized cost method is used to value Money Fund's net asset value per share,
which is expected to remain fixed at $1.00 per share except under extraordinary
circumstances; there can be no assurance that Money Fund's net asset value will
not vary. Further details are in "About Your Account-How to Buy Shares - Money
Fund Net Asset Valuation" in the Statement of Additional Information.
How to Sell Shares
Payment for shares tendered by an Account for redemption is made ordinarily
in cash and forwarded within seven days after receipt by the Trust's transfer
agent, OppenheimerFunds Services (the "Transfer Agent"), of redemption
instructions in proper form, except under unusual circumstances as determined by
the SEC. The Trust understands that payment to the Account owner will be made in
accordance with the terms of the accompanying Account Prospectus. The redemption
price will be the net asset value next determined after the receipt by the
Transfer Agent
of a request in proper form. The market value of the securities in the
portfolios of the Funds is subject to daily fluctuations and the net asset value
of the Funds' shares (other than shares of the Money Fund) will fluctuate
accordingly. Therefore, the redemption value may be more or less than the
investor's cost.
Dividends, Capital Gains And Taxes
Dividends of Money Fund. The Trust intends to declare Money Fund's dividends
from its net investment income on each day the New York Stock Exchange is open
for business. Such dividends will be payable on shares held of record at the
time of the previous determination of net asset value. Daily dividends accrued
since the prior dividend payment will be paid to shareholders monthly as of a
date selected by the Board of Trustees. Money Fund's net income for dividend
purposes consists of all interest income accrued on portfolio assets, less all
expenses of that Fund for such period. Accrued market discount is included in
interest income; amortized market premium is treated as an expense. Although
distributions from net realized gains on securities, if any, will be paid at
least once each year, and may be made more frequently, Money Fund does not
expect to realize long-term capital gains, and therefore does not contemplate
payment of any capital gains distribution. Distributions from net realized gains
will not be distributed unless Money Fund's capital loss carry forwards, if any,
have been used or have expired. Money Fund seeks to maintain a net asset value
of $1.00 per share for purchases and redemptions. To effect this policy, under
certain circumstances the Money Fund may withhold dividends or make
distributions from capital or capital gains (see "Money Fund Net Asset
Valuation" in the Statement of Additional Information).
Dividends and Distributions of High Income Fund, Bond Fund, Strategic Bond Fund,
Growth & Income Fund and Multiple Strategies Fund. The Trust intends to declare
High Income Fund, Bond Fund, Strategic Bond Fund, Growth & Income Fund and
Multiple Strategies Fund dividends quarterly, payable in March, June, September
and December.
Dividends and Distributions of Aggressive Growth Fund, Growth Fund, Small Cap
Growth Fund and Global Securities Fund. The Trust intends to declare Aggressive
Growth Fund, Growth Fund, Small Cap Growth Fund and Global Securities Fund
dividends on an annual basis.
Capital Gains. Any Fund (other than Money Fund) may make a supplemental
distribution annually in December out of any net short-term or long-term capital
gains derived from the sale of securities, premiums from expired calls written
by the Fund, and net profits from hedging transactions. Each such Fund may also
make a supplemental distribution of capital gains and ordinary income following
the end of its fiscal year. All dividends and capital gains distributions paid
on shares of any of the Funds are automatically reinvested in additional shares
of that Fund at net asset value determined on the distribution date. There are
no fixed dividend rates and there can be no assurance as to payment of any
dividends or the realization of any capital gains.
Tax Treatment to the Account As Shareholder. Dividends paid by each Fund from
its ordinary income and distributions of each Fund's net realized short-term or
long-term capital gains are includable in gross income of the Accounts holding
such shares. The tax treatment of such dividends and distributions depends on
the tax status of that Account.
Tax Status of the Funds. If the Funds qualify as "regulated investment
companies" under the Internal Revenue Code, the Trust will not be liable for
Federal income taxes on amounts paid as dividends and distributions from any of
the Funds. The Funds did qualify during their last
fiscal year and the Trust
intends that they will qualify in current and future years. However, the Code
contains a number of complex tests relating to qualification which any Fund
might not meet in any particular year . If any Fund does not so qualify, it
would be treated for tax purposes as an ordinary corporation and would receive
no tax deduction for payments made to shareholders of that Fund. The above
discussion relates solely to Federal tax laws. This discussion is not exhaustive
and a qualified tax adviser should be consulted.
-4-
<PAGE>
APPENDIX A - DESCRIPTION OF TERMS
Some of the terms used in the Prospectus and the Statement of Additional
Information are described
below:
Bank obligations include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually 14 days to one year) at
a stated interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer; these instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Bank notes are short-term direct
credit obligations of the issuing bank or bank holding company.
Commercial paper consists of short-term (usually 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations. Variable rate master demand notes are obligations that permit the
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement between the holder and the borrower. The holder has the right
to increase the amount under the note at any time up to the face amount, or to
decrease the amount borrowed, and the borrower may repay up to the face amount
of the note without penalty.
Corporate obligations are bonds and notes issued by corporations and other
business organizations, including business trusts, in order to finance their
long-term credit needs.
Letters of credit are obligations by the issuer (a bank or other person) to
honor drafts or other demands for payment upon compliance with specified
conditions.
Securities issued or guaranteed by the United States Government or its agencies
or instrumentalities include issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Such
agencies and instrumentalities include, but are not limited to, Bank for
Cooperatives, Federal Financing Bank, Federal Home Loan Bank, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Issues of the United States Treasury
are direct obligations of the United States Government. Issues of agencies or
instrumentalities are (i) guaranteed by the United States Treasury, or (ii)
supported by the issuing agency's or instrumentality's right to borrow from the
United States Treasury, or (iii) supported by the issuing agency's or
instrumentality's own credit.
A-1
<PAGE>
APPENDIX B - DESCRIPTION OF SECURITIES RATINGS
This is a description of (i) the two highest rating categories for Short Term
Debt and Long Term Debt by the Rating Organizations referred to under
"Investment Objectives and Policies -- Money Fund", and (ii) additional rating
categories that apply principally to investments by High Income Fund, Strategic
Bond Fund and Bond Fund. The rating descriptions are based on information
supplied by the Rating Organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months),
are judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated
issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by
the following characteristics: (a) leveling market positions in well-established
industries; (b) high rates of return on funds employed; (c) conservative
capitalization structures with moderate reliance on debt and ample asset
protection; (d) broad margins in earning coverage of fixed financial charges and
high internal cash generation; and (e) well established access to a range of
financial markets and assured sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of no more
than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However, the relative degree of
safety is not as high as for issues designated "A-1".
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of assurance for
timely payment.
F-1: Very strong credit quality; assurance of timely payment is only slightly
less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned "F-1+" or "F-1"
ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial
paper (defined by Duff & Phelps as obligations with maturities, when issued, of
under one year), asset-backed commercial paper, and certificates of deposit (the
ratings cover all obligations of the institution with maturities, when issued,
of under one year, including bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic, or
financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to
commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding timely
repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
Long Term Debt Ratings.
These rating categories apply principally to investments by High Income Fund,
Strategic Bond Fund and Bond Fund. For Money Fund only, the two highest rating
categories of each Rating Organization are relevant for securities purchased
with a remaining maturity of 397 days or less, or for rating issuers of
short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the "Aaa"
group, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in "Aaa" securities or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
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: 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.
Ba: Judged to have speculative elements; their future cannot be considered
well-assured. Often the protection of interest and principal payments may be
very moderate and not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Of poor standing and may be in default or there may be present elements
of danger with respect to principal or interest.
Ca: Represent obligations which are speculative in a high degree and are
often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" in each generic rating
classification from "Aa" through "B" in its corporate bond rating system. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.
Standard & Poor's: Bonds are rated as follows:
AAA: The highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
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: 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 capacity than for bonds in the "A"
category.
BB, B, CCC, CC: 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 equality 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.
Fitch
Investment Grade Bond Ratings
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
Speculative Grade Bond Ratings
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements. B: Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflect the obligor's limited
margin of safety and the need for reasonable business and economic activity
through out the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD and D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA," "DDD," "DD," or "D" categories.
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than the risk-
free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions. Plus (+) and
minus (-) signs are used in the "AA" category to indicate the relative position
of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are
rated as follows:
AAA: The lowest expectation for investment risk. Capacity for timely repayment
of principal and interest is substantial such that adverse changes in business,
economic, or financial conditions are unlikely to increase investment risks
significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in
business, economic, or financial conditions may increase
investment risk albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to denote
relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings assess the
likelihood of receiving payment of principal and interest on a timely basis and
incorporate TBW's opinion as to the vulnerability of the company to adverse
developments, which may impact the market's perception of the company, thereby
affecting the marketability of its securities. A: Possesses an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to its natural money markets. If weakness or
vulnerability exists in any aspect of the company's business, it is entirely
mitigated by the strengths of the organization.
A/B: The company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, it not quite as
favorable as for companies in the highest rating category.
B-1
<PAGE>
APPENDIX TO PROSPECTUS
Graphic material included in Prospectus of Oppenheimer Variable Account
Funds: "Comparison
of Total Return of Oppenheimer Variable Account Funds with Broad-Based
Indices - Changes in Value
of a $10,000 Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer Variable
Account Funds (the "Funds") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in shares of the Funds for
the life of each Fund (except Oppenheimer Money Fund) and comparing such values
with the same investments over the same time periods in Broad-Based Indices. Set
forth below are the relevant data points that will appear on the linear graphs.
Additional information with respect to the foregoing, including a description of
the Broad-Based Indices, is set forth in the Prospectus under "How Have the
Funds Performed? - Management's Discussion of Performance."
Merrill Lynch
Fiscal High Yield
Year Ended High Income Fund Master Index
12/31/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Brothers
Fiscal Corporate
Year Ended Bond Fund Bond Index
12/31/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Fiscal Capital
Year Ended Appreciation Fund S&P 500 Index
12/31/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Fiscal
Year Ended Growth Fund S&P 500 Index
12/31/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Lehman Brothers
Fiscal Multiple Aggregate
Year Ended Strategies Fund S&P 500 Index Bond Index
- ---------- --------------- ------------- ----------
12/31/87
12/31/88
12/31/89
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Fiscal Global Morgan Stanley
Year Ended Securities Fund World Index
11/12/90(1)
12/31/90
12/31/91
12/31/92
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
Lehman Solomon Brothers
Brothers World
Fiscal Strategic Aggregate Government
Year Ended Bond Fund Bond Index Bond Index
05/03/93(1)
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
- -----------------------
(1) Commencement of operations.
Fiscal Growth & S&P
Year Ended Income Fund 500 Index
07/05/95(1)
12/31/95
12/31/96
12/31/97
- -----------------------
(1) Commencement of operations.
B-2
<PAGE>
Oppenheimer Variable Account Funds
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
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 Trust, OppenheimerFunds, 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.
B-3
<PAGE>
Oppenheimer Variable Account Funds
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated May 1, 1998.
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company
consisting
of ten separate Funds (the "Funds"):
Oppenheimer Money Fund ("Money Fund")
Oppenheimer High Income Fund ("High Income Fund")
Oppenheimer Bond Fund ("Bond Fund")
Oppenheimer Strategic Bond
Fund ("Strategic Bond Fund")
Oppenheimer Aggressive Growth Fund ("Aggressive Growth Fund")
Oppenheimer Growth Fund ("Growth Fund")
Oppenheimer Small Cap Growth Fund ("Small Cap Growth Fund"). Prior to May 1,
1998, this Fund was named "Oppenheimer Capital Appreciation Fund." Oppenheimer
Global Securities Fund ("Global Securities Fund") Oppenheimer Multiple
Strategies Fund ("Multiple Strategies Fund") Oppenheimer Growth & Income Fund
("Growth & Income Fund") Shares of the Funds are sold to provide benefits under
variable life insurance policies and variable annuity contracts and other
insurance company separate accounts (collectively the "Accounts"), as described
in the Account Prospectus.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated May 1, 1998. It should be read together with the Trust's
Prospectus, which may be obtained by writing to the Funds' Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, or by
calling the Transfer Agent at the toll-free number shown above, and the Account
Prospectus.
TABLE OF CONTENTS
Page
About the Funds
Investment Objectives and Policies...........................................
Investment Policies and Strategies......................................
Other Investment Techniques and Strategies.............................
Other Investment Restrictions..........................................
How the Funds are Managed...................................................
Organization and History...............................................
Trustees and Officers of the Trust.....................................
The Manager and Its Affiliates.........................................
Brokerage Policies of the Funds.............................................
Performance of the Funds......................................................
Class 2 Service Plans......................................................
About Your Account
How to Buy Shares...........................................................
Dividends, Capital Gains and Taxes..........................................
Additional Information About the Funds......................................
Page
Financial Information About the Funds
Independent Auditors' Report................................................
Financial Statements........................................................
Appendix A: Industry Classifications......................................A-1
Appendix B: Major Shareholders.............................................B-1
ABOUT THE FUNDS
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and policies of
each of the Funds are described in the Prospectus. Set forth below is
supplemental information about those policies. Certain capitalized terms used in
this Additional Statement are defined in the Prospectus.
o Money Fund. The Prospectus describes "Eligible Securities" in which Money
Fund may invest and indicates that if a security's rating is downgraded, the
Manager and/or the Board may have to reassess the security's credit risk. If a
security has ceased to be a First Tier Security, the Manager will promptly
reassess whether the security continues to present "minimal credit risk." If the
Manager becomes aware that any Rating Organization has downgraded its rating of
a Second Tier Security or rated an unrated security below its second highest
rating category, the Trust's Board of Trustees shall promptly reassess whether
the security presents minimal credit risk and whether it is in Money Fund's best
interests to dispose of it; but if Money Fund disposes of the security within 5
days of OppenheimerFunds, Inc. (the "Manager") learning of the downgrade, the
Manager will provide the Board with subsequent notice of such downgrade. If a
security is in default, or ceases to be an Eligible Security, or is determined
no longer to present minimal credit risks, the Board must determine whether it
would be in Money Fund's best interests to dispose of the security. The Rating
Organizations currently designated as such by the Securities and Exchange
Commission ("SEC") are Standard & Poor's Corporation, Moody's Investors Service,
Inc., Fitch Investors Service, L.P., Duff & Phelps, Inc., IBCA Limited and its
affiliate, INCA, Inc., and Thomson BankWatch, Inc. See Appendix B to the
Prospectus for a description of the rating categories of the Rating
Organizations.
o Time Deposits. The Fund may invest in fixed time deposits, which
are non-negotiable deposits in a bank for a specified period of time at a
stated interest rate, whether or not subject to
withdrawal penalties; however, such deposits which are subject to such
penalties, other than deposits maturing in less than 7 days, are subject to the
10% investment limitation for illiquid securities set forth in "Other Investment
Techniques and Strategies - Illiquid and Restricted
Securities" in the Prospectus.
o Floating Rate/Variable Rate Notes. Money Fund may invest in instruments
with floating or variable interest rates. The interest rate on a floating rate
obligation is based on a stated prevailing market rate, such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper
or bank certificates of deposit, or some other standard, and is adjusted
automatically each time such market rate is adjusted. The interest rate on a
variable rate obligation is also based on a stated prevailing market rate but is
adjusted automatically at a specified interval of no less than one year. Some
variable rate or floating rate obligations in which Money Fund may invest have a
demand feature entitling the holder to demand payment at an amount approximately
equal to amortized cost or the principal amount thereof plus accrued interest at
any time, or at specified intervals not exceeding one year. These notes may or
may not be backed by bank letters of credit. The interest rates on these notes
fluctuate from time to time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. Generally,
the changes in the interest rate on such securities reduce the fluctuation in
their market value. As interest rates decrease or increase, the potential for
capital appreciation or depreciation is less than that for fixed-rate
obligations of the same maturity.
o Master Demand Notes. Master demand notes are corporate obligations that
permit the investment of fluctuating amounts by Money Fund at varying rates of
interest pursuant to direct arrangements between Money Fund, as lender, and the
corporate borrower that issues the note. These notes permit daily changes in the
amounts borrowed. Money Fund has the right to increase the amount under the note
at any time up to the full amount provided by the note agreement, or to decrease
the amount. The borrower may repay up to the full amount of the note at any time
without penalty. It is not generally contemplated that master demand notes will
be traded because they are direct lending arrangements between the lender and
the borrower. There is no secondary market for these notes, although they are
redeemable and thus immediately repayable by the borrower at face value, plus
accrued interest, at any time. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, Money Fund's
right to redeem is dependent upon the ability of the borrower to pay principal
and interest on demand. In evaluating the master demand arrangements, the
Manager considers the earning power, cash flow, and other liquidity ratios of
the issuer. If they are not rated by Rating Organizations, Money Fund may invest
in them only if, at the time of an investment, they are Eligible Securities. The
Manager will continuously monitor the borrower's financial ability to meet all
of its obligations because Money Fund's liquidity might be impaired if the
borrower were unable to pay principal and interest on demand. There is no limit
on the amount of the Money Fund's assets that may be invested in floating rate
and variable rate obligations. Floating rate or variable rate obligations which
do not provide for recovery of principal and interest within seven days' notice
will be subject to the limitations applicable to illiquid securities described
in "Other Investment Techniques and Strategies -Illiquid and Restricted
Securities" in the Prospectus.
o Commodity Futures Contracts. High Income Fund, Strategic Bond and Bond
Fund (collectively, the "Income Funds") may invest a portion of their assets in
commodity futures contracts (referred to as commodity futures). Commodity
futures may be based upon commodities within five main commodity groups: (1)
energy, which includes crude oil, natural gas, gasoline and heating oil; (2)
livestock, which includes cattle and hogs; (3) agriculture, which includes
wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals,
which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious
metals, which includes gold, platinum and silver. The Income Funds may purchase
and sell commodity futures contracts, options on futures contracts and options
and futures on commodity indices with respect to these five main commodity
groups and the individual commodities within each group, as well as other types
of commodities.
o Characteristics of the commodity futures markets. A commodity futures
contract is an agreement between two parties in which one party agrees to buy an
asset from the other party at a later date at a price and quantity agreed upon
when the contract is made. In the United States, commodity futures contracts are
traded on futures exchanges. These futures exchanges offer a central marketplace
for transactions in futures contracts, a clearing corporation to process trades,
a standardization of expiration dates and contract sizes, and the availability
of a secondary market. Futures markets also regulate the terms and conditions of
delivery as well as the maximum permissible price movement during a trading
session. Additionally, the commodity futures exchanges have position limit rules
which limit the amount of futures contracts that any one party may hold in a
particular commodity at any point in time. These position limit rules are
designed to prevent any one participant from controlling a significant portion
of the market.
o Comparison to forward contracts. Futures contracts and forward contracts
have the same economic effect: both are an agreement to purchase a specified
amount of a specified commodity at a specified future date for a price agreed
upon at the time the contract is entered into. However, there are significant
differences in the two types of contracts. Forward contracts are individually
negotiated transactions and are not exchange traded. Therefore, under a forward
contract, the Income Funds would make a commitment to carry out the purchase or
sale of the underlying commodity at expiration.
o Storage Costs. As in the financial futures markets, there are hedgers
and speculators in the commodity futures markets. However, unlike financial
instruments, commodities entail costs of physical storage when purchased. For
instance, a large manufacturer of baked goods that wishes to hedge against a
rise in the price of wheat has two basic choices: (i) it can purchase the wheat
today in the cash market and store the wheat at its cost until it needs the
wheat to produce baked goods, or (ii) it can buy commodity futures related to
wheat. The price of the commodity futures will reflect the storage costs
associated with purchasing the physical commodity. To the extent that these
storage costs change for an underlying commodity while the Income Funds are
"long" (that is, owns) futures contracts on that commodity, the value of the
futures contract may change commensurately.
o Reinvestment Risk. In the commodity futures markets, if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will sell futures contracts to lock in the price of the commodity at delivery in
the future. In order to induce speculators to take the corresponding purchase
side of the same futures contract, the commodity producer must be willing to
sell the futures contract at a price which is below the expected future spot
price. Conversely, if the predominant group of hedgers in the futures market are
the purchasers of the underlying commodity who purchase futures contracts to
hedge against a rise in prices, then speculators will take the short side of the
futures contract only if the futures price is greater than the expected future
spot price of the commodity.
o Strategies. The changing strategies of the hedgers and speculators in
the commodity markets can determine whether futures prices are above or below
the expected future spot price. This can have significant implications for the
Income Funds when it is time to reinvest the proceeds from a maturing futures
contract into a new futures contract. If the strategy of hedgers and speculators
in futures markets has shifted such that commodity purchasers are the
predominant group of hedgers in the market, the Income Funds might have to
reinvest at higher futures prices or choose other related commodity investments.
o Additional Economic Factors. The values of commodities which underlie
commodity futures contracts are subject to additional variables which may be
less significant in the case of traditional securities such as stocks and bonds.
