<PAGE>
Registration No. 33-02769
File No. 811-4563
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
0POST-EFFECTIVE AMENDMENT NO. 19 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 18 / X /
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(Formerly named "Oppenheimer Government Securities Fund)
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
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(Address of Principal Executive Offices)
1-303-671-3200
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(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ------- pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ X / On February 1, 1995 pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / On ------- pursuant to paragraph (a)(ii)
of Rule 485.
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1994, was filed on November 29, 1994.
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FORM N-1A
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; How to Exchange Shares; Special Investor
Services; Service Plan for Class A Shares; Distribution and
Service Plan for Class B Shares; Distribution and Service
Plan for Class C shares; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special Investor
Services
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Restrictions
14 Trustees and Officers of the Fund; How the Fund is Managed
15 Trustees and Officers of the Fund - Major Shareholders; How
the Fund is Managed
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund; Back Cover
17 How the Fund is Managed; Brokerage Policies of the Fund
18 Additional Information about the Fund
19 About Your Account
20 Dividends, Capital Gains and Taxes
21 Distribution and Service Plans; How the Fund is Managed;
Additional Information about the Fund; Financial Statements
22 Dividends, Capital Gains and Taxes
23 Financial Statements
___________________
*Not applicable or negative answer.
<PAGE>
Oppenheimer
Limited-Term Government Fund
Prospectus dated February 1, 1995.
Oppenheimer Limited-Term Government Fund (the "Fund") is a
mutual fund that seeks high current return and safety of principal. The
Fund invests principally in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, including mortgage-backed
securities issued by Government National Mortgage Association ("GNMA").
While payments of principal and interest on certain U.S. Government
securities (including the GNMA Certificates which the Fund will hold) are
guaranteed by the U.S. Government or its agencies or instrumentalities,
neither the principal value of those securities nor the net asset value
of shares of the Fund is guaranteed, and therefore the Fund's net asset
value per share is subject to fluctuations due to changes in the value of
its portfolio securities. Under normal circumstances, the Fund
anticipates that it will maintain an average effective portfolio duration
on a dollar-weighted basis of not more than three years. Please refer to
"Investment Policies and Strategies" for more information about the types
of securities the Fund invests in and the risks of investing in the
Fund.
The Fund offers three classes of shares: (1) Class A shares,
which are sold at a public offering price that includes a front-end sales
charge, and (2) Class B and Class C shares, which are sold without a
front-end sales charge, although you may pay a sales charge when you
redeem your shares, depending on how long you own them. A contingent
deferred sales charge is imposed on most Class B shares redeemed within
five years of purchase. A contingent deferred sales charge is imposed on
most Class C shares redeemed within 12 months of purchase. Class B and
Class C shares are also subject to an annual "asset-based sales charge."
Each class of shares bears different expenses. In deciding which class of
shares to buy, you should consider how much you plan to purchase, how long
you plan to keep your shares, and other factors discussed in "How to Buy
Shares" starting on page ____.
This Prospectus explains concisely what you should know
before investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed information about
the Fund in the February 1, 1995 Statement of Additional Information. For
a free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is incorporated
into this Prospectus by reference (which means that it is legally part of
this Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management
of its assets, administration, distribution of its shares and other
services and those expenses are subtracted from the Fund's assets to
calculate the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other expenses
directly, such as sales charges and account transaction charges. The
following tables are provided to help you understand your direct expenses
of investing in the Fund and your share of the Fund's business operating
expenses that you will bear indirectly. The numbers below are based on
the Fund's expenses during its last fiscal year ended September 30,
1994.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account" on pages
____ through _____ for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge on
Purchases (as a % of
offering price) 3.50% None None
Sales Charge on Reinvested
Dividends None None None
Deferred Sales Charge (as
a % of the lower of the
original purchase price or
redemption proceeds) None(1) 4% in the first 1% if
year, declining shares are
to 1% in the redeemed
fifth year and within 12
eliminated months of
thereafter(2) purchase(2)
Exchange Fee $5.00(3) $5.00(3) $5.00(3)
- -------------------
</TABLE>
(1)If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares," below.
(2)See "How to Buy Shares," below, for more information on the
contingent deferred sales charges.
(3)Fee is waived for automated exchanges, described in "How to Exchange
Shares."
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. Those expenses are detailed in the Fund's Financial Statements
in the Statement of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of average net assets of each class of
the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for
Class A shares are the Service Plan Fees (which are a maximum of 0.25% of
average annual net assets of that class), and for Class B and Class C
shares, are the Service Plan Fees (maximum of 0.25%) and the asset-based
sales charges of 0.75%. These plans are described in greater detail in
"How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual amount of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during the
fiscal year ended September 30, 1994. Therefore, the Annual Fund
Operating Expenses shown for Class C shares are estimates based on amounts
that would have been payable in that period assuming that Class C shares
were outstanding during such fiscal year.
Class A Class B Class C
Shares Shares Shares
Management Fees ____% ____% ____%
12b-1 Distribution Plan Fees 0.25% 1.00% 1.00%
Other Expenses % % %
Total Fund Operating Expenses ____% ____% ____%
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the chart above. If you
were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and
10 years:
1 year 3 years 5 years 10 years*
Class A Shares
Class B Shares
Class C Shares
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares
Class B Shares
Class C Shares
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 5 years. Because of the asset-based
sales charge and the contingent deferred sales charge on Class B and Class
C shares, long-term Class B and Class C shareholders could pay the
economic equivalent of an amount greater than the maximum front-end sales
charge allowed under applicable regulatory requirements. The automatic
conversion of Class B shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
-- What is The Fund's Investment Objective? The Fund's investment
objective is to seek high current return and safety of principal. The
Fund anticipates that under normal circumstances, it will maintain an
average effective portfolio duration of not more than three years.
-- What Does the Fund Invest In? The Fund invests in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (these are called "U.S. Government Securities"), and
repurchase agreements on such securities. The Fund's investments in U.S.
Government Securities may include collateralized mortgage obligations
("CMO's") whereby payment of principal and interest generated by the pool
of mortgages is passed through to the Fund. CMO's may be issued in a
variety of classes or series ("tranches") that have different maturities
and levels of volatility. The Fund may also invest in "stripped" CMO's
or mortgage-backed securities. Stripped mortgage-backed securities
usually have two classes that receive different proportions of the
interest and principal payments. The Fund may also use certain hedging
instruments to try to manage investment risks. These investments are more
fully explained in "Investment Objectives and Policies," starting on
page ___.
-- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio manager, who is primarily responsible for the selection
of the Fund's securities, is David Rosenberg. The Manager is paid an
advisory fee by the Fund, based on its assets. The Fund's Board of
Trustees, elected by shareholders, oversees the investment advisor and the
portfolio manager. Please refer to "How the Fund is Managed," starting
on page ___ for more information about the Manager and its fees.
-- How Risky is the Fund? Although U.S. Government Securities
involve little credit risk, their values will fluctuate depending on
prevailing interest rates. When prevailing interest rates fall, the value
of already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally decline. The
magnitude of these fluctuations will often be greater for longer-term debt
securities than shorter-term securities. While the Manager tries to
reduce risks by diversifying investments, by carefully researching
securities before they are purchased for the portfolio, and in some cases
by using hedging techniques, there is no guarantee of success in achieving
the Fund's objectives and your shares may be worth more or less than their
original cost when you redeem them. Please refer to "Investment
Objectives and Policies" starting on page ___ for a more complete
discussion.
-- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Class A shares are offered with a front-end sales
charge, starting at 3.5% and reduced for larger purchases. Class B shares
and Class C shares are offered without a front-end sales charge, but may
be subject to a contingent deferred sales charge if redeemed within 5
years or 12 months, respectively, of purchase. Please review "How To Buy
Shares" starting on page ___ for more details, including a discussion
about which class may be appropriate for you.
-- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___.
-- How Has the Fund Performed? The Fund measures its performance by
quoting a yield, dividend yield, average annual total return and
cumulative total return, which measure historical performance. Those
returns can be compared to the yields and total returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can
also be compared to broad U.S. Government bond indices, which we have done
on page ___. Please remember that past performance does not guarantee
future results.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. The information for the fiscal years
ended September 30, 1990, 1991, 1992, 1993 and 1994, has been audited by
Deloitte & Touche LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended September 30,
1994 is included in the Statement of Additional Information. The
information in the table for the fiscal periods prior to October 1, 1990
(except for total return) was audited by the Fund's previous independent
auditors. Class C shares were not publicly offered during the fiscal year
ended September 30, 1994. Accordingly, no information on Class C shares
is reflected in the table below or in the Fund's other financial
statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high current return and safety of principal.
As a matter of fundamental policy the Fund seeks its objective by
investing only in obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities ("U.S. Government Securities"), and
repurchase agreements on such securities, and may write covered calls and
use hedging instruments approved by its Board of Trustees (the "Board").
U.S. Government Securities include the following:
-- U.S. Treasury Obligations. These include Treasury Bills (which
have maturities of one year or less when issued), Treasury Notes (which
have maturities of one to ten years when issued) and Treasury Bonds (which
have maturities generally greater than ten years when issued). U.S.
Treasury obligations are backed by the full faith and credit of the United
States.
-- Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These are obligations supported by any of the
following: (a) the full faith and credit of the U.S. Government, such as
GNMA modified pass-through certificates; (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S.
Government, such as bonds issued by Federal National Mortgage Association
("Fannie Mae"); (c) the discretionary authority of the U.S. Government to
purchase the obligations of the agency or instrumentality; or (d) the
credit of the instrumentality, such as obligations of Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Securities of agencies and
instrumentalities that are supported by the discretionary authority of the
U.S. Government to purchase such securities and which the Fund may
purchase under (c) above include: Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Freddie Mac and Fannie Mae.
-- Mortgage-Backed Securities. The Fund will invest in GNMA
certificates only of the "fully-modified pass-through" type, which are
guaranteed as to timely payment of principal and interest by the full
faith and credit of the United States Government. GNMA certificates are
debt securities that represent an interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration, or are guaranteed by the Veterans Administration. The
Fund may also invest in other mortgage-backed securities that are issued
or guaranteed by agencies or instrumentalities of the U.S. Government,
such as Freddie Mac and Fannie Mae.
The effective maturity of a mortgage-backed security may be shortened
by unscheduled or early payment of principal and interest on the
underlying mortgages, which may affect the effective yield of such
securities. The principal that is returned may be invested in instruments
having a higher or lower yield than the prepaid instruments, depending on
then-current market conditions. Such securities therefore may be less
effective as a means of "locking in" attractive long-term interest rates
and may have less potential for appreciation during periods of declining
interest rates than conventional bonds with comparable stated maturities.
If the Fund buys mortgage-backed securities at a premium, prepayments of
principal and foreclosures of mortgages may result in some loss of the
Fund's principal investment to the extent of the premium paid.
The Fund may invest in collateralized mortgage obligations ("CMOs")
that are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or that are collateralized by a portfolio of mortgages
or mortgage-related securities guaranteed by such an agency or
instrumentality. Payment of the interest and principal generated by the
pool of mortgages is passed through to the holders as the payments are
received by the issuer of the CMO. CMOs may be issued in a variety of
classes or series ("tranches") that have different maturities. The
principal value of certain CMO tranches may be more volatile than other
types of mortgage-related securities, because of the possibility that the
principal value of the CMO may be prepaid earlier than the maturity of the
CMO as a result of prepayments of the underlying mortgage loans by the
borrowers.
The Fund may invest in "stripped" mortgage-backed securities or CMOs
or other securities issued by agencies or instrumentalities of the U.S.
Government. Stripped mortgage-backed securities usually have two classes.
The classes receive different proportions of the interest and principal
distributions on the pool of mortgage assets that act as collateral for
the security. In certain cases, one class will receive all of the
interest payments, while the other class will receive all of the principal
value on maturity. 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.
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 the Fund holds
illiquid stripped securities, the amount it can hold will be subject to
the Fund's fundamental investment policy limiting investments in illiquid
securities to 5% of the Fund's assets.
Investment Policies and Strategies. The Fund anticipates that under
normal circumstances, it will maintain an average effective portfolio
duration of not more than three years. That duration will be measured on
the Fund's portfolio on a "dollar-weighted" basis. "Effective portfolio
duration" refers to the expected percentage change in the value of a bond
resulting from a change in general interest rates (measured by each 1%
change in the rates on U.S. Treasury securities). For example, if a bond
has an effective duration of three years, a 1% increase in general
interest rates would be expected to cause the bond to decline about 3%.
It is a measure of portfolio volatility, and is one of the fundamental
tools used by the Manager in selecting securities for the Fund's
portfolio.
However, the calculation of a bond's duration (or the duration of the
entire portfolio of bonds, in the case of the Fund) cannot be considered
or relied on as a exact prediction of future volatility. Duration is
calculated by using a number of variables and assumptions based on the
historical performance of similar bonds, and duration can be affected by
unexpected economic or other events affecting a security. For example,
in the case of CMOs, duration calculations are based on historical rates
of prepayments of underlying mortgages, and if these mortgages are prepaid
more rapidly than expected, the calculation of duration for a particular
CMO may not be correct. Because of unanticipated changes that may occur
to change the effective duration of securities subsequent to their
acquisition by the Fund, there can be no assurance that the Fund will
achieve its targeted effective duration at all times. See "Investment
Objective and Policies" in the Statement of Additional Information for
more information on the Fund's calculation of effective portfolio
duration.
-- Risk Factors. Although U.S. Government Securities involve little
credit risk, their values will fluctuate depending on prevailing interest
rates. Because of this factor, the Fund's share value and yield are not
guaranteed and will fluctuate, and there can be no assurance that the
Fund's objective will be achieved. The magnitude of those fluctuations
generally will be greater when the average maturity of the Fund's
portfolio securities is longer. See "Investment Objective and Policies"
in the Statement of Additional Information for further information on U.S.
Government Securities. Because the yields on U.S. Government Securities
are generally lower than on corporate debt securities, the Fund may
attempt to increase the income it can earn from U.S. Government Securities
by writing covered call options against them, when market conditions are
appropriate. Writing covered calls is explained below, under "Other
Investment Techniques and Strategies."
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those policies. The Fund's investment policies and practices are not
"fundamental" unless the Prospectus or Statement of Additional Information
says that a particular policy is "fundamental."
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are those
that cannot be changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
-- Portfolio Turnover. The Fund may buy or sell U.S. Government
Securities without regard to the length of time they have been held. The
Manager attempts to take advantage of short-term differentials in yields
when short-term trading is consistent with the objective of seeking income
while seeking safety of principal. While short-term trading increases
portfolio turnover, the Fund incurs little or no brokerage costs for U.S.
Government Securities. High portfolio turnover may affect the ability of
the Fund to qualify as a "regulated investment company" under the Internal
Revenue Code for tax deductions for dividends and capital gains
distributions the Fund pays to shareholders. The Fund qualified in its
last fiscal year end intends to do so in the coming year, although it
reserves the right not to qualify.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
detailed information about these practices, including limitations on their
use that are designed to reduce some of the risks.
-- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of
the Fund's total assets and are subject to other conditions described in
the Statement of Additional Information. The Fund presently does not
intend to lend its portfolio securities, but if it does, the value of
securities loaned is not expected to exceed 5% of the value of the Fund's
total assets in the coming year.
-- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date. As
a matter of fundamental policy, the Fund will not enter into when-issued
or delayed delivery transactions unless the acceptance and delivery of the
security to the Fund is mandatory, occurs within 120 days of the trade
date, and is settled in cash on the settlement date.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements, subject to the following limits. The Fund will not enter into
repurchase transactions that will cause more than 25% of the Fund's net
assets to be subject to repurchase agreements having a maturity of seven
days or less, or that will cause more than 5% of the Fund's net assets to
be subject to repurchase agreements having a maturity beyond seven days.
As a matter of fundamental policy, the Fund will not enter into repurchase
agreements unless ownership and control of the securities subject to the
agreement are transferred to the Fund. Repurchase agreements must be
fully collateralized. However, if the vendor fails to pay the re-sale
price on the delivery date, the Fund may experience costs in disposing of
the collateral and losses if there is any delay in doing so.
-- Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements under which the Fund sells securities and agrees to
repurchase them at an agreed upon time and at an agreed upon price. The
difference between the amount the Fund receives for the securities and the
amount it pays on repurchase is deemed to be a payment of interest. For
further information, see "Other Investment Techniques and Strategies -
Reverse Repurchase Agreements" in the Statement of Additional Information.
-- Illiquid and Restricted Securities. Under the policies
established by the Fund's Board of Trustees, the Manager determines the
liquidity of the Fund's investments. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act
of 1933. As a fundamental policy, the Fund will not invest more than 5%
of its total assets in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
purchasers, are not subject to that limit.
-- Writing Covered Calls. As part of the Fund's investment
objective, to earn additional income the Fund may write (sell) call
options on U.S. Government Securities. The Fund receives premiums from
the calls it writes. The calls are "covered" in that the Fund must own the
securities that are subject to the call (although it may substitute other
qualifying securities). There is no limit on the amount of the Fund's
total assets that may be subject to calls. In writing calls there are
risks that the Fund may forgo profits on an increase in the price of the
underlying security if the call is exercised. In addition, the Fund could
experience capital losses that might cause previously-distributed income
to be re-characterized for tax purposes as a return of capital to
shareholders.
-- Hedging With Options and Futures Contracts. The Fund may buy and
sell options and futures contracts to manage its exposure to changing
interest rates and securities prices. Some of these strategies, such as
selling futures, buying puts and writing calls, hedge the Fund's portfolio
against price fluctuations. Other hedging strategies, such as buying
futures, writing puts and buying calls, tend to increase market exposure.
The Fund may invest in interest rate futures, interest rate swap
transactions, and call and put options on U.S. Government Securities and
Interest Rate Futures. All of these are referred to as "hedging
instruments."
A call or put may not be purchased if the value of all of the Fund's
call and put options would exceed 5% of the value of the Fund's total
assets. The Fund's option writing activities generally will not exceed
100% of its assets, in the aggregate. Writing puts requires the
segregation of liquid assets to cover the put. The Fund will not write a
put if it will require more than 50% of the Fund's net assets to be
segregated to cover the put obligation. The Fund does not use hedging
instruments for speculative purposes.
The use of hedging instruments may involve special risks. Options
and futures can be volatile investments and involve certain risks. If the
Manager uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market. In selling
calls there are risks that the Fund may forego profits on an increase in
the price of the underlying security if the call is exercised. In
addition, the Fund could experience capital losses that might cause
previously distributed income to be recharacterized for tax purposes as
a return of capital to shareholders.
There are special risks in particular hedging strategies. For
example, in writing puts, there is the risk that the Fund may be required
to buy the underlying security at a disadvantageous price. Interest rate
swaps are subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks, because the Fund could be
obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes. These risks and the hedging
strategies the Fund may use are described in greater detail in the
Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment restrictions
which, are "fundamental" policies.
Under these fundamental policies, the Fund cannot do any of the
following: (a) invest in any security other than U.S. Government
Securities, including repurchase agreements thereon; the Fund may write
covered calls and use hedging instruments approved by the Board; (b)
borrow money, except from banks for temporary purposes in amounts not in
excess of 5% of the value of its assets; no assets of the Fund may be
pledged, mortgaged or hypothecated other than to secure a borrowing, and
then in amounts not exceeding 7.5% of the Fund's total assets; borrowings
may not be made for leverage, but only for liquidity purposes to satisfy
redemption requests when liquidation of portfolio securities is considered
inconvenient or disadvantageous; however, the Fund may enter into reverse
repurchase agreements and when-issued and delayed delivery transactions
as described herein; such prohibition against pledging, mortgaging or
hypothecating assets does not bar the Fund from escrow arrangements for
options trading or collateral or margin arrangements in connection with
hedging instruments approved by the Board; (c) enter into a repurchase
transaction that will cause more than 25% of the Fund's total assets to
be subject to such agreements; (d) make loans, except that the Fund may
purchase or hold debt obligations and enter into repurchase transactions
and may lend its portfolio securities in amounts not exceeding 25% of the
total assets of the Fund if such loans are collateralized by cash or U.S.
Government Securities in amounts equal at all times to at least 100% of
the value of the securities loaned, including accrued interest; (e)
purchase restricted or illiquid securities (including repurchase
agreements of more than seven days' duration and other securities that are
not readily marketable) if more than 5% of the Fund's total assets would
be invested in such securities; (f) purchase any securities (other than
U.S. Government Securities) that would cause more than 5% of the Fund's
total assets to be invested in securities of a single issuer, or purchase
more than 10% of the outstanding voting securities of an issuer; or (g)
deviate from its other fundamental policies described in "Investment
Objective and Policies" and "Other Investment Techniques and Strategies"
in the Statement of Additional Information.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply only at the time the Fund purchases a security, and
the Fund need not dispose of a security merely because the Fund's assets
have changed or the security has increased in value relative to the size
of the Fund. There are other fundamental policies discussed in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1986 as a
Massachusetts business trust. The Fund is an open-end diversified
management investment company with an unlimited number of authorized
shares of beneficial interest. Organized as a series fund, the Fund
presently has only one series.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. Each class has its own dividends and distributions,
and pays certain expenses which may be different for the different
classes. Each class may have a different net asset value. Each share
has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote together on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
handles its day-to-day business. The Manager carries out its duties,
subject to the policies established by the Board of Trustees, under an
Investment Advisory Agreement which states the Manager's responsibilities
and its fees, and describes the expenses that the Fund pays to conduct its
business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than ___ billion as
of December 31, 1994, and with more than ___ million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
-- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is David Rosenberg, a Vice President of the
Manager. He has been responsible for the day-to-day management of the
Fund's portfolio since January, 1994. Mr. Rosenberg also serves as a
portfolio manager of other OppenheimerFunds. Previously he was an officer
and portfolio manager for Delaware Investment Advisors and for one of its
mutual funds.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.500% of the first $100 million of
the Fund's average annual net assets, 0.450% of the next $150 million,
0.425% of the next $250 million and 0.400% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was _____ of
average annual net assets for Class A shares and _____ for Class B shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies in
"Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected
for the Fund's portfolio transactions. Because the Fund purchases most
of its portfolio securities directly from the sellers and not through
brokers, it therefore incurs relatively little expense for brokerage.