Variables such as drought, floods, weather, livestock disease, embargoes and
tariffs may have a greater impact on commodity prices and commodity-linked
instruments, including futures contracts, Hybrid Instruments, commodity options
and commodity swaps, than on traditional securities. These additional variables
may create additional investment risks which subject the Income Funds'
commodity-related investments to greater volatility than investments in
traditional securities.
o Leverage. There is much greater leverage in futures trading than in
trading stocks and bonds. As a registered investment company, the Income Funds
must pay in full for all securities it purchases. In other words, the Income
Funds are not allowed to purchase securities on margin. However, the Income
Funds are allowed to purchase futures contracts on margin where the initial
margin requirements are typically between 3 and 6 percent of the face value of
the contract. That means the Income Funds are required to pay up front only
between 3 to 6 percent of the face value of the futures contract. Therefore, the
Income Funds have a higher degree of leverage in its futures contract purchases
than in its stock purchases. As a result there may be greater volatility in the
rates of return on futures contract purchases than on stock purchases.
o Price volatility. Despite the daily price limits on the futures
exchanges, the short-term price volatility of commodity futures contracts has
been historically greater than that for traditional securities such as stocks
and bonds. To the extent that the Income Funds invest in commodity futures
contracts, the assets of the Income Funds, and hence the net asset value of a
Fund's shares, may be subject to greater volatility.
o Marking-to-market futures positions. The futures clearinghouse marks
every futures contract to market at the end of each trading day, to ensure that
the outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Income Funds'
futures positions have declined in value, the Income Funds may be required to
post additional margin to cover that decline. Alternatively, if the Income
Funds' futures positions have increased in value, that increase will be credited
to the Income Funds' accounts.
o Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. The
market value of fixed income securities in which Money Fund, High Income Fund,
Bond Fund and Strategic Bond Fund may invest generally will be affected by
changes in the level of interest rates. An increase in interest rates will tend
to reduce the market value of fixed income investments, and a decline in
interest rates will tend to increase their value. In order to take advantage of
differences in securities prices and yields or of fluctuations in interest
rates, consistent with their respective investment objectives, these Funds may
trade for short-term profits.
o High Yield Securities. As stated in the Prospectus, the corporate debt
in which High Income Fund and Strategic Bond Fund will principally invest may be
in the lower rating categories.
Risks of high yield securities include: (i) limited liquidity and
secondary market support, (ii) substantial market price volatility resulting
from changes in prevailing interest rates, (iii) subordination 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 which may cause the Fund to invest premature redemption proceeds 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, their prices have at times experienced significant and rapid decline
when a substantial number of holders decided to sell. A decline is also likely
in the high yield bond market during an 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 net asset value of these Funds. For example,
federally-insured savings and loan associations have been required to divest
their investments in high yield bonds.
o Private Label Mortgages. The Funds may also invest in private label
mortgages which are real asset-linked mortgages issued by entities other than
United States government agencies. Private label mortgages are offered in
tranches with debt layers ranging in credit quality from AAA to,
potentially, B.
o Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth &
Income Fund, Strategic Bond Fund , Global Securities Fund and Small Cap Growth
Fund. The investment risks and rewards of certain of the investment policies of
these Funds are discussed below.
o Securities of Growth-Type Companies. Aggressive Growth Fund, Growth
Fund, Small Cap Growth Fund and Global Securities Fund may emphasize securities
of "growth-type" companies. Such issuers typically are those whose goods or
services have relatively favorable long-term prospects for increasing demand, or
ones which develop new products, services or markets and normally retain a
relatively large part of their earnings for research, development and investment
in capital assets. They may include companies in the natural resources fields or
those developing industrial applications for new scientific knowledge having
potential for technological innovation, such as nuclear energy, oceanography,
business services and new customer products.
o Small, Unseasoned Companies. Each of these Funds may invest in
securities of small unseasoned companies. These are companies that have been in
operation for less than three years, even after including the operations of any
of their predecessors. Securities of these companies may have a limited
liquidity (which means that a Fund may have difficulty selling them at an
acceptable price when it wants to) and the price of those securities may be
volatile.
o Domestic Securities. Investments by Strategic Bond Fund, Growth & Income
Fund and Multiple Strategies Fund in fixed-income securities issued by domestic
corporations may include participation interests, asset-backed securities and
other debt obligations (bonds, debentures, notes, mortgage-backed securities and
CMOs) together with preferred stocks.
o Over-the-counter options. Small Cap Growth Fund may trade over the
counter options. Over the counter options are not traded on an exchange and are
traded directly with dealers. To the extent an over the counter option is a
tailored investment for a Fund, it may be less liquid than an exchange traded
option. Further, similar to hybrid instruments, over the counter options contain
counterparty risk. This Fund will take on the credit risk that the seller of an
over the counter option will perform its obligations under the option agreement
if Small Cap Growth exercises the option. To minimize this risk, either Fund
intends to transact, to the extent practicable, with issuers that have an
investment grade credit rating.
o Investment Policies - Collateralized Securities. Each of these
Funds may invest in the collateralized securities described below. High
Income Fund, Bond Fund and Strategic Bond Fund are most likely to make such
investments.
o Asset-Backed Securities. The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been exhausted.
The risks of investing in asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The underlying
loans are subject to prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as
described above for prepayments of a pool of mortgage loans underlying
mortgage-backed securities.
o Mortgage-Backed Securities. These securities represent participation
interests in pools of residential mortgage loans which may or may not be
guaranteed by agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which generally provide for
periodic payment of interest in fixed or determinable amounts (usually
semi-annually) with principal payments at maturity or specified call dates.
Mortgage-backed securities may be backed by the full faith and credit of the
U.S. Treasury (e.g., direct pass-through certificates of Government National
Mortgage Association); some are supported by the right of the issuer to borrow
from the U.S. Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer itself. Those
guarantees do not extend to the value or yield of the mortgage-backed securities
themselves or to the net asset value of the Fund's shares. Any of those
government agencies may also issue collateralized mortgage-backed obligations,
discussed below.
The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. The actual life of any particular
pool will be shortened by any unscheduled or early payments of principal and
interest. Principal prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to predict accurately
the average life of a particular pool. Yield on such pools is usually computed
by using the historical record of prepayments for that pool, or, in the case of
newly-issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield realized
by the Fund to differ from the yield calculated on the basis of the expected
average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as do the values of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise to the extent that the values of other debt securities rise,
because of the prepayment feature of pass-through securities. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments it
receives may occur at times when available investments offer higher or lower
rates than the original investment, thus affecting the yield of the Fund.
Monthly interest payments received by the Fund have a
compounding effect
which may increase the yield to the Fund more than debt obligations that pay
interest semi-annually. Because of those factors, mortgage-backed securities may
be less effective than Treasury bonds of similar maturity at maintaining yields
during periods of declining interest rates. The Fund may purchase
mortgage-backed securities at a premium or at a discount. Accelerated
prepayments adversely affect yields for pass-through securities purchased at a
premium (i.e., at a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not have been fully
amortized at the time the obligation is repaid. The opposite is true for
pass-through securities purchased at a discount. The Fund may purchase
mortgage-backed securities at a premium or at a discount.
These Funds may invest in "stripped" mortgage backed securities, in which
the principal and interest portions of the security are separated and sold.
Stripped mortgage-backed securities usually have at least two classes each of
which receives different proportions of interest and principal distributions on
the underlying pool of mortgage assets. One common variety of stripped
mortgage-backed security has one class that receives some of the interest and
most of the principal, while the other class receives most of the interest and
remainder of the principal. In some cases, one class will receive all of the
interest (the "interest-only" or "IO" class), while the other class will receive
all of the principal (the "principal-only" or "PO" class). Interest only
securities are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. An increase in principal payments
or prepayments will reduce the income available to the IO security. In other
types of CMOs, the underlying principal payments may apply to various classes in
a particular order, and therefore the value of certain classes or "tranches" of
such securities may be more volatile that the value of the pool as a whole, and
losses may be more severe than on other classes.
o Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality, or a
private issuer. Such bonds generally are secured by an assignment to a trustee
(under the indenture pursuant to which the bonds are issued) of collateral
consisting of a pool of mortgages. Payments with respect to the underlying
mortgages generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through to the
holders of the CMOs as such (i.e., the character of payments of principal and
interest is not passed through, and therefore payments to holders of CMOs
attributable to interest paid and principal repaid on the underlying mortgages
do not necessarily constitute income and return of capital, respectively, to
such holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs. CMOs often are issued in two or more classes
with different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying mortgages
are not passed through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are used to pay
interest on each class and to retire successive maturities (known as "tranches")
in sequence. Unlike other mortgage-backed securities (discussed above), CMOs are
designed to be retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
o Participation Interests. Strategic Bond Fund, Global Securities Fund,
High Income Fund, Multiple Strategies Fund and Growth & Income Fund may invest
in participation interests, subject to the limitation, described in "Illiquid
and Restricted Securities" in the Prospectus, on investments by the Fund in
illiquid investments. Participation interests provide the Fund an undivided
interest in a loan made by the issuing financial institution in the proportion
that the Fund's participation interest bears to the total principal amount of
the loan. It is currently intended that no more than 5% of the net assets of
Multiple Strategies Fund, Growth & Income Fund or Strategic Bond Fund can be
invested in participation interests of the same borrower. Participation
interests are primarily dependent upon the creditworthiness of the borrowing
corporation, which is obligated to make payments of principal and interest on
the loan, and there is a risk that such borrowers may have difficulty making
payments. In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the net asset value of its shares. In the event of a
failure by the financial institution to perform its obligation in connection
with the participation agreement, the Fund might incur certain costs and delays
in realizing payment or may suffer a loss of principal and/or interest.
o Foreign Securities. As noted in the Prospectus, each Fund, other than
Money Fund, may invest in securities (which may be denominated in U.S. dollars
or non-U.S. currencies) issued or guaranteed by foreign corporations, certain
supranational entities (described below) and foreign governments or their
agencies or instrumentalities, and in securities issued by U.S. corporations
denominated in non-U.S. currencies. All of these are considered to be "foreign
securities." Money Fund may invest in certain U.S. dollar-denominated foreign
securities, as described in the Prospectus. The obligations of foreign
governmental entities may or may not be supported by the full faith and credit
of a foreign government. Obligations of supranational entities include those of
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European Coal and
Steel Community, the Asian Development Bank and the Inter-American Development
Bank. The governmental members, or "stockholders," usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital" contributed
by members at the entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their commitments.
Investing in foreign securities, and in particular in securities in
emerging market countries, involves considerations and risks not typically
associated with investing in securities in the U.S. The values of foreign
securities will be affected by changes in currency rates or exchange control
regulations or currency blockage, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or abroad) or changed circumstances in dealings
between nations. Costs will be incurred in connection with conversions between
various currencies. Foreign brokerage commissions are generally higher than
commissions in the U.S., and foreign securities markets may be less liquid, more
volatile and less subject to governmental regulation than in the U.S.
Investments in foreign countries could be affected by other factors not
generally thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods.
Because each Fund, other than Money Fund, may purchase securities
denominated in foreign currencies, a change in the value of any such currency
against the U.S. dollar will result in a change in the U.S. dollar value of each
Fund's assets and each Fund's income available for distribution. In addition,
although a portion of each Fund's investment income may be received or realized
in foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars, and absorb the cost of currency fluctuations. High
Income Fund, Strategic Bond Fund, Multiple Strategies Fund, Growth & Income Fund
and Global Securities Fund may engage in foreign currency exchange transactions
for hedging purposes to attempt to protect against changes in future exchange
rates. See "Hedging - Forward Contracts," below.
The values of foreign investments and the investment income derived from
them may also be affected unfavorably by changes in currency exchange control
regulations. Although each Fund, other than Money Fund, will invest only in
securities denominated in foreign currencies that at the time of investment do
not have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of currency
controls. In addition, the values of foreign securities will fluctuate in
response to changes in U.S. and foreign interest rates.
Investments in foreign securities offer potential benefits not available
from investments solely in securities of domestic issuers by offering 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. From time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be reimposed. If a Fund's
portfolio securities are held abroad, the countries in which they may be held
and the sub-custodians or depositories holding them must be approved by the
Trust's Board of Trustees to the extent that the approval is required under
applicable rules of the Securities and Exchange Commission.
Under normal market conditions, Global Securities Fund will invest its
assets in securities of issuers located in a minimum of five different foreign
countries; this minimum may be reduced to four foreign countries when foreign
country investments comprise less than 80% of Global Securities Fund's net
assets; to three foreign countries when such investments comprise less than 60%
of its net assets, to two foreign countries when such investments comprise less
than 40% of its net assets and to one foreign country when such investments
comprise less than 20% of its net assets. In addition, no more than 20% of
Global Securities Fund's net assets shall be invested in securities of issuers
located in any one foreign country; that limit shall be increased to 35% for
securities located in Australia, Canada, France, Japan, the United Kingdom or
Germany. None of the above percentage limits are fundamental policies.
o Warrants and Rights. As described in the Prospectus, each Fund other
than Money Fund may invest in warrants and rights. Warrants basically are
options to purchase equity securities at set prices valid for a specified period
of time. Their prices do not necessarily move in a manner parallel to the prices
of the underlying securities. Any price paid 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. Warrants and rights have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
o Repurchase Agreements. Each Fund may acquire securities that are subject
to repurchase agreements in order to generate income while providing liquidity
as set forth in the prospectus. Money Fund's repurchase agreements must comply
with the collateral requirements of Rule 2a-7 under the Investment Company Act.
In a repurchase transaction, a Fund acquires a security from, and simultaneously
resells it to, an approved vendor (a U.S. commercial bank or the U.S. branch of
a foreign bank or broker-dealer which has been designated a primary dealer in
government securities which must meet the credit requirements set by the Trust's
Board of Trustees from time to time) for delivery on an agreed-upon future date.
The resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day to day,
and delivery pursuant to resale typically will occur within one to five days of
the purchase. Repurchase agreements are considered "loans" under the Investment
Company Act, collateralized by the underlying security. The Funds' 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 Funds' Manager
will impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.
o Loans of Portfolio Securities. Each Fund may lend its respective
portfolio securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities and must consist of cash, bank letters of credit, U.S. Government
securities, or certain other cash equivalents. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Trust if
the demand meets the terms of the letter. Such terms and the issuing bank must
be satisfactory to the Trust. Any Fund lending its securities receives amounts
equal to the dividends declared or interest paid on the loaned securities during
the term of the loan as well as the interest on the collateral securities, less
any finders', administrative or other fees the Fund pays in connection with the
loan. A Fund may share the interest it receives on the collateral securities
with the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Board of Trustees. The
lending Fund will not lend its portfolio securities to any officer, trustee,
employee or affiliate of the Fund or its Manager. The terms of a Fund's loans
must meet certain tests under the Internal Revenue Code and permit it to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
o Borrowing. From time to time, the Funds (other than Money Fund) may
borrow from banks on an unsecured basis to invest the borrowed funds in
portfolio securities. Borrowing is subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks. The Investment
Company Act and the Fund's fundamental investment policies require that any such
borrowing will be made only to the extent that the value of that Fund's assets,
less its liabilities other than borrowings, is equal to at least 300% of all
borrowings including the proposed borrowing . If the value of such Fund's
assets, when computed in that manner, should fail to meet the 300% asset
coverage requirement, that Fund is required within three days to reduce its bank
debt to the extent necessary to meet such requirement. To do so, the Fund may
have to sell a portion of its investments at a time when it would otherwise not
want to sell the securities. Borrowing for investment increases both investment
opportunity and risk. Interest on money borrowed is an expense the Funds would
not otherwise incur, so that they may have little or no net investment income
during periods of substantial borrowings. Since substantially all of these
Funds' assets fluctuate in value whereas borrowing obligations are fixed, when a
Fund has outstanding borrowings, its net asset value will tend to increase and
decrease more when its portfolio assets increase or decrease than would
otherwise be the case. The Funds (including Money Fund) may also borrow as a
temporary measure for extraordinary or emergency purposes.
o When-Issued and Delayed Delivery Transactions. Each Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. Although a 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 commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve risk of loss if the value of the security declines prior to
the settlement date. During the period between commitment by a 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 identify assets to its Custodian, consisting of cash, U.S. Government
securities, or other high grade debt securities rated "A" or better by Moody's
or Standard & Poor's at least equal to the value of purchase commitments until
payment is made.
The Funds 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 a 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 to do so may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous. If any of
the Funds 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. 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.
To the extent any 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. Each 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 in a direction other
than that expected by the Manager before settlement will affect the value of
such securities and may cause loss to that Fund.
When-issued transactions and forward commitments allow a 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, a 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.
Other Investment Techniques and Strategies
Covered Calls and Hedging
As described in the Prospectus, each Fund (except Money Fund) may each
write covered calls and may also employ one or more types of Hedging
Instruments, including the futures identified in the Prospectus ("Futures").
The Funds' strategy of hedging with Futures and options on Futures will be
incidental to each such Fund's activities in the underlying cash market. When
hedging to attempt to protect against declines in the market value of the Fund's
portfolio, to permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate selling securities
for investment reasons, a given Fund would: (i) sell Futures, (ii) purchase puts
on such Futures or securities, or (iii) write covered calls on securities or on
Futures. When hedging to permit a Fund to establish a position in the securities
markets as a temporary substitute for purchasing individual securities (which
that Fund will normally purchase, and then terminate that hedging position), or
to attempt to protect against the possibility that a Fund's portfolio debt
securities are not fully included in a rise in the securities market, these
Funds may: (i) purchase Futures, or (ii) purchase calls on such Futures or on
securities.
When hedging to attempt to protect against declines in the dollar value of
a foreign currency- denominated security or in a payment on such security, a
Fund would: (a) purchase puts on that foreign currency or on foreign currency
Futures, (b) write calls on that currency or on such Futures, or (c) enter into
Forward Contracts at a lower or higher rate than the spot ("cash") rate.
Additional information about the Hedging Instruments these Funds may use is
provided below. At present, the Funds do not intend to purchase or sell Futures
or related options if, after any such purchase, the sum of initial margin
deposits on Futures and premiums paid for related options exceeds 5% of the
value of that Fund's total assets. Certain options on foreign currencies are
considered related options for this purpose. In the future, a 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 that
Fund's investment objective, legally permissible and adequately disclosed.
Writing Covered Call Options. When any of the Funds (except Money Fund) write a
call on a security, it receives a premium and agrees to sell the underlying
security to a purchaser of a corresponding call on the same security 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 security), regardless of
market price changes during the call period. Such Fund has retained the risk of
loss should the price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, each such 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 the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call expires unexercised, because a Fund retains the underlying
security and the premium received. Any such profits are considered short-term
capital gains for Federal income tax purposes, and when distributed by each such
Fund are taxable as ordinary income. If the Fund could not effect a closing
purchase transaction due to lack of a market, it would have to hold the callable
securities until the call expired or was exercised. Call writing may affect a
Fund's turnover rate and brokerage commissions. The exercise of calls written by
a Fund may cause that Fund to sell related portfolio securities, thus increasing
its turnover rate in a manner beyond its control.
The Funds may also write (and purchase) calls on foreign currencies. A
call written on a foreign currency by any of the Funds 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 written by any of the Funds on a foreign currency is for
cross-hedging purposes if it is not covered, but is designed to provide a hedge
against a decline (due to an 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. In such
circumstances, the Fund collateralizes the option by maintaining in a segregated
account with the Funds' 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.
A Fund may also write calls on Futures without owning a futures contract
(or, with respect to the High Income Fund, a deliverable bond) provided that at
the time the call is written, the Fund covers the call by segregating in escrow
an equivalent dollar amount of 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
require a Fund to deliver a futures contract; it would simply put the Fund in a
short futures position, which is permitted by each Fund's hedging policies.
Hedging. Set forth below are the Hedging Instruments which the Funds (except
Money Fund) may use.
Writing Put Options. A put option on securities gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying investment
at the exercise price during the option period. Writing a put covered by
segregated liquid assets equal to the exercise price of the put has the same
economic effect to a Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price. However, a Fund has
also assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though the
value of the investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) realizes a gain in the amount
of the premium less transaction costs. If the put is exercised, the Fund must
fulfill its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at that
time. In that case, the Fund may incur a loss, equal to the sum of the sale
price of the underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities or on foreign currencies, to secure
its obligation to pay for the underlying security, the Fund will earmark liquid
assets with a value equal to or greater than the exercise price of the
underlying securities. The Fund therefore forgoes the opportunity of investing
the segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the exchange or broker-dealer through whom such option was
sold, requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by that Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
Purchasing Calls and Puts. When a Fund purchases a call (other than in a
closing purchase transaction), it pays a premium and has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if 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 plus the
transaction costs and the premium paid for the call 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 such Fund purchases a put, it pays a premium and has the right to
sell the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price. Buying a put on
securities or Futures a Fund owns enables the Fund to attempt to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and, as a result,
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment; the put may, however, be sold prior to expiration
(whether or not at a profit).
Purchasing a put on either Futures or on securities it does not own
permits a Fund either to resell the put or, if applicable, to 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 its 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. When the Fund purchases a put on a Future or
security not held by it, the put protects the Fund to the extent that the prices
of the underlying Future or securities move in a similar pattern to the prices
of the securities in a Fund's portfolio.
Futures. No price is paid or received upon the purchase or sale of a
Future. Upon entering into a Futures transaction, a Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). The initial margin 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 specified conditions.
As the Future is marked to market 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. Prior to expiration of the Future, if the Fund
elects to close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to be
paid by or released to the Fund, and any loss or gain is realized for tax
purposes. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Forward Contracts. 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 Funds 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.
These Funds may enter into Forward Contracts with respect to specific
transactions. For example, when a Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when a Fund
anticipates receipt of dividend payments in a foreign currency, a 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. A 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.
These Funds 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 a 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 that Fund's portfolio securities denominated in such foreign currency, or
when a 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 that 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 that Fund are denominated ("cross-hedge").
These Funds will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate that Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities or other assets denominated in that
currency or another currency that is also the subject of the hedge. The Fund,
however, in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in these currencies
provided the excess amount is "covered" by liquid, high-grade debt securities,
denominated in that foreign currency or U.S. dollars, at least equal at all
times to the amount of such excess. As an alternative, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency being
hedged by a forward sale contract at a price no higher than the forward contract
price 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 a
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 a 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 a Fund to sustain losses on these contracts and
transactions costs.
At or before the maturity of a Forward Contract requiring any 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, a Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although each 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 that Fund desire to
resell that currency to the dealer.
Interest Rate Swap Transactions. The risk incurred by Bond Fund, High
Income Fund and Strategic Bond Fund when entering into a swap agreement is
twofold: 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. These Funds 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 party, the measure
of that party'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."
Additional Information About Hedging Instruments and Their Use. Each
Fund's Custodian, or a securities depository acting for the Custodian, will act
as that Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the securities on which the Fund has written options
or as to other acceptable escrow securities, so that no margin will be required
for such transactions. OCC will release the securities on the expiration of the
option or upon the Fund's entering into a closing transaction. An option
position may be closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When a Fund writes an over-the-counter ("OTC") option, it will enter into
an arrangement with a securities dealer, which would establish a formula price
at which that Fund would have the absolute right to repurchase that OTC option.
This formula price would generally be based on a multiple of the premium
received for the option, plus the amount by which the option is exercisable
below for a put, above for a call, the market price of the underlying security
("in-the-money"). For any OTC option which any of these three Funds writes, it
will treat as illiquid (for purposes of the 15% of net assets restriction on
illiquid securities, stated in the Prospectus) the mark-to-market value of any
OTC option held by it, unless subject to a buy-back agreement with the executing
broker.
The SEC is evaluating the general issue of whether or not OTC options
should be considered as liquid securities, and the procedure described above
could be affected by the outcome of that evaluation.
Each Fund's option activities may affect its turnover rate and brokerage
commissions. As noted above, the exercise of calls written by a Fund may cause
that Fund to sell related portfolio securities, thus increasing its turnover
rate in a manner beyond a Fund's control. The exercise by a Fund of puts on
securities or Futures may cause the sale of related investments, also increasing
portfolio turnover. Although such exercise is within the Fund's control, holding
a put might cause the Fund to sell the underlying investment for reasons which
would not exist in the absence of the put. Each Fund will pay a brokerage
commission each time it buys or sells a call, buys a put or sells an underlying
investment in connection with the exercise of a put or call. Such commissions
may be higher than those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of such investments and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options could
result in a Fund's net asset value being more sensitive to changes in the value
of the underlying investment.
Regulatory Aspects of Hedging Instruments. These Funds must each operate
within certain restrictions as to its long and short positions in Futures and
options thereon under a rule (the "CFTC Rule") adopted by the Commodity Futures
Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEA"),
which excludes the Fund from registration with the CFTC as a "commodity pool
operator" (as defined in the CEA) if it complies with the CFTC Rule. The Rule
does not limit the percentage of each Fund's assets that may be used for Futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule each Fund must limit its aggregate initial futures margin and
related option premiums to no more than 5% of that Fund's net assets for hedging
strategies that are not considered bona fide hedging strategies under the Rule.
Under the restrictions, each Fund also must, as to its short positions, use
Futures and options thereon solely for bona-fide hedging purposes within the
meaning and intent of the applicable provisions under the CEA. Certain options
on foreign currencies are considered related options for this purpose.
Transactions in options by these Funds are subject to limitations
established by each of the exchanges governing the maximum number of options
which 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 exchanges or 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 or an affiliated investment
adviser. Position limits also apply to Futures. 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 a Fund purchases a Future, the Fund will maintain, in a segregated account
or accounts with its custodian bank, 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 Hedging Instruments and Covered Calls. Each Fund intends to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986. That qualification enables each Fund to "pass-through" its income and
realized capital gains to shareholders without the Fund
having to pay tax on them.
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
must be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities 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 ordinary gain or loss. Currency gains and losses
are offset against market gains and losses on each trade before determining a
net "Section 988" gain or loss under the Internal Revenue Code for that trade,
which may increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
Possible Risk Factors in Hedging. In addition to the risks with respect to
options discussed in the Prospectus and above, there is a risk in using short
hedging by: (i) selling Futures or (ii) purchasing puts on broadly-based indices
or Futures to attempt to protect against declines in the value of the Fund's
securities that the prices of the Futures or applicable index (thus the prices
of the Hedging Instruments) will correlate imperfectly with the behavior of the
cash (i.e., market value prices) of the Fund's 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
futures contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures markets depend 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 a 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
securities being hedged and movements in the price of the Hedging Instruments,
each Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of securities being hedged if the historical volatility of the prices of
such securities being hedged is more than the historical volatility of the
applicable index. It is also possible that where a Fund has used Hedging
Instruments in a short hedge, the market may advance and the value of securities
held in the Fund's portfolio may decline. If this occurred, the Fund would lose
money on the Hedging Instruments and also experience a decline in value in its
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 a Fund uses Hedging Instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying Futures and/or calls on such Futures, on
securities, or on stock indices, it is possible that the market may decline. If
either Fund then concludes not to invest in such securities at that time because
of concerns as to possible further market decline or for other reasons, that
Fund will realize a loss on the Hedging Instruments that is not offset by a
reduction in the price of the equity securities purchased.
Other Investment Restrictions
The significant investment restrictions of all the Funds are set forth in
the Prospectus. The following investment restrictions are also fundamental
policies. Fundamental policies and the Funds' investment objectives cannot be
changed without the vote of a "majority" of the outstanding shares of the Trust
(or of the Fund, as to matters affecting only that Fund). 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 such
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (2) more than 50% of the outstanding shares.
Under these additional restrictions, each of the Funds cannot:
o invest in real estate or in interests in real estate, but may purchase
securities of issuers holding real estate or interests therein;
o invest in companies for the purpose of acquiring control of
management thereof;
o underwrite securities of other companies, except insofar as it might be
deemed to be an underwriter for purposes of the Securities Act of 1933 in the
resale of any securities held in its own portfolio;
o invest or hold securities of any issuer if those officers and trustees
or directors of the Trust or its adviser owning individually more than 1/2 of 1%
of the securities of such issuer together own more than 5% of the securities of
such issuer .
The following operating policies of the Funds are not fundamental policies
and may be changed by a vote of the majority of the Trust's Board of Trustees
without shareholder approval. These additional restrictions provide that the
Funds cannot:
o invest in oil or gas exploration or development programs, but may purchase
options, futures contracts, swaps and other investments, which are backed by, or
the investment return from which are linked to oil, gas and mineral values; or
o pledge, mortgage or hypothecate any assets to secure a debt; the escrow,
collateral and margin arrangements involved with any of the Funds' investments
are not considered to involve such a pledge, mortgage or hypothecation.
For purposes of the Funds' policy not to concentrate described in the
investment restrictions listed in the Prospectus, the Funds have adopted the
corporate industry classifications set forth in Appendix A to the Statement of
Additional Information. In addition, the Funds are restricted by the Investment
Company Act from issuing senior securities (as defined in that Act). These are
not fundamental policies.
New York's insurance laws require that investments of each Fund be made
with a degree of care of an "ordinarily prudent person." The Manager believes
that compliance with this standard will not have a negative impact on the
performance of any of the Funds. In addition, each Fund's investments must
comply with the diversification requirements contained in Section 817(h) of the
Internal Revenue Code, and each Fund will comply with the diversification
requirements of Section 10506 of the California Insurance Code (see "Other
Investment Techniques and Strategies -- Foreign Securities" in the Prospectus)
and with the regulations adopted under those statutes.
How the Funds are Managed
Organization and History. As a Massachusetts business trust, the Trust is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Trust 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.
At all shareholder meetings, shareholders only vote on matters affecting their
Fund. Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Trust, 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 Trust
valued at $25,000 or more or holding at least 1% of the Trust'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 Trust'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.
At all shareholder meetings, shareholders only vote on matters affecting their
Fund, and each Fund votes separately on such matters. However, matters that
require a vote by all shareholders of the Trust are submitted to all the
shareholders, without individual
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust'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 Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Trust) to be held personally liable
as a "partner" under certain circumstances, the risk of a Trust shareholder
incurring financial loss on account of shareholder liability is limited to the
relatively remote circumstances in which the Trust 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 Trust. The Trust's Trustees and officers and their
principal occupations and business affiliations during the past five years are
set forth below. Each Trustee is also a Trustee, Director or Managing General
Partner of Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial
California Tax Exempt Trust, Oppenheimer Total Return Fund, Inc., Oppenheimer
Equity Income Fund, Oppenheimer Champion Income Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Main Street Funds, Inc.,
Oppenheimer International Bond Fund, Oppenheimer Integrity Funds, Oppenheimer
Strategic Income Fund, Oppenheimer Real Asset Fund, Centennial America Fund,
L.P., Oppenheimer Municipal Fund, Oppenheimer Limited-Term Government Fund,
Panorama Series Fund, Inc. and The New York Tax-Exempt Income Fund, Inc.
(collectively, the "Denver-based Oppenheimer Funds") except for Mr. Fossel who
is not a Trustee of Centennial New York Tax-Exempt Trust or Managing General
Partner of Centennial America Fund, L.P. Ms. Macaskill is President and Mr.
Swain is Chairman and Chief Executive Officer of each of the Denver-based
Oppenheimer funds. As of March 31, 1998, none of the Trustees or officers were
Account owners and thus none owned any Fund shares.
Robert G. Avis, Trustee*; Age: 66
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards,
Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G.
Edwards Trust Company (its affiliated investment adviser and trust company,
respectively).
William A. Baker, Trustee; Age: 83
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 67
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
- --------------
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
Jon S. Fossel, Trustee; Age: 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment companies), Chairman of the Investment Company
Institute Education Foundation; formerly Chairman and a director of the Manager,
President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager.
Sam Freedman, Trustee; Age : 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age: 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company).
C. Howard Kast, Trustee; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age: 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting
Nurse Corporation of Colorado
.
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 64 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September 1988); formerly President and a director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"), and Chairman of the Board of SSI.
Bridget A. Macaskill, President ; Age:
46 49
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
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*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996) ; President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); a Trustee and Director of other Oppenheimer funds; formerly an
Executive Vice President of the Manager.
Alan Gilston, Vice President; Small Cap Growth Fund Portfolio Manager; Age: 39
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since September 1997); formerly a Vice President
and portfolio manager at Schroder Capital Management International, Inc.
Paul Larocco, Vice President; Aggressive Growth Fund Portfolio Manager; Age : 40
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since April 1996); an officer of other
Oppenheimer funds; formerly a Securities Analyst with Columbus Circle Investors
(August 1990-January 1993), prior to which he was an Investment Analyst for
Chicago Title & Trust Co.
Michael S. Levine, Growth & Income Fund Associate Portfolio
Manager; Age: 32
Two World Trade Center, New York, New York 10048-0203
Assistant Vice President of the Manager (since April 1996); formerly portfolio
manager and research associate for Amas Securities, Inc., prior to which he was
an analyst for Shearson Lehman Hutton
Inc.
Robert Milnamow, Vice President; Growth & Income Fund Portfolio Manager;
Age: 47
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since November 1995); an officer of other
Oppenheimer funds; previously a portfolio manager with Phoenix Securities Group
(August 1989-August 1995) .
David P. Negri, Vice President; Bond Fund, Strategic Bond Fund and Multiple
Strategies Fund Portfolio Manager; Age: 44
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1989); an officer of
other Oppenheimer funds.
Jane Putnam, Vice President; Growth Fund Portfolio Manager; Age: 37
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager funds.(since October 1995); previously a portfolio
manager and equity research analyst for Chemical Bank.
Thomas P. Reedy, Vice
President; High Income Fund Portfolio Manager; Age: 36
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1993); an officer of other Oppenheimer
funds; formerly a Securities Analyst for the Manager.
Richard H. Rubinstein, Vice President;
Multiple Strategies Fund Portfolio Manager; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since October 1995); an officer of other
Oppenheimer funds (since June 1990).
Arthur P. Steinmetz, Vice President; Strategic Bond Fund Portfolio Manager;
Age: 39
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since March 1993); an officer of other
Oppenheimer funds.
Jay W. Tracey III, Vice President; Small Cap Growth Fund Portfolio Manager;
Age: 44
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since September 1994); Vice President and
portfolio manager of other OppenheimerFunds; formerly a Managing Director of
Buckingham Capital Management (February 1994-September 1994), prior to which he
was Portfolio Manager and Vice President of other Oppenheimer funds and a Vice
President of the Manager (July 1991-February 1994).
Dorothy G. Warmack, Vice President; Money Fund Portfolio Manager; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager and Centennial (since January 1992); an officer of
other Oppenheimer funds.
William L. Wilby, Vice President; Global Securities Fund Portfolio Manager;
Age: 53
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since July 1994) and Vice President of
HarbourView (since October 1993); an officer of other Oppenheimer funds;
formerly international investment strategist at Brown Brothers Harriman & Co.,
prior to which he was a Managing Director and Portfolio Manager at AIG Global
Investors.
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
George C. Bowen, Vice President, Treasurer, and Assistant Secretary; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a Trustee, Director and officer of other
Oppenheimer funds .
Robert J. Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
o Remuneration of Trustees. The officers of the Trust and one of the
Trustees of the Trust (Mr. Swain) who is affiliated with the Manager receive no
salary or fee from the Trust. The remaining Trustees of the Trust received the
compensation shown below. The compensation from the Trust was paid during its
fiscal year ended December 31, 1997. The compensation from all of the
Denver-based Oppenheimer funds includes the Trust and compensation is received
as a director, trustee, managing general partner or member of a committee or
Board of those funds during the calendar year 1997.
Total
Compensation
Aggregate From All
Compensation Denver-based
Name Position From Trust OppenheimerFunds1
Robert G. Avis Trustee $3,391.05 $63,501
William A. Baker Audit and Review
$3,410.51 $77,502
Committee Ex-Officio
Member2 and Trustee
Charles Conrad, Jr. Trustee(3) $3,649.51 $72,000
Jon S. Fossel Trustee $3,391.05 $63,277
Sam Freedman Audit and Review $2,579.56 $66,501
Committee Member2
and Trustee
Raymond J. Kalinowski Audit and Review $3,822.45 $ 71,561
Committee Member2
and Trustee
C. Howard Kast Audit and Review $4,088.19 $76,503
Committee Chairman2
and Trustee
Robert M. Kirchner Trustee3 $3,649.51 $ 72,000
Ned M. Steel Trustee $3,391.05 $ 63,501
1 For the 1997 calendar year.
2Commitee positions effective July 1, 1997.
3Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Trust. As of December 31, 1997, none have elected to do so.
Under the plan, the compensation deferred by a Trustee is periodically adjusted
as though an equivalent amount had been invested in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the assets,
liabilities or net income per share of any Fund. The plan will not obligate the
Trust to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the SEC, the Trust
may invest in the funds selected by the Trustee under the plan without
shareholder approval for the limited purpose of determining the value of the
Trustee's deferred fee account.
o Major Shareholders. As of March 31, 1998 the holders of 5% or more of the
outstanding shares of any Fund were separate accounts of (i) Monarch Life
Insurance Company ("Monarch"), Springfield, MA; (ii) ReliaStar Bankers Security
Life Insurance Company ("ReliaStar"), Minneapolis, MN; (iii) The Life Insurance
Company of Virginia ("Life of Virginia"), Richmond, VA; (iv) Nationwide Life
Insurance Company ("Nationwide"), Columbus, OH; (v) Aetna Life Insurance and
Annuity Company ("Aetna"), Hartford, CT; (vi) Massachusetts Mutual Life
Insurance Company, Springfield, MA ("MassMutual"), (vii) Jefferson-Pilot Life
Insurance Company ("Jefferson Pilot"), Greensboro, NC, (viii) Chubb Life
Insurance Company of America ("Chubb"), Concord, NH; (ix) Acacia National Life
Insurance Company ("Acacia"), Washington, D.C.; (x) Protective Life Insurance
Company ("Protective"), Birmingham, AL; (xi)CUNA Mutual Group ("CUNA"), Madison,
WI; (xii) COVA Financial Life Insurance Company ("COVA"), Oakbrook Terrace, IL;
(xiii) American Enterprise Life Insurance Company ("American Express"),
Minneapolis, MN; (xiv) PFL Life Insurance Company ("PFL"), Cedar Rapids, IA and
their respective affiliates. Such shares were held as shown in Appendix B.
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 Trust, and
one of whom (Mr. Swain) serves as a Trustee of the Trust.
The Manager and the Funds have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of a Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o Portfolio Management. The Portfolio Managers of the Funds are as
follows; Money Fund, Dorothy Warmack; High Income, Thomas P. Reedy; Bond Fund,
Multiple Strategies Fund and Strategic Bond Fund, David Negri (joined by Richard
Rubinstein for Multiple Strategies Fund and by Arthur Steinmetz for Strategic
Bond Fund); Small Cap Growth Fund, Jay W. Tracey III and Alan Gilston;
Aggressive Growth Fund, Paul LaRocco; Growth Fund, Jane Putnam; Global
Securities Fund, William Wilby; and Growth & Income Fund, Robert J. Milnamow and
Michael S. Levine. They are the persons principally responsible for the
day-to-day management of each of the Fund's respective portfolios. Their
backgrounds are described in the Prospectus under "Portfolio Managers." Other
members of the Equity Portfolio Department, particularly, George Evans and Frank
Jennings for Global Securities Fund, Jay W. Tracey, III for Aggressive Growth
Fund, Robert Doll for Growth Fund and Michael S. Levine for Multiple Strategies
Fund provide the portfolio managers with counsel and support in managing those
Funds' portfolios.
o The Investment Advisory Agreements. The Investment Advisory Agreements
between the Manager and the Trust for each of the eleven Funds require the
Manager, at its expense, to provide each 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 each 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 each Fund.
Expenses not expressly assumed by the Manager under the Investment
Advisory Agreements are paid by the Trust. The Investment Advisory Agreements
list examples of expenses paid by the Trust, 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. Expenses with respect to any two or more Funds are
allocable in proportion to the net assets of the respective Funds except where
allocations of direct expenses can be made. The management fees paid by the
Funds to the Manager for the Funds' most recent three fiscal years (except for
Small Cap Growth Fund, which commenced operations in 1998) were as follows:
Fiscal year ended December 31,
1995 1996 1997
Money Fund $ 338,483 $445,899
High Income Fund $ 866,154 $1,177,754
Bond Fund $1,280,422 $2,188,350
Aggressive Growth Fund $1,790,785 $3,382,840
Growth Fund $644,977 $1,139,255(2)
Multiple Strategies Fund $2,540,311 $3,132,569
Global Securities Fund $2,451,556 $3,395,740
Strategic Bond Fund $ 281,335 $ 618,338
Growth & Income Fund(1) $ 6,710(1) $ 160,819
- --------------------
(1)From July 5, 1995 (commencement of operations) to December 31, 1996. (2)
During the fiscal year ended December 31, 1996, the Manager reimbursed
Oppenheimer Growth Fund $27,276 for certain SEC registration fees incurred in
connection with the acquisition by that Fund of J.P. Aggressive Growth Fund,
Inc.
The Investment Advisory Agreements provide that the Manager is not liable
for any loss sustained by the Trust and/or any Fund in connection with matters
to which the Investment Advisory Agreements relate, except a loss resulting by
reason of the Manager's willful misfeasance, bad faith or gross negligence in
the performance of its duties or reckless disregard for its obligations
thereunder. The Manager may act as investment adviser for any other person, firm
or corporation, and the Investment Advisory Agreements permit the Manager to use
the name "Oppenheimer" in connection with other investment companies for which
it may act as investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Trust, the right of the Trust or any of
the Funds to use the name "Oppenheimer" as part of their names may be withdrawn.
The Investment Advisory Agreements contain no expense limitation.
o The Distributor. Under its General Distributor's Agreement with the
trust dated May 1, 1998, the Distributor acts as the principal underwriter in
the continuous public offering of the Fund's Class 2 shares only, but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales (other than those paid under the Class 2 Service Plans of each Fund),
including advertising and the cost of printing and mailing prospectuses (other
than those furnished to existing shareholders), may be borne by the Distributor
or by the insurance company separate account sponsors and their affiliates that
offer Class 2 shares to their contract owners. For additional information about
distribution of the each Fund's shares and the expenses connected with such
activities, please refer to "Class 2 Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, the Trust's Transfer
Agent, is responsible for maintaining the Trust's shareholder registry and
shareholder accounting records.
Brokerage Policies of the Funds
Brokerage Provisions of the Investment Advisory Agreements Affecting Aggressive
Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund, Global
Securities Fund, Small Cap Growth Fund and Strategic Bond Fund. One of the
duties of the Manager under the Investment Advisory Agreements is to arrange the
portfolio transactions for the Funds. The Investment Advisory Agreements contain
provisions relating to the employment of broker-dealers ("brokers") to effect
the Funds' portfolio transactions. In doing so, the Manager is authorized by the
Investment Advisory Agreements 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 Funds
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 interests and policies of
the Funds as established by the 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 Investment Advisory Agreements the Manager is authorized to
select brokers that provide brokerage and/or research services for the Funds
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.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the Investment Advisory Agreements, and the procedures and rules
described above, allocations of brokerage are generally made by the Manager's
portfolio traders based upon recommendations from the Manager's portfolio
managers. In certain instances portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory agreement and
the procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for certain
fixed-income agency transactions in the secondary market, and are otherwise paid
only if it appears likely that a better price or execution can be obtained. When
Funds engage 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. Option commissions may be
relatively higher than those which would apply to direct purchases and sales of
portfolio securities.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless the Manager determines that a better price or
execution can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread between the bid and asked
prices. The Funds seek to obtain prompt execution of these orders at the most
favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Funds 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
Board of Trustees permits the Manager to use concessions on fixed price
offerings to obtain research in the same manner as is permitted for agency
transactions. The Board also permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis at
the stated commission, and (iii) the trade is not a riskless principal
transaction. The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase.
Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. As most
purchases made by Money Fund, High Income Fund, Bond Fund and Strategic Bond
Fund are principal transactions at net prices, these Funds incur little or no
brokerage costs. 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. No principal transactions and,
except under unusual circumstances, no agency transactions for these
Funds will be handled by any affiliated securities dealer. In the unusual
circumstance when these Funds pay brokerage commissions, the above-described
brokerage practices and policies are followed. Money Fund's policy of investing
in short-term debt securities with maturities of less than 397 days results in
high portfolio turnover. However, since brokerage commissions, if any, are
small, high portfolio turnover does not have an appreciable adverse effect upon
the net asset value of that Fund.
During the Funds' fiscal year ended December 31, 1995 , 1996 and 1997
total brokerage commissions paid by the Funds (not including spreads or
concessions on principal transactions on a net trade basis) were $4,083,132 ,
$507,501 and $ , respectively, for Aggressive Growth Fund; $104,203 $24,248 and
$ , respectively, for High Income Fund; $152,870 , $215,286 and $ ,
respectively, for Growth Fund; $400,275 , $351,373 and $ , respectively, for
Multiple Strategies Fund; $2,826,016 , $2,101,076 and $
, respectively for Global Securities Fund; $13,074 , $11,995 and $ ,
respectively, for Strategic Bond Fund; $2,100 , $13,852 and $ , respectively,
for Bond Fund; and $42,952 , $71,023 and $ ,, respectively for Growth & Income
Fund. During the fiscal year ended December 31, 1997, $
, $ , $ , $ , $ , $
, $ , $ , and $ was paid by Aggressive Growth Fund, Growth Fund, Multiple
Strategies Fund, Global Securities Fund, Strategic Bond Fund, Bond Fund, High
Income Fund and Growth & Income Fund, respectively, to dealers as brokerage
commissions in return for research services; the aggregate amount of those
transactions was $
, $ , $ , $ , $ , $ ,
$ , $ , and $_______ for these respective Funds.
------------ ------------
Performance of the Funds
o Money Fund Yield Information. Money Fund's current yield for a
seven day period of time is determined in accordance with regulations adopted
under the Investment Company Act as follows.
First, a base period return is calculated for the seven-day period by
determining the net change in the value of a hypothetical pre-existing account
having one share at the beginning of a seven day period. The change includes
dividends declared on the original share and dividends declared on any shares
purchased with dividends on that share, but such dividends are adjusted to
exclude any realized or unrealized capital gains or losses affecting the
dividends declared. Next, the base period return is multiplied by 365/7 to
obtain the current yield to the nearest hundredth of one percent. The compounded
effective yield for a seven-day period is calculated by (a) adding 1 to the base
period return (obtained as described above), (b) raising the sum to a power
equal to 365 divided by 7 and (c) subtracting 1 from the result. For the seven
days ended December 31, 1997, Money Fund's "current yield" was 5.03% and its
compounded "effective yield" for that period was ___%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. Since the calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends, the dividends declared during a period may not be the same on an
annualized basis as the yield for that period.
o High Income Fund, Bond Fund and Strategic Bond Fund Yield Information.
The "yield" or "standardized yield" of High Income Fund, Bond Fund and Strategic
Bond Fund for a 30-day period is calculated using the following formula set
forth in the SEC rules:
Standardized ~ Yield ~ = ~ 2~ [~ (~ {a-b} over cd ~ +~ 1~ ) SUP 6~ -~ 1~ ]
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period. b = expenses
accrued for the period (net of any expense reimbursements). c = the average
daily number of Fund shares outstanding during the
30-day period that were entitled to receive dividends. d = the Fund's
maximum offering price (including sales charge) per share
on the last day of the period.
Each Fund's yield for a 30-day period may differ from the yield for any
other periods. The SEC formula assumes that the yield for a 30-day period occurs
at a constant rate for a six-month period and is annualized at the end of the
six-month period. For the 30 days ended December 31, 1997, the yield of High
Income Fund, Bond Fund and Strategic Bond Fund, calculated as described above,
was ___%, ____% and _____%, respectively. The "standardized" yield is not based
on distributions paid by a Fund to shareholders in the 30-day period, but is a
hypothetical yield based upon the return on a Fund's portfolio investments, and
may differ from a Fund's "distribution return" described below.
o Dividend Yield and Distribution Return. From time to time High Income,
Bond and Strategic Bond Funds may quote a "dividend yield" or a "distribution
return." Dividend yield is based on that Fund's dividends derived from net
investment income during a stated period, and distribution return includes
dividends derived from net investment income and from realized capital gains
declared during a stated period. Under those calculations, the Fund's dividends
and/or distributions declared during a stated period of one year or less (for
example, 30 days) are added together, and the sum is divided by the Fund's
maximum offering price (equal to its net asset value) per share on the last day
of the period. The result may be annualized if the period of measurement is less
than one year. The dividend yield of High Income Fund, Bond Fund and Strategic
Bond Fund for the quarter ended December 31, 1997, was _____%, _____% and
_____%, respectively.
Total Return. Each Fund, except Money Fund, may quote its "total return" or
"average annual total return." "Average annual total return" (see the formula
below) is an average annual compounded rate of return. It is the rate of return
based on factors which include a hypothetical initial investment of $1,000 ("P"
in the formula below) over a number of years ("n") with an Ending Redeemable
Value ("ERV") of that investment, according to the following formula:
LEFT ({~ERV~} OVER P~ right) SUP {1/n}~-1~=~Average~Annual~Total~ Return
-1-
<PAGE>
The cumulative "total return" calculation measures the change in value of a
hypothetical investment of $1,000 over a stated period. 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: ALIGNC {ERV~-~ P~} over P~ =~Total~ Return
Both formulas assume that all dividends and capital gains distributions during
the period are reinvested at net asset value per share, and that the investment
is redeemed at the end of the period. Set forth below is the "average annual
total return" and "total return" for each Fund (using the method described
above) during the periods indicated:
Average Annual Total Return for:
Cumulative
Total
Fiscal Year Five Year Ten Year Return From
Ended Period Period Inception(1) Inception(1)
12/31/97 Ended 12/31/97 Ended to to 12/31/97
12/31/97 12/31/97
High Income Fund
Bond Fund
Aggressive Growth Fund
Growth Fund
Multiple Strategies Fund
Global Securities Fund
Strategic Bond Fund Growth & Income Fund
- --------------
(1)Inception dates are as follows: 4/30/86 for High Income Fund; 4/3/85 for Bond
Fund and Growth Fund; 8/15/86 for Aggressive Growth Fund; 2/9/87 for Multiple
Strategies Fund; 11/12/90 for Global Securities Fund; 5/3/93 for Strategic Bond
Fund; and 7/5/95 for Growth & Income Fund.
The total return on an investment made in shares of any one of the Funds
(except Money Fund) may be compared with performance for the same period of the
index shown in that Fund's performance graph in the Prospectus. The performance
of Small Cap Growth Fund can be compared to the performance during the same
period of the Russell 2000, a widely recognized index of small capitalization
U.S. issuers.
Yield and total return information may be useful to investors in reviewing
performance of the Funds. However, a number of factors should be taken into
account before using such performance information as a basis for comparison with
alternative investments. An investment in any of these Funds is not insured.
Their performance is not guaranteed and will fluctuate over time. Yield and
total return for any Fund for any given past period is not an indication or
representation by that Fund of future yields or rates of return on its shares.
In comparing the performance of one Fund to another, consideration should be
given to each Fund's investment policy, portfolio quality, portfolio maturity,
type of instrument held and operating expenses. When comparing yield, total
return and investment risk of an investment in any of the Funds with those of
other investment instruments, investors should understand that certain other
investment alternatives such as money market instruments, certificates of
deposits ("CDS"), U.S. Government securities or bank accounts provide yields
that are fixed or that may vary above a stated minimum, and may be insured or
guaranteed. Finally, the performance quotations do not reflect the charges
deducted from an Account, as explained in the attached Prospectus for the
Policies. If these charges were deducted, that performance would be lower than
as described above. In addition, the Policies may have inception dates different
than those of the Funds shown above.
Other Performance Comparisons. From time to time the Trust may publish the
ranking of any of the Funds by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent service. Lipper monitors the performance of
regulated investment companies, including the Funds, and ranks their performance
for various periods based on categories relating to investment objectives. The
performance of the Funds is ranked against all other funds underlying variable
insurance products. The Lipper performance analysis includes the reinvestment of
capital gains distributions and income dividends but does not take sales charges
or taxes into consideration.
From time to time, the Trust may include in its advertisements and sales
literature performance information about the Funds (and the insurance company
separate accounts that hold their shares) cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper and Morningstar.
From time to time the Trust may publish the ranking of the performance of
any of the separate accounts that offer any of the Funds by Morningstar, Inc.,
an independent mutual fund monitoring service, that ranks mutual funds,
including the Funds, monthly in broad investment categories (domestic stock,
international stock, 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
reflects 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%). Rankings are subject to change.
Class 2 Service Plans
The Trust has adopted a Service Plan for Class 2 shares of each Fund under
Rule 12b-1 of the Investment Company Act, pursuant to which the each Fund makes
payments to the Distributor in connection with the distribution and/or servicing
of the shares of Class 2. Each Class 2 Plan has been approved by a vote of (i)
the Board of Trustees of the Trust, 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 Manager as the then-sole initial holder of such shares.
Under the Class 2 Plans, no payment will be made to any insurance company
separate account sponsor or affiliate thereof under a Fund's Class 2 Plan (each
is referred to as a "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 Trust's Independent Trustees. Initially, the Board of Trustees
has set the fee at the maximum rate allowed under the Plans and set no minimum
amount.
In addition, the Manager and the Distributor may, under the Plans, from
time to time from their own resources (which, as to the Manager, may include
profits derived from the advisory fee it receives from each respective Fund)
make payments to Recipients for distribution and administrative services they
perform. The Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of distribution assistance payments they make to
Recipients from their own assets.
Unless terminated as described below, each Class 2 Plan continues in
effect from year to year but only as long as such continuance is specifically
approved at least annually by the Trust'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. Any Class 2 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. No Class 2 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
Board the Independent Trustees.
While the plans are in effect, the Treasurer of the Trust must provide
separate written reports to the Trust's Board of Trustees at least quarterly
describing the amount of payments made pursuant to each Plan and the purposes
for which the payments were made. The Class 2 reports also must include the
identity of each Recipient that received any payment. These reports are subject
to the review and approval of the Independent Trustees.
Unreimbursed expenses incurred with respect to Class 2 shares for any
fiscal quarter by the Distributor may not be recovered under the Class 2 Plan in
subsequent fiscal quarters. Payments received by the Distributor under any Class
2 Plan will not be used to pay any interest expense, carrying charges, or other
financial costs, or allocation of overhead by the Distributor.
About Your Account
How To Buy Shares
Determination of Net Asset Value Per Share. The sale of shares of the Funds is
currently limited to Accounts as explained on the cover page of this Statement
of Additional Information and the Prospectus. Such shares are sold at their
respective offering prices (net asset values without sales charges) and redeemed
at their respective net asset values as described in the Prospectus.
The net asset value per share of each Fund is determined as of the close
of business of The New York Stock Exchange (the "NYSE") on each day that the
NYSE is open, by dividing the value of the Fund's net assets by the number of
shares that are outstanding. The NYSE normally closes at 4:00 P.M., New York
time, but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The NYSE's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. Dealers may conduct trading at times when the Exchange
is closed (including weekends and holidays). Trading may occur in debt
securities and in foreign securities at times when the NYSE is closed (including
weekends and holidays or after 4:00 P.M., New York time, on a regular business
day). Because the net asset value of the Funds will not be calculated on those
days, the net asset values per share of the Funds may be significantly affected
at times when shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the valuation
of each Fund's (other than Money Fund's) securities, generally as follows: (I)
equity securities traded on a U.S. securities exchange or on the Automated
Quotation System ("NASDAQ") of the Nasdaq Stock Market, Inc. for which last sale
information is regularly reported are valued at the last reported sale price on
the principal exchange for such security or NASDAQ that day (the "Valuation
Date") or, in the absence of sales that day, at the last reported sale price
preceding the Valuation Date if it is within the spread of the closing "bid" and
"asked" prices on the Valuation Date or, if not, the closing "bid" price on the
Valuation Date; (ii) equity securities traded on a foreign securities exchange
are valued generally at the last sales price available to the pricing service
approved by the Fund's Board of Trustees or to the Manager as reported by the
principal exchange on which the security is traded at its last trading session
on or immediately preceding the Valuation Date, or, if unavailable, at the mean
between "bid" and "asked" prices obtained from the principal exchange or two
active market makers in the security on the basis of reasonable inquiry; (iii) a
non-money market fund will value (x) debt instruments that had a maturity of
more than 397 days when issued, (y) debt instruments that had a maturity of 397
days or less when issued and have a remaining maturity in excess of 60 days ,
and (z) non-money market type debt instruments that had a maturity of 397 days
or less when issued and have a remaining maturity of sixty days or less, at the
mean between "bid" and "asked" prices determined by a pricing service approved
by the Fund's Board of Trustees or, if unavailable, obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(iv) money market-type debt securities held by a non-money market fund that had
a maturity of less than 397 days when issued and have a remaining maturity of 60
days or less , and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less , shall be valued at cost, adjusted for
amortization of premiums and accretion of discount; and (vi)(v) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (ii) and (iii)
above), the security may be priced at the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no " asked" price is available) provided that the Manager is
satisfied that the firm rendering the quotes is reliable and that the quotes
reflect the current market value.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the NYSE. Events affecting the
values of foreign securities traded in securities markets that occur between the
time their prices are determined and the close of the NYSE will not be reflected
in a 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 a Fund's net asset value, in which
case an adjustment would be made, if necessary.
In the case of U.S. Government securities, mortgage-backed securities,
foreign fixed-income securities and corporate bonds, when last sale information
is not generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of quality,
yield, maturity, and other special factors involved. The Manager may use pricing
services approved by the Board of Trustees to price U.S. Government securities
or mortgage-backed securities for which last sale information is not generally
available. The Manager will monitor the accuracy of such pricing services which
may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities. Foreign currency, including forward contracts,
will be valued at the closing price in the London foreign exchange market that
day as provided by a reliable bank, dealer or pricing service. The values of
securities denominated in foreign currency will be converted to U.S. dollars at
the closing price in the London foreign exchange market that day as provided by
a reliable bank, dealer or pricing service.
Puts, calls and futures are valued at the last sale price on the principal
exchanges on which they are traded or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Trustees or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing "bid" and "ask" prices on
the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing "bid" price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an exchange or on
NASDAQ, it shall be valued at the mean between "bid" and "ask" prices obtained
by the Manager from two active market makers (which in certain cases may be the
"bid" price if no "ask" price is available).
When a 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.
Credit is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining a Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by a Fund expires, the Fund has a gain in the
amount of the premium; if the Fund enters into a closing purchase transaction,
it will have a gain or loss depending on whether the premium received was more
or less than the cost of the closing transaction. If a 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.
Money Fund Net Asset Valuation. Money Fund will seek to maintain a net asset
value of $1.00 per share for purchases and redemptions. There can be no
assurance that it will do so. The Fund operates under SEC Rule 2a-7, under which
the Fund may use the amortized cost method of valuing its shares. The amortized
cost method values a security initially at its cost and thereafter assumes a
constant amortization of any premium or accretion of any discount,
regardless of the impact of
fluctuating interest rates on the market value of the security. The method does
not take into account unrealized capital gains or losses.
The Trust's Board of Trustees has established procedures intended to
stabilize Money Fund's net asset value at $1.00 per share. If the Fund's net
asset value per share were to deviate from $1.00 by more than 0.5%, Rule 2a-7
requires the Board promptly to consider what action, if any, should be taken. If
the Trustees find that the extent of any such deviation may result in material
dilution or other unfair effects on shareholders, the Board will take whatever
steps it considers appropriate to eliminate or reduce such dilution or unfair
effects, including, without limitation, selling portfolio securities prior to
maturity, shortening the average portfolio maturity, withholding or reducing
dividends, reducing the outstanding number of Fund shares without monetary
consideration, or calculating net asset value per share by using available
market quotations.
As long as it uses Rule 2a-7, Money Fund must abide by certain conditions
described above and in the prospectus. For purposes of the Rule, the maturity of
an instrument is generally considered to be its stated maturity (or in the case
of an instrument called for redemption, the date on which the redemption payment
must be made), with special exceptions for certain variable and floating rate
instruments. Repurchase agreements and securities loan agreements are, in
general, treated as having a maturity equal to the period scheduled until
repurchase or return, or if subject to demand, equal to the notice period.
While the amortized cost method provides certainty in valuation, there may
be periods during which the value of an instrument as determined by amortized
cost is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on Money
Fund shares may tend to be lower than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market prices
or estimates of market prices for its portfolio. Conversely, during periods of
rising interest rates, the daily yield on Money Fund shares will tend to be
higher than that of a portfolio priced at market value.
Dividends, Capital Gains and Taxes
Distributions and Taxes. The Trust intends for each Fund to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
By so qualifying, the Funds will not be subject to Federal income taxes on
amounts paid by them as dividends and distributions, as described in the
Prospectus. Each Fund is treated as a single entity for purposes of determining
Federal tax treatment. The Trust will endeavor to ensure that each Fund's assets
are so invested so that all such requirements are satisfied, but there can be no
assurance that it will be successful in doing so.
The Internal Revenue Code requires that a holder (such as a Fund) of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year even though that Fund receives no interest payment
in cash on the security during the year. As an investment company, each Fund
must pay out substantially all of its net investment income each year.
Accordingly, when a Fund holds zero coupon securities, it may be required to pay
out as an income distribution each year an amount which is greater than the
total amount of cash interest the Fund actually received. Such distributions
will be made from the cash assets of that Fund or by liquidation of portfolio
securities, if necessary. The Fund may realize a gain or loss from such sales.
In the event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they would have
had in the absence of such transactions.
Additional Information About the Funds
The Custodian and the Transfer Agent. The Bank of New York is the custodian of
the Trust's securities. The custodian's responsibilities include safeguarding
and controlling the Trust's portfolio securities, collecting income on the
portfolio securities, and handling the delivery of portfolio securities to and
from the Trust. The Manager has represented to the Trust that its banking
relationships with the Custodian have been and will continue to be unrelated to
and unaffected by the relationship between the Trust and the Custodian. It will
be the practice of the Trust to deal with the Custodian in a manner uninfluenced
by any banking relationship the Custodian may have with the Manager and its
affiliates.
OppenheimerFunds Services, a subsidiary of the Manager, is responsible as
Transfer Agent for maintaining the Trust's shareholder registry and shareholder
accounting records, and for administrative functions. It also acts as the
shareholder servicing agent for the other Oppenheimer funds.
Independent Auditors. The independent auditors of the Trust examine its
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.
-2-
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Beverages
Broadcasting
Building Materials
Cable Television
Chemicals
Computer Hardware
Computer Software
Conglomerates
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Finance, Insurance and Real Estate
National Commercial Banks
State Commercial Banks
Commercial Banks, NEC
Savings Institution, Federally Chartered
Savings Institutions, Not Federally
Chartered
Functions Related to Depository
Banking, NEC
Federal & Federally-Sponsored
Credit Agencies
Personal Credit Institutions
Short-Term Business Credit Institutions
Miscellaneous Business Credit
Institutions
Mortgage Bankers & Correspondence
Foreign National Banks
Foreign Commercial Banks
Foreign-Sponsored Credit Institutions
Asset-Backed Securities
Finance Services
Security & Commodity Brokers, Dealers,
Exchanges & Services
Security Brokers, Dealers & Flotation Cos.
Investment Advice
Life Insurance
Accident & Health Insurance
Fire, Marine & Casualty Insurance
Insurance Carriers, NEC
Insurance Agents, Brokers & Services
Food
Gas Utilities
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Leasing & Factoring
Leisure
Manufacturing
Mining
Gold & Silver Ores
Gold
Silver Ores
Miscellaneous Metal Ores
Crude Petroleum Natural Gas
Drilling Oil and Gas Wells
Oil and Gas Field Exploration Services
Nondurable Household Goods
Paper
Publishing/Printing
Railroads
Restaurants
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-1
<PAGE>
APPENDIX B - MAJOR SHAREHOLDERS
As of March 31, 1998, the number of shares and approximate percentage of Fund
shares held of record by separate accounts of the following insurance companies
(and their respective subsidiaries) that held 5% or more of the outstanding
shares of one of the Funds were as follows:
Life of
Monarch ReliaStar Virginia Nationwide Aetna
Money Fund
High Income Fund
Bond Fund
Capital Appreciation
Fund
Growth Fund
Multiple Strategies
Fund
Global Securities Fund
Strategic Bond Fund
Growth & Income Fund
- ---------------
*Less than 5% of the outstanding shares of that Fund.