From time to time it may use brokers when buying portfolio securities.
When deciding which brokers to use, the Manager is permitted by the
investment advisory agreement to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager serves as investment
adviser.
-- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "yield." These terms are
used to show the performance of each class of shares separately, because
the performance of each class of shares will usually be different, as a
result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or market indices,
as we have done below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance will
vary, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
-- Total Returns. There are different types of "total returns" used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. When total returns are shown
for Class B shares, they reflect the effect of the contingent deferred
sales charge that applies to the period for which total return is shown.
When total returns are shown for a one-year period for Class C shares,
they reflect the effect of the contingent deferred sales charge. Total
returns may also be shown based on the change in net asset value, without
considering the effect of either the front-end or the contingent deferred
sales charge, as applicable, and those returns would be reduced if sales
charges were deducted.
-- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares and
Class C shares do not reflect the deduction of the contingent deferred
sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
-- Management's Discussion of Performance. During the past fiscal
year ended September 30, 1994, the Fund's performance was affected by
changes in the direction of the bond markets from the prior year. General
interest rates moved from very low levels, with the Federal Reserve Bank
raising short-term rates four times between February and May of 1994. As
interest rates rose, the bond markets declined. To enhance income as
interest rates rose, the Fund shifted investments away from traditional
short-term U.S. Treasury securities, adding significantly to investments
in mortgage-backed securities issued by U.S. Government agencies or
instrumentalities, which generally offer significant yield advantages over
U.S. Treasury securities. The Fund will continue to seek opportunities
to enhance the Fund's yield while conservatively managing risk to limit
the impact if interest rates go higher.
-- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in Class A and
Class B shares of the Fund held until September 30, 1994; in the case of
Class A shares, since March 10, 1986, and in the case of Class B shares,
from the inception of the Class on May 3, 1993. In both cases, all
dividends and capital gains distributions were reinvested in additional
shares. The graph reflects the deduction of the current 3.50% maximum
initial sales charge on Class A shares and the current 4% maximum
contingent deferred sales charge on Class B shares. Class C shares were
not publicly offered during the fiscal year ended September 30, 1994.
Accordingly, no information is presented on Class C shares in the graph
below.
For the fiscal year ended September 30, 1994, the Fund has selected
a new index, the Lehman Brothers U.S. Government Bond Index, a
broad-based, unmanaged index of U.S. government and agency securities and
mortgage-backed securities with maturities of one to five years, against
which to measure its performance. The Lehman Brothers Short U.S.
Government Bond Index uses the same selection criteria as Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service, for Lipper's short U.S. Government fund
category that includes the Fund. For the fiscal year ended September 30,
1993, the Fund had compared its performance to that of the Lehman Brothers
U.S. Government Bond Index, a broad-based, unmanaged index of U.S.
government and agency securities and mortgage-backed securities of all
maturities. The newly-selected index reflects adoption by the Fund's
Board in (June), 1994 of a non-fundamental investment policy that the
Fund, under normal circumstances, anticipates that it will maintain a
dollar-weighted average portfolio effective duration of not more than
three years. The Fund's name was changed at that time to Oppenheimer
Limited-Term Government Fund, and Lipper moved the Fund into its short
U.S. Government fund category. The performance graph below includes the
old index for comparison purposes.
Index performance reflects reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in any one index and the index data does not reflect any
assessment of the risk of the investments included in the index.
(insert graph)
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
-- Class A Shares. When you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested.
-- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within five
years of buying them, you will normally pay a contingent deferred sales
charge that varies depending on how long you owned your shares.
-- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, deciding which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. Because the Fund's operating costs
that apply to a class of shares and the effect of the different types of
sales charges on your investment will vary your investment results over
time, the most important factors to consider are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which offer all three classes of shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund, based on the
sales charge rates that apply to each class, and considering the effect
of the asset-based sales charges on Class B and Class C expenses (which
will affect your investment return), and, for the sake of comparison, we
have assumed that there is a 10% rate of appreciation in your investment
each year. Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Fund's actual investment returns,
and the operating expenses borne by each class of shares, and which class
of shares you invest in. The factors discussed below are not intended to
be investment advice or recommendations, because each investor's financial
considerations are different.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on How Much You Plan To Invest. For
example, the reduced sales charges available for larger purchases of Class
A shares may, over time, offset the effect of paying an initial sales
charge on your investment (which reduces the amount of your investment
dollars used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B or C for which
no initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge on
Class C shares will have a greater impact on your account over the longer
term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B or C
shares from a single investor. Of course, these examples are based on
approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, using the assumed annual performance
return stated above, and therefore should not be relied on as rigid
guidelines.
Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
-- Are There Differences in Account Features That Matter To You?
Because some features (such as checkwriting) may not be available to Class
B or C shareholders, or other features (such as Automatic Withdrawal
Plans) may not be advisable (because of the effect of the contingent
deferred sales charge) in non-retirement accounts for Class B or Class C
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will
be reduced by the additional expenses borne by those classes that are not
borne by Class A, such as the Class B and Class C asset-based sales
charges described below and in the Statement of Additional
Information.
Also, because not all of the OppenheimerFunds currently offer Class
B and Class C shares, and because exchanges are permitted only to the same
class of shares in another of the OppenheimerFunds, you should consider
how important the exchange privilege is likely to be for you.
-- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling or
servicing one class of shares than another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charges is the same as the purpose of the front-
end sales charge on Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for sales of
shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial adviser,
to be sure it is appropriate for you.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You must request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink," below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Prices Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (all references to time in
this Prospectus mean "New York time."). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by 4:00 P.M., on a regular business day and transmit it to the
Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject
any purchase order for the Fund's shares, in its sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the Distributor
and allocated to your dealer. Different sales charge rates and
commissions applied to sales of Class A shares prior to April 1, 1994.
The current sales charge rates and commissions paid to dealers and brokers
are as follows:
- ------------------------------------------------------------------------
Front-End Sales Charge Commission
As a Percentage of: as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- ------------------------------------------------------------------------
Less than $100,000 3.50% 3.63% 3.00%
$100,000 or more but
less than $250,000 3.00% 3.09% 2.50%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.50%
- ------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
The Class A contingent deferred sales charge will not exceed the aggregate
commissions the Distributor paid to your dealer on all Class A shares of
all OppenheimerFunds you purchased subject to the Class A contingent
deferred sales charge. In determining whether a contingent deferred sales
charge is payable, the Fund will first redeem shares that are not subject
to the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in the
order that you purchased them. The Class A contingent deferred sales
charge is waived in certain cases described in "Waivers of Class A Sales
Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those
sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
-- Right of Accumulation. To qualify for the lower sales charges
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A shares you purchase for your own accounts,
or jointly, or on behalf of your children who are minors, under trust or
custodial accounts. A fiduciary can count all shares purchased for a
trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Group Programs. Reduced sales charges are available to
participants in a group sales program if the administrator of the program
has entered into an agreement with the Distributor providing, among other
things, that all participants' purchases are made by a single group order
and payment for each investment period and that requisite data about such
participants and purchases be provided to the Transfer Agent in acceptable
computer format. The sales charge for such purchases will be at the rate
in the table above that applies to combined current purchases (minimum $25
per participant per period) of shares of the Fund, Oppenheimer
Intermediate Tax-Exempt Bond Fund and Oppenheimer Insured Tax-Exempt Bond
Fund by all participants in such program based upon the current value (at
offering price) of shares of such funds held by all participants in such
program at the time of purchase. No certificates will be issued for
shares held by program participants and dividends and distributions must
be reinvested in accounts held by such participants. Automatic Withdrawal
Plans (described below) may not be used for such accounts. The Fund and
the Distributor reserve the right to amend, suspend or cease offering such
programs at any time without prior notice.
-- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; and (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administrative services.
In addition, no initial or deferred sales charge will be imposed on
Class A shares of the Fund paid for with the redemption proceeds of shares
of a mutual fund other than a money market fund or a fund managed by the
Manager or its affiliates. This sales charge waiver must be requested
when you buy your shares, and the Distributor may require evidence of
qualification for this waiver.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) returns of excess contributions made to
Retirement Plans, (3) Automatic Withdrawal Plan payments that are limited
to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees, and (5) if at the time an order is placed for Class A
shares that would otherwise be subject to the Class A contingent deferred
sales charge, the dealer agrees to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (with no further commission payable if the shares are redeemed
within 18 months of purchase).
-- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within five years of their purchase, a contingent deferred sales charge
will be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since
Beginning of
Month in which Contingent Deferred Sales Charge
Purchase Order On Redemptions in That Year
Was Accepted (As % of Amount Subject to Charge)
- ------------------------------------------------------
0-1 4.0%
1-2 3.0%
2-3 2.0%
3-4 2.0%
4-5 1.0%
5 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made. Different contingent deferred sales
charges applied to redemptions of Class B shares prior to April 1, 1994.
-- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans; and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
59 1/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 59 1/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with the other requirements
for such distributions under the Internal Revenue Code and may not exceed
10 % of the account value annually, measured from the date the Transfer
Agent receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C Shares"
in the Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the service fee
on a quarterly basis. The Distributor currently pays sales commissions of
2.75% of the purchase price to dealers from its own resources at the time
of sale. The total up-front commission paid by the Distributor to the
dealer at the time of sale of Class B shares is 3.00% of the purchase
price. The Distributor retains the asset-based sales charge to recoup the
sales commissions it pays, the advances of service fee payments it makes,
and its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. At September 30, 1994, the end of
the Plan year, the Distributor had incurred unreimbursed expenses under
the Plan of $_______ (equal to ____% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for certain expenses it incurred before the Plan
was terminated.
Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of
1.0% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
-- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans; and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
59 1/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 59 1/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with the other requirements
for such distributions under the Internal Revenue Code and may not exceed
10 % of the account value annually, measured from the date the Transfer
Agent receives the request).
The contingent deferred sales charge is also waived on Class C shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
Because the Distributor's actual expenses in selling Class C shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class C shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Directors may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for certain expenses it
incurred before the plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
-- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge or on which you paid a contingent deferred
sales charge when you redeemed them. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
-- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
-- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
-- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-
IRAs
-- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a Withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The check is not payable to all shareholders listed on the account
statement
-- The check is not sent to the address of record on your statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or from a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
-- To redeem shares through a service representative, call 1-800-852-
8457
-- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink or Wire. Shareholders
may also request wires of redemption proceeds of $2,500 or more in Federal
Funds to a designated commercial bank account if the bank is a member of
the Federal Reserve wire system. To place a wire redemption request, call
the Transfer Agent at 1-800-852-8457. There is a $15 fee for each Federal
Funds wire. There are no dollar limits on telephone redemption proceeds
sent to a bank account designated when you establish AccountLink.
Normally the ACH wire to your bank is initiated on the business day after
the redemption. You do not receive dividends on the proceeds of the
shares you redeemed while they are waiting to be wired.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
-- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
-- Checkwriting privileges are not available for accounts holding
Class B shares or Class C shares, or Class A shares that are subject to
a contingent deferred sales charge.
-- Checks must be written for at least $100.
-- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
-- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
-- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, (4) or the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
-- Shares of the fund selected for exchange must be available for
sale in your state of residence.
-- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege.
-- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day.
-- You must meet the minimum purchase requirements for the fund you
purchase by exchange.
-- Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same names and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
-- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
-- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
-- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname and address on
the Fund's records. However, each shareholder may call the Transfer Agent
at 1-800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are paid
on the fourth Wednesday of every month, but the Board of Trustees can
change that date. Distributions may be made monthly from any net short-
term capital gains the Fund realizes in selling securities. Dividends
paid on Class A shares generally are expected to be higher than for Class
B and Class C shares because expenses allocable to Class B and Class C
shares will generally be higher.
Commencing with the Fund's fiscal quarter beginning July 1, 1994, the
Fund adopted the practice, to the extent consistent with the amount of the
Fund's net investment income and other distributable income, of attempting
to pay dividends on Class A shares at a constant level, although the
amount of such dividends are subject to change from time to time depending
on market conditions, the composition of the Fund's portfolio and expenses
borne by the Fund or borne separately by that Class. The practice of
attempting to pay dividends on Class A shares at a constant level requires
the Manager, consistent with the Fund's investment objectives and
investment restrictions, to monitor the Fund's portfolio and select higher
yielding securities when deemed appropriate to maintain necessary net
investment income levels. The Fund anticipates paying dividends at the
targeted dividend level from net investment income and other distributable
income without any impact on the Fund's net asset value per share. The
Board of Trustees may change the Fund's targeted dividend level at any
time, without prior notice to shareholders; the Fund does not otherwise
have a fixed dividend rate and there can be no assurance as to the payment
of any dividends or the realization of any capital gains.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
-- Reinvest All Distributions In The Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
-- Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or sent to
your bank account on AccountLink.
-- Receive All Distributions In Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest Your Distributions In Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
-- "Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares on
or just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
-- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or loss
is the difference between the price you paid for the shares and the price
you received when you sold them.
-- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
Oppenheimer Limited-Term Government Fund
3410 South Galena Street
Denver, CO 80231
1-800-525-7048
Investment Advisor Prospectus
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc. OPPENHEIMER
Two World Trade Center Limited-Term
New York, New York 10048-0203 Government Fund
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Effective February 1, 1995
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, 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 Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR856.0894.N *Printed on recycled paper
<PAGE>
Oppenheimer Limited-Term Government Fund
3410 South Galena Street
Denver, CO 80231
1-800-525-7048
Investment Advisor Prospectus and
Oppenheimer Management Corporation New Account Application
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc. OPPENHEIMER
Two World Trade Center Limited-Term
New York, New York 10048-0203 Government Fund
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Effective February 1, 1995
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, 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 Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR855.0894.N *Printed on recycled paper
<PAGE>
Oppenheimer Limited-Term Government Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated February 1, 1995.
This Statement of Additional Information of Oppenheimer Limited-Term
Government Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated February 1, 1995. It should be read together with the Prospectus
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . .
Other Investment Techniques and Strategies. . . . . . .
Other Investment Restrictions . . . . . . . . . . . . .
How the Fund is Managed. . . . . . . . . . . . . . . . . .
Organization and History. . . . . . . . . . . . . . . .
Trustees and Officers of the Fund . . . . . . . . . . .
The Manager and Its Affiliates. . . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account
How to Buy Shares. . . . . . . . . . . . . . . . . . . . .
How to Sell Shares . . . . . . . . . . . . . . . . . . . .
How to Exchange Shares . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information about the Fund. . . . . . . . . . .
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
The obligations of U.S. Government agencies or instrumentalities in
which the Fund may invest may or may not be guaranteed or supported by the
"full faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full
faith and credit of the United States. If the securities are not backed
by the full faith and credit of the United States, the owner of the
securities must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United States
in the event that the agency or instrumentality does not meet its
commitment. The Fund will invest in U.S. Government Securities of such
agencies and instrumentalities only when the Fund's investment manager,
Oppenheimer Management Corporation (the "Manager") is satisfied that the
credit risk with respect to such instrumentality is minimal.