(continued)
B-1
<PAGE>
MassMutual Jefferson-PilotPFL Chubb Acacia
Money Fund
High Income Fund
Bond Fund
Capital Appreciation
Fund
Growth Fund
Multiple Strategies
Fund
Global Securities
Fund
Strategic Bond Fund
Growth & Income
Fund
- ---------------
*Less than 5% of the outstanding shares of that Fund.
B-2
<PAGE>
American
Express Protective CUNA COVA
Money Fund
High Income Fund
Bond Fund
Capital Appreciation
Fund
Growth Fund
Multiple Strategies
Fund
Global Securities
Fund
Strategic Bond Fund
Growth & Income
Fund
- ---------------
B-3
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
B-4
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
----------------------------------------------
(a) Financial Statements
1. Financial Highlights (see Parts A and B)*
2. Independent Auditors' Report (see Part B)*
3. Statements of Investments (see Part B)*
4. Statements of Assets and Liabilities (see Part B)
herewith.*
5. Statements of Operations (see Part B)*
6. Statements of Changes in Net Assets*
7. Notes to Financial Statements (see Part B)*
8. Independent Auditors' Consent: *
(b) Exhibits
--------
1. Seventh Restated Declaration of Trust dated
12/16/97: Filed herewith.
2. By-Laws, amended as of 6/26/90: Previously filed with
Registrant's Post-Effective Amendment No. 26, 2/13/95, and incorporated
herein by reference.
3. Not Applicable.
4. (i) Oppenheimer Money Fund specimen share certificate: Filed
with Registrant's Post-
Effective Amendment No. 30, 4/23/97, and incorporated herein by
reference.
- ----------------
*To be filed by amendment.
(ii) Oppenheimer Bond Fund specimen share certificate: Filed
with Registrant's Post-
Effective Amendment No. 30, 4/23/97, and incorporated herein by
reference.
(iii)Oppenheimer Growth Fund specimen share certificate: Filed
with Registrant's Post-
Effective Amendment No. 30, 4/23/97, and incorporated herein by
reference.
(iv) Oppenheimer High Income Fund specimen share certificate:
Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97,
and incorporated herein by reference.
(v) Oppenheimer Aggressive Growth Fund specimen share certificate:
Filed herewith.
(vi) Oppenheimer Multiple Strategies Fund specimen share
certificate: Filed with Registrant's Post-Effective Amendment No.
30, 4/23/97, and incorporated herein by
reference.
(vii) Oppenheimer Global Securities Fund specimen share
certificate: Filed with Registrant's Post-Effective Amendment No.
30, 4/23/97, and incorporated herein by
reference.
(viii)Oppenheimer Strategic Bond Fund specimen share certificate:
Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97,
and incorporated herein by
reference.
(ix) Oppenheimer Growth & Income Fund specimen share
certificate: Filed with Registrant's Post-Effective Amendment No.
30, 4/23/97, and incorporated herein by
reference.
(x) Oppenheimer Small Cap Growth Fund specimen share
certificate: Filed herewith.
(xi) Oppenheimer Money Fund Class 2 specimen share certificate:
Filed herewith.
(xii) Oppenheimer Bond Fund Class 2 specimen share
certificate: Filed herewith.
(xiii) Oppenheimer Growth Fund Class 2 specimen share
certificate: Filed herewith.
(xiv) Oppenheimer High Income Fund Class 2 specimen share
certificate: Filed herewith.
(xvOppenheimer Aggressive Growth Fund
Class 2 specimen share certificate: Filed herewith.
(xvi) Oppenheimer Multiple Strategies Fund Class 2 specimen
share certificate: Filed herewith.
(xvii) Oppenheimer Global Securities Fund Class 2 specimen
share certificate: Filed herewith.
(viii)Oppenheimer Strategic Bond Fund Class 2 specimen
share certificate: Filed herewith.
(xix) Oppenheimer Growth & Income Fund Class 2 specimen
share certificate: Filed herewith.
(xx) Oppenheimer Small Cap Growth Fund Class 2 specimen share
certificate: Filed herewith.
5. (i) Investment Advisory Agreement for Oppenheimer Money Fund
dated 9/1/94: Filed with Post-Effective Amendment No. 26,
2/13/95, and incorporated herein by
reference.
(ii) Investment Advisory Agreement for Oppenheimer High Income
Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26,
2/13/95, and incorporated herein
by reference.
(iii) Investment Advisory Agreement for Oppenheimer Bond
Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26,
2/13/95, and incorporated herein by reference.
(iv) Investment Advisory Agreement for Oppenheimer
Aggressive Growth Fund 9/1/94: Filed with
Post-Effective Amendment No. 26, 2/13/95, and incorporated herein
by reference.
(v) Investment Advisory Agreement for Oppenheimer Growth Fund
dated 9/1/94: Filed with Post-Effective Amendment No. 26,
2/13/95, and incorporated herein by
reference.
(vi) Investment Advisory Agreement for Oppenheimer Multiple
Strategies Fund dated 9/1/94: Filed with Post-Effective Amendment
No. 26, 2/13/95, and incorporated herein
by reference.
(vii) Investment Advisory Agreement for Oppenheimer Global
Securities Fund dated 9/1/94: Filed with Post-Effective Amendment
No. 26, 2/13/95, and incorporated herein
by reference.
(viii)Investment Advisory Agreement for Oppenheimer
Strategic Bond Fund dated 9/1/94: Filed with Post-Effective
Amendment No. 26, 2/13/95, and incorporated herein
by reference.
(ix) Investment Advisory Agreement for Oppenheimer Growth &
Income Fund dated 5/1/95: Filed with Post-Effective Amendment No.
29, 4/22/96, and incorporated herein
by reference.
(x) Investment Advisory Agreement for Oppenheimer Small Cap Growth
Fund dated 5/1/98 - Filed herewith.
6. General Distributor's Agreement for Class 2 Shares dated 2/24/98:
Filed herewith.
7. Not Applicable.
8. Custody Agreement between Oppenheimer Variable Account Funds and The
Bank of New York, dated 11/12/92: Previously filed with Registrant's
Post-Effective Amendment No. 21, 3/12/93, refiled with Registrant's
Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
9. Not Applicable.
10. (i) Opinion and Consent of Counsel, 3/14/85: Previously filed
with Registrant's Pre-
Effective Amendment No. 1, 3/20/85, refiled with Registrant's
Post-Effective Amendment
No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and
incorporated herein by
reference.
(ii) Opinion and Consent of Counsel, 4/28/86: Previously filed with
Registrant's Post- Effective Amendment No. 5, 8/12/86, refiled with
Registrant's Post-Effective Amendment No. 27, 4/27/95 pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(iii) Opinion and Consent of Counsel, 7/31/86: Previously filed with
Registrant's Post- Effective Amendment No. 5, 8/12/86, refiled with Registrant's
Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(iv) Opinion and Consent of Counsel, 1/21/87: Previously filed with
Registrant's Post- Effective Amendment No. 7, 2/6/87, refiled with
Registrant's Post-Effective Amendment No. 27, 4/27/95, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(v) Opinion and Consent of Counsel, dated July 31, 1990: Previously
filed with Registrant's Post-Effective Amendment No. 15, 9/19/90,
refiled with Registrant's Post- Effective Amendment No. 27, 4/27/95
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(vi) Opinion and Consent of Counsel dated April 23, 1993: Previously
filed with Registrant's Post-Effective Amendment No. 22, 4/30/93,
refiled with Registrant's Post- Effective Amendment No. 27, 4/27/95
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(vii) Opinion and Consent of Counsel dated April 18, 1995:
Filed with Post-Effective Amendment No. 29, 4/22/96, and
incorporated herein by reference.
Opinion and Consent of Counsel
dated __________: To be filed by amendment.
11. Independent Auditors' Consent - To be filed by amendment.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. (i) Service Plan and Agreement for Class 2 shares of
Oppenheimer Money Fund: Filed herewith.
(ii) Service Plan and Agreement for Class 2 shares of Oppenheimer
Bond Fund: Filed herewith.
(iii) Service Plan and Agreement for Class 2 shares of Oppenheimer
Growth Fund: Filed herewith.
(iv) Service Plan and Agreement for Class 2 shares of Oppenheimer
High Income Fund: Filed herewith.
(v) Service Plan and Agreement for Class 2 shares of Oppenheimer
Aggressive Growth Fund: Filed herewith.
(vi) Service Plan and Agreement for Class 2 shares of Oppenheimer
Multiple Strategies Fund: Filed herewith.
(vii) Service Plan and Agreement for Class 2 shares of Oppenheimer
Global Securities Fund: Filed herewith.
(viii)Service Plan and Agreement for Class 2 shares of
Oppenheimer Strategic Bond Fund: Filed herewith.
(ix) Service Plan and Agreement for Class 2 shares of Oppenheimer
Growth & Income Fund: Filed herewith.
(x) Service Plan and Agreement for Class 2 shares of Oppenheimer
Small Cap Growth Fund: Filed herewith.
16. Performance Data Computation Schedules: To be filed by amendment.
17. Financial Data Schedules: To be filed by amendment.
-- Powers of Attorney: Filed with Post-Effective Amendment No. 29,
4/22/96, and with
Registrant's Post-Effective Amendment No. 24, 2/25/94, and
incorporated herein by
reference.
18. Not applicable
Item 25. Persons Controlled by or under Common Control with Registrant
- -------------------------------------------------------------------------------
Registrant does not control any other person. Except that all of
Registrant's issued and outstanding shares are held by certain separate
accounts, as described in Part B of this Registration Statement, Registrant is
not under common control with any other person.
Item 26. Number of Holders of Securities
No. of Record
Holders as of
Title of Class (Series) December 31, 1997
----------------------- ----------------------------
Oppenheimer Money Fund 5
Oppenheimer High Income Fund 9
Oppenheimer Bond Fund 9
Oppenheimer Aggressive Growth Fun 8
Oppenheimer Growth Fund 11
Oppenheimer Multiple Strategies Fund 6
Oppenheimer Global Securities Fund 4
Oppenheimer Strategic Bond Fund 6
Oppenheimer Growth & Income Fund 6
Oppenheimer Small Cap Growth Fund 0
Item 27. Indemnification
---------------------
Reference is made to paragraphs (c) through (g) of Section 12 of Article
SEVENTH of Registrant's Fifth Restated Declaration of Trust previously filed as
an exhibit to this
Registration Statement, incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, 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 director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same capacity
to other registered investment companies as described in Parts A and B hereof
and listed in Item 28(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position
with OppenheimerFunds, Inc. Other Business and Connections
During
("OFI") the Past Two Years
- --------------------------- ------------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers,
Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst;
Senior Vice President of
HarbourView Asset
Management Corporation
("HarbourView"); prior to
March, 1996 he was the senior
equity portfolio manager
for the Panorama Series Fund, Inc.
(the "Company") and
other mutual funds and pension
funds managed by G.R.
Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former
investment adviser, which was a
subsidiary of
Connecticut Mutual Life Insurance
Company; was also
responsible for managing the common
stock department
and common stock investments of
Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds
. Formerly a Vice
President and
Senior Portfolio Manager at First
of America Investment
Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Vice President Formerly Vice President (January
1992 - February, 1996) of Asian
Equities for Barclays de Zoete
Wedd, Inc.
Robert J. Bishop,
Vice President
Vice President of Mutual
Fund Accounting (since May 1996);
an officer of other Oppenheimer
funds; formerly
an Assistant Vice President of
OFI/Mutual Fund
Accounting (April 1994-May 1996),
and a Fund Controller for
OFI.
George C. Bowen,
Senior Vice President & Treasurer
Vice President (since June
1983) and Treasurer (since March
1985) of OppenheimerFunds
Distributor, Inc. (the
"Distributor"); Vice President
(since October 1989) and
Treasurer (since April 1986) of
HarbourView; Senior
Vice President (since February
1992), Treasurer (since
July 1991)and a director (since
December 1991) of
Centennial; President, Treasurer
and a director of
Centennial Capital Corporation
(since June 1989); Vice
President and Treasurer (since
August 1978) and
Secretary (since April 1981) of
Shareholder Services,
Inc. ("SSI"); Vice President,
Treasurer and Secretary of
Shareholder Financial Services,
Inc. ("SFSI") (since
November 1989); Treasurer of
Oppenheimer Acquisition
Corp. ("OAC") (since June 1990);
Treasurer of
Oppenheimer Partnership Holdings,
Inc. (since
November 1989); Vice President and
Treasurer of
ORAMI (since July
1996); Chief Executive Officer,
Treasurer and a director of
MultiSource Services, Inc.
,
a broker-dealer (since December
1995); an officer of
other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President
& Assistant
Treasurer: Rochester Division Formerly Assistant Vice President
of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 present)
of Awhtolia College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio manager of
certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director
Executive Vice
President (since September 1993),
and a director (since January 1992)
of the Distributor;
Executive Vice President,
General
Counsel and a director
of HarbourView, SSI, SFSI and
Oppenheimer
Partnership Holdings, Inc. since
(September 1995) and
MultiSource Services, Inc. (a
broker-dealer) (since December 1995);
President and a director of Centennial
(since September 1995); President and
a director of ORAMI (since July 1996);
General Counsel (since May 1996) and
Secretary (since April 1997) of OAC;
Vice President of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc
(since October 1997); an officer of
other Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of
Oppenheimer
Millennium Funds plc (since October
1997); an officer of other
Oppenheimer funds; formerly an
Assistant Vice
President of OFI/Mutual Fund
Accounting (April 1994-
May 1996), and a Fund Controller
for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
the Distributor
; Secretary of HarbourView
,
MultiSource and
Centennial
; Secretary,
Vice President and Director of
Centennial Capital
Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds ;
Presently he holds the following
other positions: Director (since
1995) of ICI Mutual
Insurance Company; Governor (since
1994) of St. John's
College; Director (since 1994 -
present) of International
Museum of Photography at George
Eastman House;
Director (since 1986) of GeVa
Theatre. Formerly he held
the following positions: formerly,
Chairman of the Board
and Director of Rochester Fund
Distributors, Inc.
("RFD") ; President and Director of
Fielding Management
Company, Inc. ("FMC") ; President
and Director of
Rochester Capital Advisors, Inc.
("RCAI") ; Managing
Partner of Rochester Capital
Advisors, L.P., President
and Director of Rochester Fund
Services, Inc. ("RFS") ;
President and Director of Rochester
Tax Managed Fund,
Inc.; Director (1993 - 1997) of
VehiCare Corp.; Director
(1993 - 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds (May, 1993 -
January, 1996);
Secretary of
Rochester Capital Advisors,
Inc. and
General Counsel (June, 1993 -
January 1996) of
Rochester
Capital Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director
(1990-1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds
Funds.. Formerly Vice President and
General Counsel of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for
Schroder Capital Management
International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Currently a Member and Fellow
of the Institute of Chartered
Accountants; formerly an
accountant for
Arthur Young (London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President
for Bankers Trust Company
(1993-1996); Steering Committee
Member,
Subcommittee Chairman for American
Savings
Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President of Fixed
Income Portfolio Management at Bankers
Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September,
1989 - January, 1997) of Bankers
Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President
(1994-1997) of Retirement Plans
Services for OppenheimerFunds
Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive
Officer of
OppenheimerFunds
Services,
a division of the Manager President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President
and Portfolio Manager for Warburg,
Pincus Counsellors, Inc.
(1993-1997), Co-
manager of Warburg, Pincus Emerging
Markets Fund
(12/94 - 10/97), Co-manager
Warburg, Pincus
Institutional Emerging Markets Fund
- Emerging Markets
Portfolio (8/96 - 10/97), Warburg
Pincus Japan OTC
Fund, Associate Portfolio Manager
of Warburg Pincus
International Equity Fund, Warburg
Pincus Institutional
Fund - Intermediate Equity
Portfolio, and Warburg
Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President
None.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds
; formerly, a Managing
Director of
Global Equities at Paine Webber's
Mitchell Hutchins
division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director
(1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President
None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds
; formerly, a Securities
Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96) , Chinese
Finance
Society; and Director (6/94-6/95),
Greater China
Business Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager
for certain Oppenheimer funds; a
Chartered Financial Analyst; a
Vice President of HarbourView;
prior to March 1996 , the
senior bond portfolio manager for
Panorama Series Fund
Inc., other mutual funds and
pension accounts managed
by G.R. Phelps; also
responsible for managing the public
fixed-income securities department
at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director
Chief Executive
Officer (since September 1995);
President and director (since June
1991) of
HarbourView; Chairman and a
director of SSI (since
August 1994), and SFSI (September
1995); President
(since September 1995) and a
director (since October
1990) of OAC; President (since
September 1995) and a
director (since November 1989) of
Oppenheimer
Partnership Holdings, Inc.
, a holding company subsidiary
of OFI; a director of ORAMI (since
July 1996) ;
President and a director (since
October 1997) of OFIL,
an offshore fund manager subsidiary
of OFI and
Oppenheimer Millennium Funds plc
(since October
1997); President and a a director
of other Oppenheimer
funds; a director of the NASDAQ
Stock Market, Inc. and
of Hillsdown Holdings plc (a U.K.
food company);
formerly an Executive Vice
President of OFI.
Wesley Mayer,
Vice President Formerly Vice President
(January, 1995 - June, 1996) of Manufacturers Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -
present) for the Martin Luther King
Multi-Purpose Center (non-profit
community
organization); Formerly Vice
President
(January, 1995 -April,
1996) for Lockheed Martin IMS.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds
; formerly a Portfolio
Manager
(August, 1989 - August, 1995) with
Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase
Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with
Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Russell Read,
Senior Vice PresFormerly a consultant for
Prudential Insurance on behalf of
the General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds
; formerly, a Securities
Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President
Company. None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager
of certain Oppenheimer funds ;
Formerly, Vice President (June,
1983 - January, 1996) of RFS,
President and Director of
RFD ; Vice President and Director
of FMC ; Vice
President and director of RCAI ;
General Partner of RCA;
Vice President and Director of
Rochester Tax Managed
Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President and
Portfolio Manager/Security Analyst
for Oppenheimer
Capital Corp., an investment
adviser.
Lawrence Rudnick,
Assistant Vice President
None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of
Citicorp
Investment Services
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman
and Trustee of the New York-based
Oppenheimer Funds; formerly Chairman
of the Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since
1995) of Rochester Capitol
Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President,
Director
Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; a
Vice President of HarbourView;
prior to March 1996 , an
equity portfolio manager for
Panorama Series Fund, Inc.
and other mutual funds and pension
accounts managed by
G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the
Denver-based Oppenheimer Funds;
President and a Director
of Centennial; formerly
President and Director of OAMC, and Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President
An officer and/or
portfolio manager of certain
Oppenheimer funds; formerly
Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income Oppenheimer
funds; Formerly, Managing
Director and
Chief Fixed Income Strategist at
Prudential Mutual
Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to
March 1996 , an
equity portfolio manager for
Panorama Series Fund, Inc.
and other mutual funds and pension
funds managed by
G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting
and member of the
Board of Directors of the Junior
League of Denver, Inc.;
Point of Contact: Finance
Supporters of Children;
Member of the Oncology Advisory
Board of the
Childrens Hospital; Member of the
Board of Directors of
the Colorado Museum of Contemporary
Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary
of SSI (since
May 1985), and SFSI (since
November 1989); Assistant
Secretary of
Oppenheimer Millennium
Funds plc (since October
1997); an officer of other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based
Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds,
as set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer
Enterprise Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer
International Growth Fund Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer
Series Fund, Inc. Oppenheimer U.S.Government Trust Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P. Centennial California Tax Exempt Trust Centennial
Government Trust Centennial Money Market Trust Centennial New York Tax Exempt
Trust Centennial Tax Exempt Trust Oppenheimer Cash Reserves Oppenheimer Champion
Income Fund Oppenheimer Equity Income Fund Oppenheimer High Yield Fund
Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer
Limited-Term Government Fund Oppenheimer Main Street Funds, Inc. Oppenheimer
Municipal Fund Oppenheimer Real Asset Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama
Series Fund, Inc. The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way,
Englewood,Colorado 80012.
The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver,
Colorado 80203.
The address of
the Rochester-based funds is 350
Linden Oaks, Rochester, New York
14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
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 and
rules promulgated thereunder are in possession of OppenheimerFunds,
Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado
80112.
Item 31. Management Services
--------------------------
Not Applicable.
Item 32. Undertakings
------------
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to
be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Arapahoe and State of
Colorado on the 29th day of January, 1998.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By: /s/ James C. Swain *
--------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates
indicated:
Signatures: Title Date
- ----------- ----------------- --------------
/s/ James C. Swain* Chairman of the Board January 29, 1998
- --------------------- of Trustees and
James C. Swain Principal Executive
Officer
/s/ George Bowen* Treasurer and January 29, 1998
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee January 29, 1998
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 29, 1998
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 29, 1998
- ----------------------
Charles Conrad, Jr.
/s/ Sam Freedman* Trustee January 29, 1998
- ----------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee January 29, 1998
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee January 29, 1998
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 29, 1998
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 29, 1998
- -----------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------------
24(b)(i) (Seventh Restated Declaration of Trust dated 12/16/97
24(b)(4)(v) Oppenheimer Aggressive Growth Fund Specimen Share Certificate
24(b)(4)(x) Oppenheimer Small Cap Growth Fund Specimen
Share Certificate
24(b)(4)(xi) Oppenheimer Money Fund Class 2 specimen share certificate
24(b)(4)(xii) Oppenheimer Bond Fund Class 2 specimen share certificate
24(b)(4)(xiii) Oppenheimer Growth Fund Class 2 specimen share certificate
24(b)(4)(xiv) Oppenheimer High Income Fund Class 2 specimen
share certificate
24(b)(4)(xv) Oppenheimer Aggressive Growth Fund Class 2 specimen
share certificate
24(b)(4)(xvi) Oppenheimer Multiple Strategies Fund Class 2 specimen
share certificate
24(b)(4)(xvii) Oppenheimer Global Securities Fund
Class 2 specimen share certificate
24(b)(4)(viii) Oppenheimer Strategic Bond Fund Class 2 specimen share
certificate
24(b)(4)(xix) Oppenheimer Growth & Income Fund Class 2 specimen share
certificate
24(b)(4)(xx) Oppenheimer Small Cap Growth Fund Class 2 specimen
share certificate
24(b)(5)(x) Investment Advisory Agreement for Oppenheimer Small
Cap Growth Fund dated 5/1/98
24(b)(6) General Distributor's Agreement for Class 2 shares
dated 2/24/98
24(b)(15)(i) Service Plan and Agreement for Class 2 shares of
Oppenheimer Money Fund dated 2/24/98
24(b)(15)(ii) Service Plan and Agreement for Class 2 shares of
Oppenheimer Bond Fund dated 2/24/98
24(b)(15)(iii) Service Plan and Agreement for Class 2 shares of
Oppenheimer Growth Fund dated 2/24/98
24(b)(15)(iv) Service Plan and Agreement for Class 2 shares of
Oppenheimer High Income Fund dated 2/24/98
24(b)(15)(v) Service Plan and Agreement for Class 2 shares of
Oppenheimer Aggressive Growth Fund dated 2/24/98
24(b)(15)(vi) Service Plan and Agreement for Class 2 shares of
Oppenheimer Multiple Strategies Fund dated 2/24/98
24(b)(15)(vii) Service Plan and Agreement for Class 2 shares of
Oppenheimer Global Securities Fund dated 2/24/98
24(b)(15)(viii) Service Plan and Agreement for Class 2 shares of
Oppenheimer Strategic Bond Fund dated 2/24/98
24(b)(15)(ix) Service Plan and Agreement for Class 2 shares of
Oppenheimer Growth & Income Fund dated 2/24/98
24(b)(15)(x) Service Plan and Agreement for Class 2 shares of
Oppenheimer Small Cap Growth Fund dated 2/24/98
C-3
SEVENTH
RESTATED
DECLARATION OF TRUST
OF
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEVENTH RESTATED DECLARATION OF TRUST, made as of December 16, 1997 by and
among the individuals executing this Sixth Restated Declaration of Trust as the
initial Trustees.
WHEREAS, (I) by Declaration of Trust dated August 28, 1984, the Trustees
establish a Trust initially named Oppenheimer Variable Life Funds, a trust fund
under the laws of the Commonwealth of Massachusetts, for the investment and
reinvestments of fund contributed thereto, (ii) by the First Restated
Declaration of Trust dated March 11, 1986, the Trustees amended and restated
said Declaration of Trust to create two new Series of Shares, and (iii) by the
Second Restated Declaration of Trust dated August 15, 1986, the Trustees further
amended and restated said Declaration of Trust to change the Trust's name to
Oppenheimer Variable Account Funds and to make certain other changes, (iv) by
the Third Restated Declaration of Trust dated October 21, 1986, the Trustees
amended and restated said Declaration of Trust to create a new Series of Shares,
(v) by the Fourth Restated Declaration of Trust dated June 4, 1990, the Trustees
amended and restated said Declaration of Trust to create a new Series of Shares,
(vi) by the Fifth Restated Declaration of Trust dated February 25, 1993, the
Trustees amended and restated said Declaration of Trust to create a new series
of shares, (vii) by the Sixth Restated Declaration of Trust dated February 28,
1995, the Trustees amended and restated said Declaration of Trust to create a
new Series of Shares;
-1-
<PAGE>
WHEREAS, the Trustees desire to further amend such Declaration of Trust
without shareholder approval, as permitted under ARTICLE FOURTH, to create two
additional Series of Shares in addition to the nine Series previously
established and designated, and to fix and determine the relative rights and
preferences of such Additional Series of Shares as set forth in said ARTICLE
FOURTH; NOW, THEREFORE, the Trustees declare that all money and property held or
delivered to the Trust Fund hereunder shall be held and managed under this
Seventh Restated Declaration of Trust IN TRUST as herein set forth below. FIRST:
This Trust shall be known as OPPENHEIMER VARIABLE ACCOUNT FUNDS. The address of
Oppenheimer Variable Account Funds is 6803 South Tucson Way, Englewood, Colorado
80112. The Registered Agent for service is Massachusetts Mutual Life Insurance
Company, 1295 State Street, Springfield, Massachusetts 01111, Attention: Legal
Department. SECOND: Whenever used herein, unless otherwise required by the
context or specifically provided: 1. All terms used in this Declaration of Trust
which are defined in the 1940 Act (defined below) shall have the meanings given
to them in the 1940 Act. 2. "Board" or "Board of Trustees" or the "Trustees"
means the Board of Trustees of the Trust. 3. "By-Laws" means the By-Laws of the
Trust as amended from time to time. 4. "Commission" means the Securities and
Exchange Commission.
-2-
<PAGE>
5. "Declaration of Trust" shall mean this Declaration of Trust as amended
or restated from time to time.
6. The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations of the Commission thereunder, all as amended from time to
time.
7. "Series" refers to Series of Shares established and designated under or
in accordance with the provisions of Article FOURTH.
8. "Shareholder" means a record owner of Shares of the
Trust.
9. "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any Series of the Trust (as the context may
require) shall be divided from time to time and includes fractions of Shares as
well as whole Shares.
10. The "Trust" refers to the Massachusetts business trust created by this
Declaration of Trust, as amended or restated from time to time.
11. "Trustees" refers to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the time
being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
1. To hold, invest or reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose
-3-
<PAGE>
of or turn to account or realize upon, securities (which term "securities" shall
for the purposes of this Declaration of Trust, without limitation of the
generality thereof, be deemed to include any stocks, shares, bonds, financial
futures contracts, indexes, debentures, notes, mortgages or other obligations,
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets) created or issued by any issuer (which term "issuer" shall for the
purposes of this Declaration of Trust, without limitation of the generality
thereof be deemed to include any persons, firms, associations, corporations,
syndicates, combinations, organizations, governments, or subdivisions thereof)
and in financial instruments (whether they are considered as securities or
commodities); and to exercise, as owner or holder of any securities or financial
instruments, all rights, powers and privileges in respect thereof; and to do any
and all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial instruments.
2. To borrow money and pledge assets in connection with any of the objects
or purposes of the Trust, and to issue notes or other obligations evidencing
such borrowings, to the extent permitted by the 1940 Act and by the Trust's
fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and amounts
-4-
<PAGE>
and on such terms and conditions, for such purposes and for such amount or kind
of consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer,
reissue or cancel its Shares, or to classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Series into one or more
series that may have been established and designated from time to time, all
without the vote or consent of the Shareholders of the Trust, in any manner and
to the extent now or hereafter permitted by this Declaration of Trust.
5. To conduct its business in all its branches at one or more offices in
Colorado and elsewhere in any part of the world, without restriction or limit as
to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith or make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and
all such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the
-5-
<PAGE>
accomplishment, carrying out or attainment of all or any of the
foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of this Declaration
of Trust, and shall each be regarded as independent and construed as powers as
well as objects and purposes, and the enumeration of specific purposes, objects
and powers shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the Trust now or hereafter conferred
by the laws of the Commonwealth of Massachusetts nor shall the expression of one
thing be deemed to exclude another, though it be of a similar or dissimilar
nature, not expressed; provided, however, that the Trust shall not carry on any
business, or exercise any powers, in any state, territory, district or country
except to the extent that the same may lawfully be carried on or exercised under
the laws thereof.
FOURTH: (A) The beneficial interest in the Trust shall be divided into
Shares, all without par value, but the Trustees shall have the authority from
time to time, without obtaining shareholder approval, to create one or more
Series of Shares in addition to the Series specifically established and
designated in part (B) of this Article FOURTH, as they deem necessary or
desirable, to establish and designate such Series, and to fix and determine the
relative rights and preferences as between the different Series of Shares as
-6-
<PAGE>
to right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion on liquidation,
sinking or purchase fund provisions, conversion rights, and conditions under
which the several Series shall have individual voting rights or no voting
rights. Except as aforesaid, all Shares of the different Series shall be
identical. The number of authorized Shares and the number of Shares of each
Series that may be issued is unlimited, and the Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable. The Trustees
may classify or reclassify any unissued Shares or any Shares previously issued
and reacquired of any Series into one or more Series that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of the
same or some other Series), reissue for such consideration and on such terms as
they may determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust. The establishment and designation of any
Series of Shares in addition to that established and designated in part (B) of
this Article FOURTH shall be effective upon the execution by a majority of the
Trustees of an instrument setting forth such establishment
-7-
<PAGE>
and designation and the relative rights and preferences of such Series, or as
otherwise provided in such instrument. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that Series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall be an amendment to this Declaration of
Trust, and may be made by the Trustees without shareholder approval. Any
Trustee, officer or other agent of the Trust, and any organization in which any
such person is interested may acquire, own, hold and dispose of Shares of any
Series of the Trust to the same extent as if such person were not a Trustee,
officer or other agent of the Trust; and the Trust may issue and sell or cause
to be issued and sold and may purchase Shares of any Series from any such person
or any such organization subject only to the general limitations, restrictions
or other provisions applicable to the sale or purchase of Shares of such Series
generally. (B) Without limiting the authority of the Trustees set forth in part
(A) of this Article FOURTH to establish and designate any further Series, the
Trustees hereby establish and designate eleven Series of Shares: "Oppenheimer
Money Fund," "Oppenheimer Bond Fund," and "Oppenheimer Growth Fund," established
by the Declaration of Trust dated August 28, 1984; "Oppenheimer High Income
Fund" and "Oppenheimer Capital Appreciation Fund," established by the First
Restated Declaration of Trust dated March
-8-
<PAGE>
11, 1986; "Oppenheimer Multiple Strategies Fund," established by the Third
Restated Declaration of Trust dated October 21, 1986; "Oppenheimer Global
Securities Fund" established by the Fourth Restated Declaration of Trust dated
June 4, 1990; "Oppenheimer Strategic Bond Fund" established by the Fifth
Restated Declaration of Trust dated February 25, 1993; "Oppenheimer Growth &
Income Fund" established by this Sixth Restated Declaration of Trust dated
February 28, 1995 and "Oppenheimer Discovery Fund" and "Oppenheimer Real Asset
Fund" established by this Seventh Restated Declaration of Trust dated December
16, 1997. The Shares of Oppenheimer Money Market Fund, Oppenheimer Bond Fund,
Oppenheimer Growth Fund, Oppenheimer High Income Fund, Oppenheimer Capital
Appreciation Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Global
Securities Fund, Oppenheimer Strategic Bond Fund, Oppenheimer Growth & Income
Fund, Oppenheimer Discovery Fund and Oppenheimer Real Asset Fund and any Shares
of any further Series that may from time to time be established and designated
by the Trustees shall (unless the Trustees otherwise determine with respect to
some further Series at the time of establishing and designating the same) have
the following relative rights and preferences:
(i) Assets Belonging to Series. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
-9-
<PAGE>
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books of
account of the Trust. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together with
any General Items allocated to that Series as provided in the following
sentence, are herein referred to as "assets belonging to" that Series. In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular Series (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable; and any General Items
so allocated to a particular Series shall belong to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the shareholders
of all Series for all purposes.
(ii) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in respect
of that Series and all expenses, costs, charges and reserves attributable to
that Series, and any general liabilities, expenses, costs, charges or reserves
-10-
<PAGE>
of the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges and reserves allocated and
so charged to a Series are herein referred to as "liabilities belonging to" that
Series. Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the holders of all Series for
all purposes.
(iii) Dividends. Dividends and distributions on Shares of a particular
Series may be paid to the holders of Shares of that Series, with such frequency
as the Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, from such of the income, and capital gains accrued
or realized, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a particular Series shall
be distributed pro rata to the holders of that Series in proportion to the
number of Shares of that Series held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which
-11-
<PAGE>
the Shareholder's purchase order and/or payment have not been received by the
time or times established by the Trustees under such program or procedure. Such
dividends and distributions may be made in cash or Shares or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with paragraph 13 of Article SEVENTH.
(iv) Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Series that has been established and designated
shall be entitled to receive, as a Series, when and as declared by the Trustees,
the excess of the assets belonging to that Series over the liabilities belonging
to that Series. The assets so distributable to the Shareholders of any
particular Series shall be distributed among such Shareholders in proportion to
the number of Shares of that Series held by them and recorded on the books of
the Trust.
(v) Transfer. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series will be recorded on
the Share transfer records of the Trust applicable to that Series only at such
times as Shareholders shall have the right to require the Trust to redeem Shares
of that Series and at such other times as may be permitted by the Trustees.
(vi) Equality. All Shares of each particular Series
-12-
<PAGE>
shall represent an equal proportionate interest in the assets belonging to that
Series (subject to the liabilities belonging to that Series), and each Share of
any particular Series shall be equal to each other Share of that Series; but the
provisions of this sentence shall not restrict any distinctions permissible
under subsection (iii) of part (B) of this Article FOURTH that may exist with
respect to dividends and distributions on Shares of the same Series. The
Trustees may from time to time divide or combine the Shares of any particular
Series into a greater or lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest in the assets belonging to that
Series or in any way affecting the rights of Shares of any other Series.
(vii) Fractions. Any fractional Share of any Series, if any such
fractional Share is outstanding, shall carry proportionately all the rights and
obligations of a whole Share of that Series, including those rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.
(viii) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Series shall have the right to exchange said
Shares into Shares of one or more other Series of Shares in accordance with
such requirements and procedures as may be established by the Trustees.
(ix) Ownership of Shares. The ownership of Shares shall be recorded on the
books of the Trust or of a transfer or similar
-13-
<PAGE>
agent for the Trust, which books shall be maintained separately for the Shares
of each Series that has been established and designated. No certification
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as the
case may be, shall be conclusive as to who are the Shareholders and as to the
number of Shares of each Series held from time to time by each such Shareholder.
(x) Investments in the Trust. The Trustees may accept investments in the Trust
from such persons and on such terms and for such consideration, not inconsistent
with the provisions of the 1940 Act, as they from time to time authorize. The
Trustees may authorize any distributor, principal underwriter, custodian,
transfer agent or other person to accept orders for the purchase or sale of
Shares that conform to such authorized terms and to reject any purchase or sale
orders for Shares whether or not conforming to such authorized terms. FIFTH: The
following provisions are hereby adopted with respect to voting Shares of the
Trust and certain other rights: 1. The Shareholders shall have the power to vote
(I) for the election of Trustees, when that issue is submitted to them, (ii)
with respect to the amendment of this Declaration of Trust, except when the
Trustees are granted authority to amend the
-14-
<PAGE>
Declaration of Trust without shareholder approval, (iii) to the same extent as
the shareholders of a Massachusetts business corporation, as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (iv) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act or required by law, by this Declaration of Trust, or the By-Laws of
the Trust or any registration statement of the Trust with the Commission or any
State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings of shareholders unless required
to do so by the 1940 Act, the provisions of this Declaration of Trust or other
applicable law, or unless such meeting is expressly authorized by the Trustees.
3. At all meetings of Shareholders, each Shareholder shall be entitled to one
vote on each matter submitted to a vote of the Shareholders of the affected
Series (as defined in Rule 18f-2 or its successor under the 1940 Act) for each
Share standing in his name on the books of the Trust on the date, fixed in
accordance with the By-Laws, for determination of Shareholders of the affected
Series entitled to vote at such meeting (except, if the Board so determines, for
Shares redeemed prior to the meeting), and each such Series shall vote as an
individual class ("Individual Class Voting"); provided, however, that as to any
matter with respect to which a vote of all Shareholders is required by the 1940
Act or other applicable law, such requirements as to a vote by all
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Shareholders shall apply in lieu of Individual Class Voting as described above.
Any fractional Share shall carry proportionately all the rights of a whole
Share, including the right to vote and the right to receive dividends. The
presence of a quorum at any meeting of the Shareholders shall be determined in
the manner provided for in the By-Laws. If at any meeting of the Shareholders
there shall be less than a quorum present, the Shareholders present at such
meeting may, without further notice, adjourn the same from time to time until a
quorum shall attend, but no business shall be transacted at any such adjourned
meeting except such as might have been lawfully transacted had the meeting not
been adjourned.
4. Each Shareholder, upon request to the Trust in proper form
determined by the Trust, shall be entitled to require the Trust to redeem
from the net assets of that Series all or part of the Shares of such Series
standing in the name of such Shareholder. The method of computing such net
asset value, the time at which such net asset value shall be computed and
the time within which the Trust shall make payment therefor, shall be
determined as hereinafter provided in Article SEVENTH of this Declaration
of Trust. Notwithstanding the foregoing, the Trustees, when permitted or
required to do so by the 1940 Act, may suspend the right of the
Shareholders to require the Trust to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any security of the Trust which it may issue or sell, other
than such right, if any, as the Trustees, in their discretion, may
determine.
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6. All persons who shall acquire Shares shall acquire the same subject to
the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be allowed.
SIXTH: (A) The persons who shall act as initial Trustees until the first
meeting or until their successors are duly chosen and qualify are the initial
trustees who executed the Declaration of Trust as of August 28, 1984. However,
the By-Laws of the Trust may fix the number of Trustees at a number greater than
that of the number of initial Trustees and may authorize the Trustees to
increase or decrease the number of Trustees, to fill the vacancies on the Board
which may occur for any reason, including any vacancies created by any such
increase in the number of Trustees, to set and alter the terms of office of the
Trustees and to lengthen or lessen their own terms of office or make their terms
of office of indefinite duration, all subject to the 1940 Act. Unless otherwise
provided by the By-Laws of the Trust, the Trustees need not be Shareholders.
(B) A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when requested in writing to do so by the record holders of not less
than ten per cent of the outstanding Shares. A Trustee may also be removed by
the Board of Trustees as provided in the By-Laws of the
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Trust.
(C) The Trustees shall make available a list of names and addresses of all
Shareholders as recorded on the books of the Trust, upon receipt of the request,
in writing signed by not less than ten Shareholders who have been such for at
least six months holding in the aggregate shares of the Trust valued at not less
than $25,000 at current offering price (as defined in the Trust's Prospectus
and/or Statement of Additional Information) or holding not less than 1% in
amount of the entire amount of Shares issued and outstanding; such request must
state that such Shareholders wish to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting to take action pursuant
to part (B) of this Article SIXTH and be accompanied by a form of communication
to the Shareholders. The Trustees may, in their discretion, satisfy their
obligation under this part (C) by either making available the Shareholder list
to such Shareholders at the principal offices of the Trust, or at the offices of
the Trust's transfer agent, during regular business hours, or by mailing a copy
of such communication and form of request, at the expense of such requesting
Shareholders, to all other Shareholders and the Trustees may also take such
action as may be permitted under Section 16(C) of the 1940 Act.
(D) The Trust may at any time or from time to time apply to the Commission
for one or more exemptions from all or part of said Section 16(C) and, if an
exemptive order or orders are issued by the Commission, such order or orders
shall be deemed part of Section
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16(C) for the purposes of parts (B) and (C) of this Article SIXTH. SEVENTH: The
following provisions are hereby adopted for the purpose of defining, limiting
and regulating the powers of the Trust, the Trustees and the Shareholders. 1. As
soon as any Trustee is duly elected by the Shareholders or the Trustees and
shall have accepted this Trust, the Trust estate shall vest in the new Trustee
or Trustees, together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity of
the Trustees, or any one of them shall not operate to annul or terminate the
Trust; in such event the Trust shall continue in full force and effect pursuant
to the terms of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the assets of the Trust shall at all
times be considered as vested in the Trustees. No Shareholder shall have, as
such holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof, except the rights to receive the income and distributable amounts
arising therefrom and of a particular Series as set forth herein.
4. The Trustees in all instances shall act as principals, and
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are and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and execute,
and to authorize the officers of the Trust to make and execute, any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause, and
(c) to employ a bank or trust company as custodian or any assets of the Trust
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and shareholder servicing agent, or both;
(e) to provide for the distribution of Shares either
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through a principal underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-Laws;
(g) to delegate such authority as they consider desirable to any officers of the
Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership, with respect to
stock or other securities or property held in Trust hereunder; and to execute
and deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(I) to exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities held in trust hereunder;
(j) to hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by
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such corporation or concern, and to pay calls or subscriptions with respect to
any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner
permitted by the 1940 Act and the Trust's fundamental policy
thereunder as to borrowing;
(o) to enter into investment advisory or management contracts, subject
to the 1940 Act, with any one or more corporations, partnerships, trusts,
associations or other persons; if the other party or parties to any such
contract are authorized to enter into securities transactions on behalf of the
Trust, such transactions shall be deemed to have been authorized by all of the
Trustees;
(p) to change the name of the Trust or any of its Series, without
shareholder approval, as they consider appropriate;
and (q) to establish fees and/or compensation, for the Trustees and for
committees of the Board of Trustees, to be paid by the Trust or any Series
thereof in such manner and amount as the Trustees may determine.