General changes in prevailing interest rates will affect the values
of the Fund's portfolio securities. The value will vary inversely to
changes in such rates. For example, if such rates go up after a security
is purchased, the value of the security will generally decline. A
decrease in interest rates may affect the maturity and yield of mortgage-
backed securities by increasing unscheduled prepayments of the underlying
mortgages. With its objective of seeking high current return and safety
of principal, the Fund may purchase or sell securities without regard to
the length of time the security has been held, to take advantage of short-
term differentials in yields. While short-term trading increases the
portfolio turnover, the execution cost for U.S. Government Securities is
substantially less than for equivalent dollar values of equity securities
(see "Brokerage Provisions of the Investment Advisory Agreement," below).
Under normal circumstances the Fund will maintain a dollar-weighted
average portfolio maturity of not more than three years. The Manager will
in good faith determine the maturity of debt obligations purchased by the
Fund and will consider various factors applicable to each type of debt
obligation, including those set forth below. In determining the maturity
of mortgage-backed securities, the Manager reviews the prepayment history
of the obligation and similar securities, current interest rates and
median estimates of maturity for the obligation available from dealers.
With respect to hedging instruments, the Manager looks at the term of both
the hedging instrument and the underlying security and the relationship
between the instruments. Subject to the requirement that the dollar
weighted average portfolio maturity will not exceed three years, the Fund
may invest in individual debt obligations of any maturity, including
obligations with a remaining stated maturity of more than three years.
The U.S. Government Securities in which the Fund may invest include
the following:
-- GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's
principal programs involve its guarantees of privately-issued securities
backed by pools of mortgages. GNMA Certificates are debt securities
representing an interest in one or a pool of mortgages that are insured
by the Federal Housing Administration ("FHA") or the Farmers Home
Administration ("FMHA") or guaranteed by the Veterans Administration
("VA").
The GNMA Certificates in which the Fund invests are of the "fully
modified pass-through" type, that is, they provide that the registered
holders of the Certificates will receive timely monthly payments of the
pro-rata share of the scheduled principal payments on the underlying
mortgages, whether or not those amounts are collected by the issuers.
Amounts paid include, on a pro rata basis, any prepayment of principal of
such mortgages and interest (net of servicing and other charges) on the
aggregate unpaid principal balance of such GNMA Certificates, whether or
not the interest on the underlying mortgages has been collected by the
issuers.
The GNMA Certificates purchased by the Fund are guaranteed as to
timely payment of principal and interest by GNMA. It is expected that
payments received by the issuers of GNMA Certificates on account of the
mortgages backing the Certificates will be sufficient to make the required
payments of principal of and interest on such GNMA Certificates, but if
such payments are insufficient for that purpose, the guaranty agreements
between the issuers of the Certificates and GNMA require the issuers to
make advances sufficient for such payments. If the issuers fail to make
such payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts which may be required to be paid
under any guaranty issued by GNMA as to such mortgage pools. An opinion
of an Assistant Attorney General of the United States, dated December 9,
1969, states that such guaranties "constitute general obligations of the
United States backed by its full faith and credit." GNMA is empowered to
borrow from the United States Treasury to the extent necessary to make any
payments of principal and interest required under such guaranties.
GNMA Certificates are backed by the aggregate indebtedness secured
by the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages
and, except to the extent of payments received by the issuers on account
of such mortgages, GNMA Certificates do not constitute a liability of, nor
evidence any recourse against, such issuers, but recourse is solely
against GNMA. Holders of GNMA Certificates (such as the Fund) have no
security interest in or lien on the underlying mortgages.
Monthly payments of principal will be made, and additional
prepayments of principal may be made, to the Fund with respect to the
mortgages underlying the GNMA Certificates held by the Fund. All of the
mortgages in the pools relating to the GNMA Certificates in the Fund are
subject to prepayment without any significant premium or penalty, at the
option of the mortgagors. While the mortgages on 1-to-4-family dwellings
underlying certain GNMA Certificates have a stated maturity of up to 30
years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less. Periods
of dropping interest rates may spur refinancing of existing mortgages,
accelerating the rate of prepayments. Prepayments on such mortgages
received by the Fund will be reinvested in additional GNMA Certificates
or other U.S. Government Securities. The yields on such additional
securities may not necessarily be the same as (and may be lower than) the
yields on the prepaid securities, which will affect the income the Fund
receives and pays to its shareholders.
-- Federal Home Loan Mortgage Corporation ("FHLMC") Certificates.
FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees
to each registered holder of a FHLMC Certificate timely payment of the
amounts representing a holder's proportionate share in (i) interest
payments less servicing and guarantee fees, (ii) principal prepayments and
(iii) the ultimate collection of amounts representing such holder's
proportionate interest in principal payments on the mortgage loans in the
pool represented by such FHLMC Certificate, in each case whether or not
such amounts are actually received. The obligations of FHLMC under its
guarantees are obligations solely of FHLMC and are not backed by the full
faith and credit of the United States.
-- Federal National Mortgage Association ("FNMA") Certificates.
FNMA, a federally-chartered and privately-owned corporation, issues FNMA
Certificates which are backed by a pool of mortgage loans. FNMA
guarantees to each registered holder of a FNMA Certificate that the holder
will receive amounts representing such holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such FNMA Certificate,
less servicing and guarantee fees, and such holder's proportionate
interest in the full principal amount of any foreclosed or other
liquidated mortgage loan, in each case whether or not such amounts are
actually received. The obligations of FNMA under its guarantees are
obligations solely of FNMA and are not backed by the full faith and credit
of the United States or any agency or instrumentality thereof other than
FNMA.
Other Investment Techniques And Strategies
-- Repurchase Agreements. The Fund may acquire securities that are
subject to repurchase agreements, in order to generate income while
providing liquidity. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer
which has been designated a primary dealer in government securities, which
must meet the credit requirements set by the Fund's Board of Trustees from
time to time), for delivery on an agreed upon future date. The sale 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 Fund's repurchase agreements will require that at all times
while the repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value. If the vendor of a
repurchase agreement fails to pay the agreed-upon resale price on the
delivery date, the Fund's risks in such event may include any costs of
disposing of the collateral, and any loss from any delay in foreclosing
on the collateral.
-- Reverse Repurchase Agreements. The Fund will maintain, in a
segregated account with its Custodian, cash, Treasury bills or other U.S.
Government Securities having an aggregate value equal to the amount of
such commitment to repurchase, including accrued interest, until payment
is made. The Fund will use reverse repurchase agreements as a source of
funds on a short-term basis (and not for leverage), and will not enter
into reverse repurchase agreements in amounts exceeding 25% of the total
assets of the Fund. In determining whether to enter into a reverse
repurchase agreement with a bank or broker-dealer, the Fund will take into
account the creditworthiness of such party. The Fund will not enter into
reverse repurchase agreements in an amount which, when combined with all
other borrowings by the Fund, will exceed 5% of the Fund's total assets.
As a matter of fundamental policy, the Fund will not enter into a reverse
repurchase transaction unless the securities collateralizing the
transaction have a maturity date not later than the settlement date for
the transaction.
-- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities (other than in repurchase transactions) to brokers, dealers and
other financial institutions 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 market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government Securities, or other cash equivalents
in which the Fund is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Fund
if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. In a portfolio securities lending
transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during
the term of the loan as well as the interest on the collateral securities,
less any finders' or administrative fees the Fund pays in arranging the
loan. The 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 its
Board of Trustees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of
delay in recovery of the securities, or loss of rights in the collateral
should the borrower fail financially. The Fund will not lend its
portfolio securities to any officer, trustee, employee or affiliate of
the Fund or its Manager. The terms of the Fund's loans must meet certain
tests under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five business days' notice or in time to vote on any
important matter.
-- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to purchase a
security for which payment will be made on a future date may be deemed a
separate security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
-- Writing Covered Calls. The Fund may write (i.e. sell) call
options ("calls") on U.S. Government Securities to enhance income through
the receipt of premiums from expired calls and any net profits from
closing purchase transactions, subject to the limitations stated in the
Prospectus. All such calls written by the Fund must be "covered" while
the call is outstanding (i.e. the Fund must own the securities subject to
the call or other securities acceptable for applicable escrow
requirements). Calls on Futures (discussed below) must be covered by
deliverable securities or by liquid assets segregated to satisfy the
Futures contract. When the Fund writes a call on a security, it receives
a premium and agrees to sell the callable investment 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. The 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, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of 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 lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the 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
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or 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
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
-- Hedging with Options and Futures Contracts. As described in the
Prospectus, the Fund may employ one or more types of Hedging Instruments
to manage its exposure to changing interest rates and securities prices.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's activities in the underlying cash market.
Puts may also be written on U.S. Government Securities to attempt to
increase the Fund's income. For hedging purposes, the Fund may use
Interest Rate Futures and call and put options on debt securities and
Interest Rate (all of the foregoing are referred to as "Hedging
Instruments"). Hedging Instruments may be used to attempt to: (i) protect
against possible declines in the market value of the Fund's portfolio
resulting from downward trends in the debt securities markets (generally
due to a rise in interest rates), (ii) protect unrealized gains in the
value of the Fund's debt securities which have appreciated, (iii)
facilitate selling debt securities for investment reasons, (iv) establish
a position in the debt securities markets as a temporary substitute for
purchasing particular debt securities, or (v) reduce the risk of adverse
currency fluctuations. A call or put may be purchased only if, after such
purchase, the value of all call and put options held by the Fund would not
exceed 5% of the Fund's total assets. The Fund will not use Futures and
options on Futures for speculation. The Hedging Instruments the Fund may
use are described below.
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, the Fund may: (i)
sell Futures, (ii) purchase puts on such Futures or U.S. Government
Securities, or (iii) write calls on securities held by it or on Futures.
When hedging to attempt to protect against the possibility that portfolio
securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase
calls on such Futures or on U.S. Government Securities. Covered calls and
puts may also be written on debt securities to attempt to increase the
Fund's income.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
Additional Information about the Hedging Instruments the Fund may use is
provided below. At present, the Fund does not intend to enter into
Futures and options on Futures if, after any such purchase, the sum of
margin deposits on Futures and premiums paid on Futures options exceeds
5% of the value of the Fund's total assets. In the future, the Fund may
employ Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, legally
permissible and adequately disclosed.
-- Writing Put Options. The Fund may write put options on U.S.
Government securities or Interest Rate Futures but only if such puts are
covered by segregated liquid assets. The Fund will not write puts if, as
a result, more than 50% of the Fund's net assets would be required to be
segregated to cover such put obligations. In writing puts, there is the
risk that the Fund may be required to buy the underlying security at a
disadvantageous price. 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 the 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, the 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 lapses unexercised, the Fund
(as the writer of the put) realizes a gain in the amount of the premium.
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 current market value 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, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. 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 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 has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. 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 the 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. The Fund may purchase calls on U.S.
Government Securities or on Interest Rate Futures, in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term debt
securities market. The value of U.S. Government Securities underlying
calls purchased by the Fund will not exceed the value of the portion of
the Fund's portfolio invested in cash or cash equivalents (i.e. securities
with maturities of less than one year). When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium and,
except as to calls on indices or Futures, 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. When the
Fund purchases a call on a Future, it pays a premium, but settlement is
in cash rather than by delivery of the underlying investment to the Fund.
In purchasing a call, the Fund benefits only if the call is sold at a
profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction costs
and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless
at its expiration date and the Fund will lose its premium payment and the
right to purchase the underlying investment.
The Fund may purchase put options ("puts") which relate to U.S.
Government Securities (whether or not it holds such securities in its
portfolio) or Futures. When the Fund purchases a put, it pays a premium
and, except as to puts on indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns enables the Fund to protect itself during the put
period against a decline in the value of the underlying investment below
the exercise price by selling such 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.)
Buying a put on Interest Rate Futures or U.S. Government Securities
permits the Fund either to resell the put or 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 the bond market, 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 Interest Rate Futures or U.S. Government Securities not held by it,
the put protects the Fund to the extent that the prices of the underlying
Future or U.S. Government Security move in a similar pattern to the prices
of the U.S. Government Securities in the Fund's portfolio.
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. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund may pay a brokerage commission each time
it buys a put or call, sells a call, or buys 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 such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying
investments.
-- Interest Rate Futures. The Fund may buy and sell Futures. No
price is paid or received upon the purchase or sale of an Interest Rate
Future. An Interest Rate Future obligates the seller to deliver and the
purchaser to take a specific type of debt security at a specific future
date for a fixed price. That obligation may be satisfied by actual
delivery of the debt security or by entering into an offsetting contract.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills with
the futures commission merchant (the "futures broker"). 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 made 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. Although Interest Rate Futures by
their terms call for settlement by delivery or acquisition of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting position. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are
traded.
-- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund may engage in interest rate
swaps only with respect to securities it holds, and not in excess of 25%
of its total assets.
Subject to the limitations described in the Prospectus, the Fund will
enter into swap transactions with appropriate counterparties pursuant to
master netting agreements. A master netting agreement provides that all
swaps done between the Fund and that counterparty under that 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". The Fund
may not enter into interest rate swap transactions with respect to more
than 25% of its total assets.
-- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges 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 the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That 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 the
market price of the underlying security (that is, the extent to which the
option "is in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
-- Regulatory Aspects of Hedging Instruments. The Fund must 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 under the CEA) if the
Fund complies with the CFTC Rule. Under these restrictions the Fund will
not, as to any positions, whether short, long or a combination thereof,
enter into Futures and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of its total
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the 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 of the CEA.
Transactions in options by the Fund 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 different exchanges through one
or more 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 the Fund purchases a Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders will be taxed on the dividends and capital gains
they receive from the Fund. One of the tests for the Fund's qualification
is that less than 30% of its gross income (irrespective of losses) must
be derived from gains realized on the sale of securities held for less
than three months. To comply with that 30% cap, the Fund will limit the
extent to which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) purchasing calls or puts which expire in
less than three months; (iii) effecting closing transactions with respect
to calls or puts written or purchased less than three months previously;
(iv) exercising puts or calls held by the Fund for less than three months;
or (v) writing calls on investments held for less than three months.