5. No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the
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Trustees, or to see to the application of any payments made or property
transferred to the Trustees or upon their order.
6. (a) The Trustees shall have no power to bind any Shareholder personally
or to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever, and the liability of a Shareholder for the acts,
omissions to act or obligations of the Trust is hereby expressly disclaimed,
other than such as the Shareholder may at any time personally agree to pay by
way of subscription to any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust shall include a notice and provision limiting the obligation
represented thereby to the Trust and its assets (but the omission of such notice
and provision shall not operate to impose any liability or obligation on any
Shareholder).
(b) Whenever this Declaration of Trust calls for or permits any action
to be taken by the Trustees hereunder, such action shall mean that taken by the
Board of Trustees by vote of the majority of a quorum of Trustees as set forth
from time to time in the By-Laws of the Trust or as required by the 1940 Act.
(c) The Trustees shall possess and exercise any and
all
such additional powers as are reasonably implied from the powers
herein contained such as may be necessary or convenient in the
conduct of any business or enterprise of the Trust, to do and
perform anything necessary, suitable, or proper for the
accomplishment of any of the purposes, or the attainment of any
one
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or more of the objects, herein enumerated, or which shall at any time appear
conducive to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts and things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not inconsistent
with the 1940 Act, to determine conclusively whether any moneys, securities, or
other properties of the Trust are, for the purposes of this Trust, to be
considered as capital or income and in what manner any expenses or disbursements
are to be borne as between capital and income whether or not in the absence of
this provision such moneys, securities, or other properties would be regarded as
capital or income and whether or not in the absence of this provision such
expenses or disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class shall be
elected for a period shorter than that from the time of the election following
the division into classes until the next meeting at which Trustees are elected
and thereafter for a period shorter than the interval between meetings or for a
period longer than five years, and the term of office of at least one class
shall expire each year.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable regulations of
the Trustees, not contrary to
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Massachusetts law, as to whether and to what extent, and at what times and
places, and under what conditions and regulations, such
right shall be exercised.
9. Any officer elected or appointed by the Trustees, by the Shareholders
or otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in the ByLaws of the Trust.
10. If the By-Laws so provide, the Trustees, and any committee thereof
shall have power to hold their meetings, to have an office or offices and,
subject to the provisions of the laws of Massachusetts, to keep the books
of the Trust outside of said Commonwealth at such places as may from time
to time be designated by them, and to take action without a meeting by
unanimous written consent or by telephone or similar method of
communication.
11. Securities held by the Trust shall be voted in person or by proxy by
the President or a Vice-President, or such officer or officers of the Trust as
the Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or
employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, director, trustee, employee or
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stockholder, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the Trust, and in the absence of fraud no
contract or other transaction shall be hereby affected or invalidated; provided
that when a Trustee, or a partnership, corporation or association of which a
Trustee is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees, including those Trustees who are neither "interested" nor "affiliated"
persons as those terms are defined in the 1940 Act, or a majority thereof; and
any Trustee who is so interested, or who is also a director, officer, trustee,
employee or stockholder of such other corporation or a member of such
partnership which is so interested, may be counted in determining the existence
of a quorum at any meeting of the Trustees which shall authorize any such
contract or transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not such director,
officer, trustee, employee or stockholder of such other trust or corporation or
association or a member of a partnership so interested.
(b) Specifically, but without limitation of the foregoing, the Trust
may enter into a management or investment advisory contract or underwriting
contract and other contracts with, and may otherwise do business with any
manager or investment adviser for the Trust and/or principal underwriter of the
Shares of the Trust or any subsidiary or affiliate of any such manager or
investment adviser and/or principal underwriter and may permit any
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such firm or corporation to enter into any contracts or other arrangements with
any other firm or corporation relating to the Trust notwithstanding that the
Trustee of the Trust may be composed in part of partners, directors, officers or
employees of any such firm or corporation, and officers of the Trust may have
been or may be or become partners, directors, officers or employees of any such
firm or corporation, and in the absence of fraud the Trust and any such firm or
corporation may deal freely with each other, and no such contract or transaction
between the Trust and any such firm or corporation shall be invalidated or in
any way affected thereby, nor shall any Trustee or officer of the Trust be
liable to the Trust or to any Shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the existence of any
such contract or transaction; provided that nothing herein shall protect any
director or officer of the Trust against any liability to the trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(c) (1) As used in this paragraph the following terms shall have the
meanings set forth below:
(I) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former Trustee, or
officer of another trust or corporation whose securities are or were owned by
the Trust or of which the Trust is or was a creditor and who served or serves in
such capacity at the
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request of the Trust, any present or former investment advisor or principal
underwriter of the Trust and the heirs, executors, administrators, successors
and assigns of any of the foregoing; however, whenever conduct by an indemnitee
is referred to, the conduct shall be that of the original indemnitee rather than
that of the heir, executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party or is
threatened to be made a party by reason of the fact or facts under which he or
it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by an indemnitee in connection with a covered proceeding;
and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination as to the
indemnitee whether by judgment, order, settlement, conviction or upon a plea of
nolo contendere or
its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an
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adjudication of liability against such indemnitee expressly
based on a finding of disabling conduct.
(e) Except as set forth in paragraph (d) above, the Trust shall
indemnify any indemnitee for covered expenses in any covered proceeding, whether
or not there is an adjudication of liability as to such indemnitee, if a
determination has been made that the indemnitee was not liable by reason of
disabling conduct by (I) a final decision on the merits of the court or other
body before which the covered proceeding was brought; or (ii) in the absence of
such decision, a reasonable determination, based on a review of the facts, by
either (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons", as defined in the 1940 Act nor parties to the covered
proceedings, or (b) an independent legal counsel in a written opinion; provided
that such Trustees or counsel, in reaching such determination, may but need not
presume the absence of disabling conduct on the part of the indemnitee by reason
of the manner in which the covered proceeding was terminated.
(f) Covered expenses incurred by an indemnitee in connection with a
covered proceeding shall be advanced by the Trust to an indemnitee prior to the
final disposition of a covered proceeding upon the request of the indemnitee for
such advance and the undertaking by or on behalf of the indemnitee to repay the
advance unless it is ultimately determined that the indemnitee is entitled to
indemnification thereunder, but only if one or more of the following is the
case: (I) the indemnitee shall provide a
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security for such undertaking; (ii) the Trust shall be insured against losses
arising out of any lawful advances; or (iii) there shall have been a
determination, based on a review of the readily available facts (as opposed to a
full trial-type inquiry) that there is a reason to believe that the indemnitee
ultimately will be found entitled to indemnification, by either independent
legal counsel in a written opinion or by the vote of a majority of a quorum of
trustees who are neither "interested persons" as defined in the 1940 Act nor
parties to the covered proceeding.
(g) Nothing herein shall be deemed to affect the right of the Trust
and/or any indemnitee to acquire and pay for any insurance covering any or all
indemnitees to the extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by the 1940 Act.
13. For purposes of the computation of net asset value, as
in this Declaration of Trust referred to, the following rules
shall
apply:
(a) The net asset value per Share of any Series, as of the time of
valuation on any day, shall be the quotient obtained by dividing the value, as
at such time, of the net assets of that Series (i.e., the value of the assets of
that Series less its liabilities exclusive of its surplus) by the total number
of Shares of that Series outstanding at such time. The assets and liabilities of
any Series shall be determined in accordance with generally accepted accounting
principles; provided, however, that
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in determining the liabilities of any Series there shall be included such
reserves as may be authorized or approved by the Trustees, and provided further
that in connection with the accrual of any fee or refund payable to or by an
investment adviser of the Trust for such Series, the amount of which accrual is
not definitely determinable as of any time at which the net asset value of each
Share of that Series is being determined due to the contingent nature of such
fee or refund, the Trustees are authorized to establish from time to time
formulae for such accrual, on the basis of the contingencies in question to the
date of such determination, or on such other basis as the Trustees may
establish.
(1) Shares of a Series to be issued shall be deemed to be
outstanding as of the time of the determination of the net asset value per Share
applicable to such issuance and the net price
thereof shall be deemed to be an asset of that Series;
(2) Shares of a Series to be redeemed by the Trust
shall be deemed to be outstanding until the time of the
determination of the net asset value applicable to such
redemption
and thereupon and until paid the redemption price thereof shall
be
deemed to be a liability of that Series; and
(3) Shares of a Series voluntarily purchased or
contracted to be purchased by the Trust pursuant to the provisions of paragraph
4 of Article FIFTH shall be deemed to be outstanding until whichever is the
later of (I) the time of the making of such purchase or contract of purchase,
and (ii) the time of which the
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purchase price is determined, and thereupon and until paid, the purchase price
thereof shall be deemed to be a liability of that Series.
(b) The Trustees are empowered, in their absolute discretion, to
establish bases or times, or both, for determining the net asset value per Share
of any Series in accordance with the 1940 Act and to authorize the voluntary
purchase by any Series, either directly or through an agent, of Shares of any
Series upon such terms and conditions and for such consideration as the Trustees
shall deem advisable in accordance with the 1940 Act.
14. Payment of the net asset value per Share of any Series properly
surrendered to it for redemption shall be made by the Trust within seven days
after tender of such shares to the Trust for such purpose plus any period of
time during which the right of the holders of the shares of that Series to
require the Trust to redeem such shares has been suspended, or as specified in
any applicable law or regulation. Any such payment may be made in portfolio
securities of that Series and/or in cash, as the Trustees shall deem advisable,
and no Shareholder shall have a right, other than as determined by the Trustees,
to have his Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior notice
to the Shareholder, to redeem Shares of the Series held by such Shareholder held
in any account registered in the name of such Shareholder for its current net
asset value, if and to the extent that such redemption is necessary to reimburse
either that
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Series of the Trust or the distributor (i.e., principal underwriter) of the
Shares for any loss either has sustained by reason of the failure of such
Shareholder to make timely and good payment for Shares purchased or subscribed
for by such
Shareholder,
regardless of whether such Shareholder was a Shareholder at the time of such
purchase or subscription; subject to and upon such terms and conditions as the
Trustees may from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and of
any Series shall be used pursuant to a royalty-free, non-exclusive license from
OppenheimerFunds, Inc. ("OFI"), incidental to and as part of an advisory,
management or supervisory contract which may be entered into by the Trust with
OFI. The license may be terminated by OFI upon termination of such advisory
management or supervisory contract or without cause upon 60 days' notice, in
which case neither the Trust nor any Series shall have any further right to use
the name "Oppenheimer" in its name or otherwise and the Trust, the Shareholders
and its officers and Trustees shall promptly take whatever action may be
necessary to change its name and the names of any Series accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or
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in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the Trust estate to be held harmless from
and indemnified against all loss and expense arising from such liability. The
Trust shall, upon request by the Shareholder, assume the defense of any such
claim made against any Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. 2. It is hereby expressly declared that a trust
and not a partnership is created hereby. No individual Trustee hereunder shall
have any power to bind the Trust, the Trust's officers or any Shareholder. All
persons extending credit to, doing business with, contracting with or having or
asserting any claim against the Trust or the Trustees shall look only to the
assets of the Trust for payment under such credit, transaction, contract or
claim; and neither the Shareholders nor the Trustees, nor any of their agents,
whether past, present or future, shall be personally liable therefor; notice of
such disclaimer shall be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. Nothing in this
Declaration of Trust shall protect a Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder. 3. The exercise by the Trustees of their powers
and discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing, shall be binding upon everyone
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interested. Subject to the provisions of paragraph 2 of this Article NINTH, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operations of this Declaration of Trust, applicable laws, contracts,
obligations, transactions, or any business or dealings the Trust may enter into,
and subject to the provisions of paragraph 2 of this Article NINTH, shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
4. This Trust shall continue without limitation of time but
subject to the provisions of sub-sections (a), (b), (c) and (d)
of
this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of a majority
of the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may sell and convey the assets of that Series
(which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders of the outstanding
Shares of the Series the assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the
holders
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of a majority of the outstanding voting securities, as defined in the 1940 Act,
of any one or more Series entitled to vote, may at any time sell and convert
into money all the assets of that Series. Upon making provisions for the payment
of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of that Series, the Trustees shall distribute the remaining assets
of that Series ratably among the holders of the outstanding Shares of that
Series. (c) The Trustees, with the favorable vote of the holders of a majority
of the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may at any time otherwise alter, transfer or
convert the assets of such Series. (d) Upon completion of the distribution of
the remaining proceeds or the remaining assets as provided in sub-sections (a),
(b), and (c), whenever applicable, the Series the assets of which have been so
transferred shall terminate, and if all the assets of the Trust have been so
transferred, the Trust shall terminate and the Trustees shall be discharged of
any and all further liabilities and duties hereunder and the right, title and
interest of all parties shall be canceled and discharged. 5. The original or a
copy of this instrument and of each declaration of trust supplemental hereto
shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each supplemental or restated
declaration of trust shall be filed with the Massachusetts
-36-
<PAGE>
Secretary of State, as well as any other governmental office where such filing
may from time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
supplemental or restated declarations of trust have been made and as to any
matters in connection with the Trust hereunder, and, with the same effect as if
it were the original, may rely on a copy certified by an officer of the Trust to
be a copy of this instrument or of any such restated or supplemental declaration
of trust. In this instrument or in any such supplemental or restated declaration
of trust, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as amended
or affected by any such restated or supplemental declaration of trust. This
instrument may be executed in any number of counterparts, each of which shall be
deemed as original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such Shares
(taken at cost or value, as determined by the
Board)
has been reduced to $200 or less upon such notice to the
shareholder in question, with such permission to increase the
-37-
<PAGE>
investment in question and upon such other terms and conditions
as
may be fixed by the Board of Trustees in accordance with the
1940
Act.
8. In the event that any person advances the organizational expenses of
the Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the Board of Trustees, to be amortized over a period or
periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust under any
authorization to take action which is permitted by the 1940 Act or other
applicable law, such action shall be deemed to have been properly taken if such
action is in accordance with the construction of the 1940 Act then in effect as
expressed in "no action" letters of the staff of the Commission or any release,
rule, regulation or order under the 1940 Act or any decision of a court of
competent jurisdiction, notwithstanding that any of the foregoing shall later be
found to be invalid or otherwise reversed or modified by any of the foregoing.
10. Any action which may be taken by the Board of Trustees
under this Declaration of Trust or its By-Laws may be taken by
the
description thereof in the then effective prospectus or
statement
of additional information relating to the Shares under the
Securities Act of 1933 or in any proxy statement of the Trust
rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of
-38-
<PAGE>
Trustees is permitted or required to place a value on assets of the Trust, such
action may be delegated by the Board, and/or determined in accordance with a
formula determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and the favorable vote of the
holders of a majority of the outstanding voting securities, as defined in the
1940 Act, entitled to vote, or by any larger vote which may be required by
applicable law in any particular case, the Trustees shall amend or otherwise
supplement this instrument, by making a Restated Declaration of Trust or a
Declaration of Trust supplemental hereto, which thereafter shall form a part
hereof; any such Supplemental or Restated Declaration of Trust may be executed
by and on behalf of the Trust and the Trustees by an officer or officers of the
Trust.
-39-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 16th day of December, 1997.
/s/ William A. Baker /s/ Charles Conrad, Jr.
William A. Baker, Trustee Charles Conrad, Jr., Trustee
197 Desert Lakes Drive 6301 Princeville Circle
Palm Springs, CA 92264 Huntington Beach, CA 92648
/s/ Ned M. Steel /s/ Robert M. Kirchner
Ned M. Steel, Trustee Robert M. Kirchner, Trustee
3416 S. Race Street 2800 S. University Boulevard
Englewood, CO 80110 Denver, CO 80210
/s/ Raymond J. Kalinowski /s/ C. Howard Kast
Raymond J. Kalinowski, TC. Howard Kast, Trustee
44 Portland Drive 2252 East Alameda
St. Louis, MO 63131 Denver, CO 80209
/s/ James C. Swain /s/ Jon S. Fossel
James C. Swain, Trustee Jon S. Fossel, Trustee
355 Adams Street 187 Mead Street
Denver, CO 80206 Waccabuc, NY 10597
/s/ Robert G. Avis /s/Sam Freedman
Robert G. Avis, Trustee Sam Freedman, Trustee
1706 Warson Estates Drive 4975 Lake Shore Drive
St. Louis, MO 63124 Littleton, Colorado 80123
OPPENHEIMER AGGRESSIVE GROWTH FUND
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER AGGRESSIVE GROWTH FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683811 509
(at left) is the owner of
(centered) FULLY PAID SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER AGGRESSIVE GROWTH FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
----------------------- -------------------
SECRETARY PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
SHAREHOLDER SERVICES, INC. (a
DIVISION OF OPPENHEIMERFUNDS,
INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT -__________________ Custodian
- --------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
- -----------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Shares
of the beneficial interest represented by the within
Certificate,
and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- -----------------------------------
(Both must sign if joint tenancy)
Signature(s)_____________________
guaranteed Name of Firm or
Bank
by:
- --------------------------
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right correspond with the name(s) as written upon
of above paragraph) the face of the certificate in every
particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a U.S.
box to left of commercial bank or trust company, a
Federally-
signature(s)) chartered savings and loan association, a
foreign bank having a U.S. correspondent
bank
or member firm of a national securities
exchange.
OPPENHEIMER SMALL CAP GROWTH FUND
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER SMALL CAP GROWTH FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER SMALL CAP GROWTH FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
_______________________ ___________________
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription
on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
_______________
(Cust) (Minor)
UNDER UGMA/UTMA
___________________
(State)
Additional abbreviations may also be used though not on above
list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
______________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
__________________________________________________________
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
________________________________
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER MONEY FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER MONEY FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER MONEY FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER BOND FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER BOND FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER BOND FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVISON
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - ____________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- ----------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
<PAGE>
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
- -------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
_________________________________________________________ Class
2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER GROWTH FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER GROWTH FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER GROWTH FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER HIGH INCOME FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER HIGH INCOME FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER HIGH INCOME FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER AGGRESSIVE GROWTH FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER AGGRESSIVE GROWTH FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER AGGRESSIVE GROWTH FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER MULTIPLE STRATEGIES FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER MULTIPLE STRATEGIES FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
<PAGE>
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
<PAGE>
(box for identifying number)
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER GLOBAL SECURITIES FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER GLOBAL SECURITIES FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER GLOBAL SECURITIES FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVISON
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - ___________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- -----------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER STRATEGIC BOND FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER STRATEGIC BOND FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER STRATEGIC BOND FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER GROWTH & INCOME FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER GROWTH & INCOME FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER GROWTH & INCOME FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
OPPENHEIMER SMALL CAP GROWTH FUND
Class 2 Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner): NUMBER [of shares]
(upper right) CLASS 2 SHARES
(centered
below boxes) Oppenheimer Variable Account
Funds
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER SMALL CAP GROWTH FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE
FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL
INTEREST OF
OPPENHEIMER SMALL CAP GROWTH FUND
a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS
(hereinafter called the "Fund"), transferable only on
the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and
the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by
acceptance hereof assents. This certificate is not
valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the
signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
/s/ George C. Bowen /s/ Bridget A. Macaskill
----------------------- -------------------
TREASURER PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
<PAGE>
with legend
OPPENHEIMER VARIABLE ACCOUNT FUNDS
SEAL
1984
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMERFUNDS SERVICES (A
DIVSION
OF OPPENHEIMERFUNDS, INC.)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or
regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________ Custodian
- ---------------
(Cust) (Minor)
UNDER UGMA/UTMA
- -------------------
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s),
and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
- --------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------
- ----------------------------------------------------------
Class 2
Shares of the beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said
shares
on the books of the within named Fund with full power of
substitution in the premises.
Dated: ______________________
Signed: __________________________
- --------------------------------
(Both must sign if joint tenancy)
Signature(s) __________________________
guaranteed Name of Firm or
Bank
by: _____________________________
Signature of
Officer
(text printed NOTICE: The signature(s) to this assignment
vertically to right must correspond with the name(s) as
of above paragraph) written upon the face of the certificate
in every particular without alteration or
enlargement or any change whatever.
(text printed in Signatures must be guaranteed by a
U.S.
box to left of commercial bank or trust company,
signature(s) a Federally-chartered savings and loan
association, a foreign bank having a
U.S.
firm of a national securities exchange.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 1st day of May, 1998, by and between OPPENHEIMER VARIABLE
ACCOUNT FUNDS (hereinafter referred to as the "Trust"), and OPPENHEIMERFUNDS,
INC. (hereinafter referred to as "OFI").
WHEREAS, the Trust is an open-end, diversified series management investment
company registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), and OFI is a registered investment adviser; and
WHEREAS, OPPENHEIMER SMALL CAP GROWTH FUND (the "Fund") is a series of the Trust
having a separate portfolio, investment policies and investment restrictions;
and
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.
a. The Trust hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Fund such other duties and
functions as are hereinafter set forth. OFI shall, in all matters, give to the
Fund and the Trust's Board of Trustees the benefit of its best judgment, effort,
advice and recommendations and shall, at all times conform to, and use its best
efforts to enable the Fund to conform to: (i) the provisions of the Investment
Company Act and any rules or regulations thereunder; (ii) any other applicable
provisions of state or Federal law; (iii) the provisions of the Declaration of
Trust and By-Laws of the Trust as amended from time to time; (iv) policies and
determinations of the Board of Trustees of the Trust; (v) the fundamental
policies and investment restrictions of the Fund as reflected in the Trust's
registration statement under the Investment Company Act or as such policies may,
from time to time, be amended by the Fund's shareholders; and (vi) the
Prospectus and Statement of Additional Information of the Trust in effect from
time to time. The appropriate officers and employees of OFI shall be available
upon reasonable notice for consultation with any of the trustees and officers of
the Trust with respect to any matters dealing with the business and affairs of
the Trust including the valuation of portfolio securities of the Fund which
securities are either not registered for public sale or not traded on any
securities market.
2. Investment Management.
a. OFI shall, subject to the direction and control by the Trust's Board of
Trustees: (i) regularly provide investment advice and recommendations to the
Fund with respect to its investments, investment policies and the purchase and
sale of securities; (ii) supervise continuously the investment program of the
Fund and the composition of its portfolio and determine what securities shall be
purchased or sold by the Fund; and (iii) arrange, subject to the provisions of
paragraph 7 hereof, for the purchase of securities and other investments for the
Fund and the sale of securities and other investments held in the portfolio of
the Fund.
b. Provided that the Trust shall not be required to pay any compensation
other than as provided by the terms of this Agreement and subject to the
provisions of paragraph 7 hereof, OFI may obtain investment information,
research or assistance from any other person, firm or corporation to supplement,
update or otherwise improve its investment management services.
<PAGE>
c. OFI shall not be liable for any loss sustained by the Trust and/or the
Fund in connection with matters to which this Agreement relates, except a loss
resulting by reason of OFI's 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 OFI or any officer thereof from
acting as investment adviser for any other person, firm or corporation and shall
not in any way limit or restrict OFI or any of its directors, officers,
stockholders 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 OFI of its duties and obligations under this
Agreement.
3. Other Duties of OFI.
OFI shall, at its own expense, provide and supervise the activities of all
administrative and clerical personnel as shall be required to provide effective
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; composition of periodic reports with respect to operations of
the Fund for its shareholders; composition of proxy materials for meetings of
the Fund's shareholders, and the composition of such registration statements as
may be required by Federal securities laws for continuous public sale of shares
of the Fund. OFI shall, at its own cost and expense, also provide the Trust with
adequate office space, facilities and equipment. OFI shall, at its own expense,
provide such officers for the Fund as the Fund's Board may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed by OFI
under this Agreement, shall be paid by the Trust, including, but not limited to:
(i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums for
fidelity and other coverage requisite to its operations; (iv) compensation and
expenses of its trustees other than those associated or affiliated with OFI; (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 under Federal securities laws of shares
of the Fund for public sale; (x) expenses of printing and mailing reports,
notices and proxy materials to shareholders of the Fund; (xi) except as noted
above, all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary non-recurring expenses as may arise,
including litigation, affecting the Fund and any legal obligation which the
Trust may have on behalf of the Fund to indemnify its officers and trustees with
respect thereto. Any officers or employees of OFI or any entity controlling,
controlled by or under common control with OFI, who may also serve as officers,
trustees or employees of the Trust shall not receive any compensation from the
Trust for their services. The expenses with respect to any two or more series of
the Trust shall be allocated in proportion to the net assets of the respective
series except where allocations of direct expenses can be made.
5. Compensation of OFI.
The Trust agrees to pay OFI on behalf of the Fund and OFI agrees to accept
as full compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee
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computed on the aggregate net asset value of the Fund as of the close of each
business day and payable monthly at the annual rate of: 0.75% of the first $200
million of average annual net assets; 0.72% of the next $200 million; 0.69% of
the next $200 million; 0.66% of the next $200 million ; and 0.60% of average
annual net assets over $800 million.
6. Use of Name "Oppenheimer."
OFI hereby grants to the Trust a royalty-free, non-exclusive license to
use the name "Oppenheimer" in the name of the Trust and the Fund for the
duration of this Agreement and any
extensions or renewals thereof.
To the extent necessary to protect OFI's rights to the name "Oppenheimer" under
applicable law, such license shall allow OFI to inspect, and subject to control
by the Trust's Board, control the name and quality of services offered by the
Fund under such name. Such license may, upon termination of this Agreement, be
terminated by OFI, in which event the Trust shall promptly take whatever action
may be necessary to change its name and the name of the Fund and discontinue any
further use of the name "Oppenheimer" in the name of the Trust or the Fund or
otherwise. The name "Oppenheimer" may be used or licensed by OFI in connection
with any of its activities, or licensed by OFI to any other party.
7. Portfolio Transactions and Brokerage.
a. OFI is authorized, in arranging the purchase and sale of the Fund's
portfolio securities, to employ or deal with such members of securities or
commodities 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 the 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 OFI of
its investment management functions.
b. OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by OFI on the basis of all relevant factors and considerations
including, insofar as feasible, the execution capabilities required by the
transaction or transactions; the ability and willingness of the broker-dealer to
facilitate the Fund's portfolio transactions by participating therein for its
own account; the importance to the Fund of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Fund.
c. OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Fund's portfolio transactions to broker-dealers, other than an
affiliated broker-dealer, qualified to obtain best execution of such
transactions 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 OFI or its affiliates exercise "investment
discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Trust 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
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qualified to effect such transaction would have charged for effecting that
transaction, if OFI determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the overall responsibilities of OFI or its affiliates with
respect to the accounts as to which they exercise investment discretion. In
reaching such determination, OFI will not be required to place or attempt to
place a specific dollar value on the brokerage and/or research services provided
or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OFI shall be prepared to show that all
commissions were allocated for purposes contemplated by this Agreement and that
the total commissions paid by the Trust over a representative period selected by
the Trust's trustees were reasonable in relation to the benefits to the Fund.
d. OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of the Board of
Trustees of the Trust and the provisions of this paragraph 7.
e. The Trust recognizes that an affiliated broker-dealer: (i) may act as
one of the Fund's regular brokers so long as it is lawful for it so to act; (ii)
may be a major recipient of brokerage commissions paid by the Trust; and (iii)
may effect portfolio transactions for the Fund only if the commissions, fees or
other remuneration received or to be received by it are determined in accordance
with procedures contemplated by any rule, regulation or order adopted under the
Investment Company Act for determining the permissible level of such
commissions.
f. Subject to the foregoing provisions of this paragraph 7, OFI may also
consider sales of shares of the Fund and the other funds advised by OFI and its
affiliates as a factor in the selection of broker-dealers for its portfolio
transactions.
8. Duration.
This Agreement will take effect on the date first set forth above. Unless
earlier terminated pursuant to paragraph 10 hereof, this Agreement shall remain
in effect until two years from the date of execution hereof, and thereafter will
continue in effect from year to year, so long as such continuance shall be
approved at least annually by the Trust's Board of Trustees, including the vote
of the majority of the trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, or by the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund and by such a vote
of the Trust's Board of Trustees.
9. Disclaimer of Trustee or Shareholder Liability.
OFI understands and agrees that the obligations of the Trust under this
Agreement are not binding upon any Trustee or shareholder of the Trust or Fund
personally, but bind only the Trust and the Trust's property. OFI represents
that it has notice of the provisions of the Declaration of Trust of the Trust
disclaiming Trustee or shareholder liability for acts or obligations of the
Trust.
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10. Termination.
This Agreement may be terminated: (i) by OFI at any time without penalty
upon sixty days' written notice to the Trust (which notice may be waived by the
Trust); or (ii) by the Trust at any time without penalty upon sixty days'
written notice to OFI (which notice may be waived by OFI) provided that such
termination by the Trust shall be directed or approved by the vote of a majority
of all of the trustees of the Trust then in office or by the vote of the holders
of a "majority" of the outstanding voting securities of the Fund (as defined in
the Investment Company Act).
11. Assignment or Amendment.
This Agreement may not be amended or the rights of OFI hereunder 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 Trust. This Agreement shall automatically
and immediately terminate in the event of its "assignment," as defined as stated
below.
12. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
for OPPENHEIMER SMALL CAP GROWTH FUND
By:
OPPENHEIMERFUNDS, INC.
By:
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER VARIABLE ACCOUNT FUNDS
AND
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Date: February 24, 1998
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, New York 10048
Dear Sirs:
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust"), a Massachusetts business
trust, is registered as an investment company under the Investment Company
Act of 1940 (the "1940
Act") consisting of one or more series ("Series") and an indefinite number of
one or more classes of its shares of beneficial interest for each Series 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 Trust's Registration Statement as it may be
amended from time to time (the "Current Prospectus and/or SAI").
In this connection, the Trust desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the sale
and distribution of Class 2 shares of beneficial interest ("Shares") for the
following Series: Oppenheimer Money Fund, Oppenheimer Bond Fund, Oppenheimer
Growth Fund, Oppenheimer High Income Fund, Oppenheimer Aggressive Growth Fund,
Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund,
Oppenheimer Strategic Bond Fund, Oppenheimer Growth & Income Fund and
Oppenheimer Small Cap Growth Fund which have been registered as described above
and of any additional Class 2 and subsequent Classes of Shares which may become
registered during the term of this Agreement. You have advised the Trust 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 Trust hereby appoints you as the
sole General Distributor for sale of its Shares, pursuant to the aforesaid
continuous public offering of its Shares and the Trust 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 Trust may
itself sell Shares as an investment to the officers, trustees or directors and
bona fide present and former full-time employees of the Trust, the Trust's
Investment Adviser and affiliates thereof, and to other
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investors who are identified in the current Prospectus and/or SAI; (b) the Trust
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 Trust may issue Shares for the reinvestment of dividends and other
distributions of the Trust or of any other Trust if permitted by the current
Prospectus and/or SAI; and (d) the Trust 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
Trust 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 Trust and
the General Distributor, you will suspend such efforts. The Trust 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 of the Trust.
3. 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. Shares of the Trust may be sold by you only at
net asset value
without sales charge upon receipt of Federal Funds for the
purchase of any
Shares sold by you pursuant to provisions hereof.
(b) You agree promptly to issue or to cause the duly appointed
transfer or
shareholder servicing agent of the Trust to issue as your
agent confirmations
of all accepted purchase orders and to transmit a copy of
such confirmations
to the Trust. 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 Trust to be paid
promptly after receipt of payment from the originating
insurance company,
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 insurance
company, dealer or
broker or investor. In no event shall the General
Distributor make payment
to the Trust later than permitted by applicable rules of
the National
Association of Securities Dealers, Inc. Notwithstanding
the provisions of
part (a) of this Section 3 of this Agreement, purchase
orders received from an
authorized insurance company or dealer after the latest
determination of the
Trust's net asset value on a regular business day will
receive that latest net
asset value if the request to the insurance company or
dealer by its customer
to arrange such purchase prior to the latest determination
of the Trust's net
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<PAGE>
asset value that day complies with the requirements governing
such requests as stated in the current Prospectus and/or SAI.
(c) If the originating insurance company or 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 insurance company or
dealer or broker, or
investor. You agree promptly to reimburse the Trust 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 Trust
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 Trust agrees that if such investor fails
to make you whole for
any loss you pay to the Trust on such canceled purchase
order, the Trust will
reimburse you for such loss to the extent of the aggregate
redemption
proceeds of any other Shares of the Trust owned by such
investor, on your
demand that the Trust exercise its right to claim such
redemption proceeds.
The Trust 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 Trust 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
Trust to the extent set
forth in the current Prospectus and/or SAI.
4. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are
appointed and shall act
as Agent of the Trust. You are authorized, for so long as
you act as General
Distributor of the Trust, to repurchase, from authorized
insurance companies
or dealers, certificated or uncertificated shares of the
Trust ("Shares") on the
basis of orders received from each insurance company or
dealer ("authorized
insurance company") with which you have a participation
agreement for the
sale of Shares and permitting resales of Shares to you,
provided that such
authorized insurance company, 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 current
effective prospectus and/or SAI, or (ii) if such Shares are
uncertificated, that
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<PAGE>
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 current
effective prospectus of the Trust.
(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 Trust,
or, if so directed, to any duly appointed transfer or
shareholder servicing
agent of the Trust. In your discretion, you may accept
repurchase requests
made by a financially responsible insurance company or
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 Trust shall
be a third party beneficiary of such indemnification.
(c) Upon receipt by the Trust 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 current effective Prospectus or SAI, the Trust
will pay or cause
its duly appointed transfer or shareholder servicing agent
promptly to pay to
the originating authorized insurance company the
redemption price of the
repurchased Shares (other than repurchased Shares subject
to the provisions
of part (d) of Section 4 of this Agreement) next determined
after your receipt
of the dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 4 of
this Agreement,
repurchase orders received from an authorized dealer after
the latest
determination of the Trust's redemption price on a regular
business day will
receive that day's latest redemption price if the request
to the dealer by its
customer to arrange such repurchase prior to the latest
determination of the
Trust'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
Trust. 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 a Fund
harmless from the effect of any errors or omissions which
might cause an
over- or under-redemption of a Fund's Shares and/or an
excess or non-
payment of dividends, capital gains distributions, or other
distributions.
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<PAGE>
(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
Trust, you agree promptly
to reimburse the Trust for any amount by which any loss
shall exceed then-
existing gains so arising.
5. 1933 Act Registration. The Trust has delivered to you a copy of its
current Prospectus and SAI. The Trust agrees that it will use its best efforts
to continue the effectiveness of the Trust's Registration Statement filed under
the 1933 Act. The Trust 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 Trust will furnish you at your expense with a
reasonable number of copies of the current Prospectus and SAI and any amendments
thereto for use in connection with the sale of Shares.
6. 1940 Act Registration. The Trust has already registered under the 1940
Act as an investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of the 1940 Act.
7. Duties of Distributor:
(a) Neither you nor any of your officers will take any long or
short position in the shares of the Trust, but this provision
shall not prevent you or your officers from acquiring shares
of the Trust for investment purposes only;
(b) You shall furnish to the Trust 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;
(c) You will not make any representations inconsistent with the
information contained in the Current Prospectus and/or SAI.
(d) You shall maintain such records as may be reasonably
required for the Trust
or its transfer or shareholder servicing agent to respond
to shareholder
requests or complaints, and to permit the Trust to maintain
proper accounting
records, and you shall make such records available to the
Trust 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 Trust's current Prospectus and/or SAI and
all applicable laws, rules and regulations with respect to the
purchase, sale and distribution of Shares.
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<PAGE>
8. Allocation of Costs. The Trust shall pay the cost of composition and
printing of sufficient copies of its Prospectus and SAI as shall be required for
periodic distribution to its shareholders and the expense of registering Shares
for sale under federal securities laws. You shall pay the expenses normally
attributable to the sale of Shares, other than as paid under the Trust's Service
Plans under Rule 12b-1 of the 1940 Act, including the cost of printing and
mailing of the Prospectus (other than those furnished to existing direct or
indirect shareholders) and any sales literature used by you in the public sale
of the Shares.
9. 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 Trust and you. Unless earlier terminated pursuant to Section 10
hereof, this Agreement shall remain in effect until September 30, 1999. 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
Trust's Board of Trustees or by vote of a majority of the voting securities of
the Trust; and (b) by the vote of a majority of the Trustees, who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such person, cast in person at a meeting called for the purpose of voting
on such approval.
10. 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 Trust); (b) by the Trust 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 Trust
and the General Distributor, provided that such termination by the Trust
pursuant to part (b) of this Section 10 shall be directed or approved by the
Board of Trustees of the Trust or by the vote of the holders of a "majority" of
the outstanding voting securities of the Trust.
11. 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.
12. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Trust under this Agreement
are not binding upon any shareholder or any Trustee of the Trust personally, but
bind only the Trust and the Trust's property; the General Distributor represents
that it has notice of the provisions of the Declaration of Trust of the Trust
disclaiming shareholder and Trustee liability for acts or obligations of the
Trust.
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13. 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, kindly so
indicate by signing in the space provided below.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By:
Accepted:
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By:
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER MONEY FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER MONEY FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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.
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3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. However, no such payments
shall be made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time to time
by a majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time increase or decrease and
thereafter adjust the rate of fees
2
<PAGE>
to be paid to the Distributor or to any Recipient, but not to exceed the
rate set forth above, and/or increase or decrease the number of shares
constituting Minimum Qualified Holdings. The Distributor shall notify all
Recipients of the Minimum Qualified Holdings and the rate of payments
hereunder applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of Class 2. This Plan may not be amended to increase
materially the
3
<PAGE>
amount of payments to be made without approval of the Class 2 Shareholders, in
the manner described above, and all material amendments must be approved by a
vote of the Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER MONEY FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
OFMI\66012b
4
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER BOND FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER BOND FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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.
1
<PAGE>
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. However, no such payments
shall be made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time to time
by a majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time increase or decrease and
thereafter adjust the rate of fees
2
<PAGE>
to be paid to the Distributor or to any Recipient, but not to exceed the
rate set forth above, and/or increase or decrease the number of shares
constituting Minimum Qualified Holdings. The Distributor shall notify all
Recipients of the Minimum Qualified Holdings and the rate of payments
hereunder applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of Class 2. This Plan may not be amended to increase
materially the
3
<PAGE>
amount of payments to be made without approval of the Class 2 Shareholders, in
the manner described above, and all material amendments must be approved by a
vote of the Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER BOND FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
OFMI\63012b
4
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER GROWTH FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER GROWTH FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER HIGH INCOME FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER HIGH INCOME FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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.
1
<PAGE>
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. However, no such payments
shall be made to any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time to time
by a majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time increase or decrease and
thereafter adjust the rate of fees
2
<PAGE>
to be paid to the Distributor or to any Recipient, but not to exceed the
rate set forth above, and/or increase or decrease the number of shares
constituting Minimum Qualified Holdings. The Distributor shall notify all
Recipients of the Minimum Qualified Holdings and the rate of payments
hereunder applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of Class 2. This Plan may not be amended to increase
materially the
3
<PAGE>
amount of payments to be made without approval of the Class 2 Shareholders, in
the manner described above, and all material amendments must be approved by a
vote of the Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER HIGH INCOME FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER AGGRESSIVE GROWTH FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER AGGRESSIVE GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER AGGRESSIVE GROWTH FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER MULTIPLE STRATEGIES FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER MULTIPLE STRATEGIES FUND (the "Fund") and OPPENHEIMERFUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER MULTIPLE STRATEGIES FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER GLOBAL SECURITIES FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER GLOBAL SECURITIES FUND (the "Fund") and OPPENHEIMERFUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER GLOBAL SECURITIES FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER STRATEGIC BOND FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER STRATEGIC BOND FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR,
INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER STRATEGIC BOND FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER GROWTH & INCOME FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER GROWTH & INCOME FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR,
INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
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<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER GROWTH & INCOME FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR CLASS 2 SHARES OF
OPPENHEIMER SMALL CAP GROWTH FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by
and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its
OPPENHEIMER SMALL CAP GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR,
INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc., pursuant to which the Fund
will reimburse the Distributor for a portion of its costs incurred in connection
with the personal service and maintenance of shareholder accounts ("Accounts")
that hold Class 2 Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according
to the terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any insurance company or affiliate thereof or
other institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may arise
concerning such service; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing, a majority
of the Trust'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, (ii) such brokerage or
other customers, or investment advisory or other clients of such Recipient
and/or accounts as to which such Recipient is a fiduciary or custodian or
co-fiduciary or co-custodian (collectively, the "Customers"), or (iii)
separate accounts created by such Recipient, 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
1
<PAGE>
Fund's books shall be deemed the Recipient as to such Shares for purposes
of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of
the lesser of: (i) .0625% (.25% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of the Shares,
computed as of the close of each business day, or (ii) the Distributor's
actual expenses under the Plan for that quarter of the type approved by
the Board. The Distributor will use such fee received from the Fund in its
entirety to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such affiliated
person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts may
include, but shall not be limited to, the following: answering routine
inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in Shares, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund, making the Fund's investment plans and dividend payment options
available, and providing such other information and customer liaison
services and the maintenance of Accounts as the Distributor or the Fund
may reasonably request. It may be presumed that a Recipient has provided
services qualifying for compensation under the Plan if it has Qualified
Holdings of Shares to entitle it to payments under the Plan. In the event
that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the request of
the Board, shall require the Recipient to provide a written report or
other information to verify that said Recipient is providing appropriate
services in this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for any
other purpose other than for the payments described in this Section 3. The
amount payable to the Distributor each quarter will be reduced to the
extent that reimbursement payments otherwise permissible under the Plan
have not been authorized by the Board for that quarter. Any unreimbursed
expenses incurred for any quarter by the Distributor may not be recovered
in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day, of Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers. 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
2
<PAGE>
time to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time increase or
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or increase or decrease the number of shares constituting
Minimum Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund or from
Oppenheimer Variable Account Funds), or (ii) by the Distributor (a
subsidiary of OFI), from its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Trust who are not "interested persons" of the Fund
or the Trust shall be committed to the discretion of the Independent Trustees.
Nothing herein shall prevent the Independent Trustees from soliciting the views
or the involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a majority of the
incumbent Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide at least quarterly a written report to the Trust's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 24, 1998 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1999 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 the Board
and its Independent Trustees by a vote cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by vote of a majority of the Independent
3
<PAGE>
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 Class 2. This Plan may not
be amended to increase materially the amount of payments to be made without
approval of the Class 2 Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust 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 Trust and the Fund.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
on behalf of OPPENHEIMER SMALL CAP GROWTH FUND
By: _____________________________
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: _____________________________