-- Risks Of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above, there
is a risk in using short hedging by selling Futures to attempt to protect
against decline in value of the Fund's portfolio securities (due to an
increase in interest rates) that the prices of such Futures 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 out
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
U.S. Government Securities markets as a temporary substitute for the
purchase of individual U.S. Government Securities (long hedging) by buying
Interest Rate Futures and/or calls on such Futures or on U.S. Government
Securities, it is possible that the market may decline; if the 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, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the U.S. Government Securities purchased.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective, cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholders meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund may not: (1) purchase
or sell real estate, commodities or commodity contracts; however, the Fund
may use hedging instruments approved by its Board whether or not such
hedging instruments are considered commodities or commodity contracts; (2)
invest in interests in oil, gas, or other mineral exploration or
development programs; (3) purchase securities on margin or make short
sales of securities; however the Fund may make margin deposits in
connection with its use of hedging instruments approved by its Board; (4)
underwrite securities except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities held in its
portfolio; (5) invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation or other
acquisition; (6) enter into reverse repurchase agreements that will cause
more than 25% of the Fund's total assets to be subject to such agreements;
(7) make investments for the purpose of exercising control of management;
(8) purchase or retain securities of any company if, to the knowledge of
the Fund, its officers and trustees and officers and directors of the
Manager who individually own more than .5% of the securities of such
company together own beneficially more than 5% of such securities; (9)
purchase or retain securities of issuers having a record of less than
three years' continuous operation (such period may include the operation
of predecessor companies or enterprises if the issuer came into existence
as a result of a merger, consolidation or reorganization, or the purchase
of substantially all of the assets of the predecessor companies or
enterprises); (10) purchase or sell standby commitments; or (11) invest
more than 25% of its assets in a single industry (neither the U.S.
Government nor any of its agencies or instrumentalities are considered an
industry for the purposes of this restriction).
How the Fund is Managed
Organization and History. The Fund was established in 1986 as First Trust
Fund-U.S. Government Series and changed its name to Oppenheimer Government
Securities Fund on July 10, 1992, and on May 1, 1994 to Oppenheimer
Limited-Term Government Fund.
As a Massachusetts business Trust, the Fund is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Fund will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Fund, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or holding
at least 1% of the Fund's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Fund's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Fund, and any
shareholder of the Fund, agrees under the Fund's Declaration of Trust to
look solely to the assets of the Fund for satisfaction of any claim or
demand which may arise out of any dealings with the Fund, and the Trustees
shall have no personal liability to any such person, to the extent
permitted by law.
Trustees And Officers Of The Fund
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general partners
of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-
Exempt Bond Fund, The New York Tax-Exempt Income Fund, Inc., Centennial
America Fund, L.P., Oppenheimer Champion High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer
Integrity Funds, Oppenheimer Strategic Income & Growth Fund, Oppenheimer
Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term
Income Fund and Oppenheimer Variable Account Funds; as well as the
following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial Money Market Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial Tax Exempt Trust and Centennial
California Tax Exempt Trust, (all of the foregoing funds are collectively
referred to as the "Denver OppenheimerFunds"). Mr. Fossel is President
and Mr. Swain is Chairman of the Denver OppenheimerFunds. As of January
___, 1995, the Trustees and officers of the Fund as a group owned less
than 1% of the Fund's outstanding shares.
Robert G. Avis, Trustee*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee
1447 Vista del Cerro, Las Cruces, New Mexico 88005
Vice President of McDonnell Douglas Space Systems Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager;
President and a director of Oppenheimer Acquisition Corp. ("OAC"),
the Manager's parent holding company; President and a director of
HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager; a director of Shareholder Services, Inc.
("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer
agent subsidiaries of the Manager; formerly President of the Manager.
Raymond J. Kalinowski, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies, Ltd.; formerly Vice Chairman and a
director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director of Van Gilder Insurance Corp. (insurance
brokers).
James C. Swain, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and a Director
of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); formerly Chairman of the
Board of SSI.
Andrew J. Donohue, Vice President
Executive Vice President and General Counsel of Oppenheimer
Management Corporation ("OMC") (the "Manager") and Oppenheimer Funds
Distributor, Inc. (the "Distributor"); an officer of other
OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; Partner in, Kraft
& McManimon (a law firm); an officer of First Investors Corporation
(a broker-dealer) and First Investors Management Company, Inc.
(broker-dealer and investment adviser); director and an officer of
First Investors Family of Funds and First Investors Life Insurance
Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
David Rosenberg, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
previously an officer and portfolio manager for Delaware Investment
Advisors and for one of its mutual funds.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
[FN]
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Mr. Swain and Mr. Fossel who is both an officer and
Trustee) and receive no salary or fee from the Fund. During the Fund's
fiscal year ended September 30, 1994, the remuneration (including expense
reimbursements) paid to all Trustees of the Fund (excluding Mr. Fossel and
Mr. Swain) as a group for services as Trustees and as members of one or
more committees of the Board totaled $____________.
Major Shareholders. As January ___, 1995, no person owned of record or
was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A or Class B shares.
How The Fund Is Managed
The Manager and Its Affiliates. The Fund's Manager is wholly-owned by
Oppenheimer Acquisition Corporation ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Jon S. Fossel and Mr.
James C. Swain) serve as Trustees of the Fund.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the Distribution Agreement are paid
by the Fund. The advisory agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal, and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation. For the Fund's fiscal years ended September 30,
1992, 1993, and 1994 the management fees paid by the Fund to the Manager
were $773,822, $781,718, and $________, respectively.
The Fund also paid the Manager $12,000 during each of the fiscal
years ended September 30, 1992, 1993 (and 1994) for accounting services
permitted by the advisory agreement. In addition, the Fund reimbursed the
Manager its expenses of $1,125, $1,500 (and $____________) during the
fiscal year ended September 30, 1992, 1993 (and 1994) respectively, for
tax services.
Under the advisory agreement, the Manager has undertaken that if the
total expenses of the Fund in any fiscal year should exceed the most
stringent state regulatory requirements on expense limitations applicable
to the Fund, the Manager's compensation under the advisory agreement will
be reduced by the amount of such excess. For the purpose of such
calculation, there shall be excluded any expense borne directly or
indirectly by the Fund which is permitted to be excluded from the
computation of such limitation by such statute or state regulatory
authority. At present, that limitation is imposed by California, and
limits expenses (with specific exclusions) to 2.5% of the first $30
million of average net assets, 2% of the next $70 million of average net
assets and 1.5% of average net assets in excess of $100 million. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties,
or reckless disregard of its obligations and duties under the advisory
agreement, the Manager is not liable for any loss resulting from a good
faith error or omissions in connection with any matters to which the
Agreement relates. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager or one of its affiliates shall no longer act as investment adviser
to the Fund, the right of the Fund to use the name "Oppenheimer" as part
of its name may be withdrawn.
-- The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is
not obligated to sell a specific number of shares. Expenses normally
attributable to sales, including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing shareholders,
are borne by the Distributor. For the fiscal year ended September 30,
1992, 1993, and 1994, the aggregate amount of sales charges on sales of
the Fund's Class A shares were $192,406, $289,261 and $_______________,
respectively, of which $28,268, $85,929 and $_____________ was retained
by the Distributor and an affiliated broker-dealer during those respective
years. Contingent deferred sales charges collected by the Distributor on
the redemption of Class B shares for the period May 3, 1993 (the
commencement of the offering of those shares) through September 30, 1993
and for the fiscal year ended September 30, 1994 totaled ______________
and _____________, respectively. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
transfer agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors, implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding, but is expected to minimize the commissions paid to
the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Most
purchases made by the Fund are principal transactions at net prices, and
the Fund incurs little or no brokerage costs. Subject to the provisions
of the advisory agreement, 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. Regardless,
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 and otherwise only if it appears likely
that a better price or execution can be obtained.
When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager and its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
Yield and Total Return Information. From time to time the "standardized
yield," "dividend yield," "average annual total return", "total return,"
and "total return at net asset value" of an investment in a class of the
Fund may be advertised. An explanation of how yields and total returns
are calculated for each class and the components of those calculations is
set forth below. No total return and yield calculations are presented
below for Class C shares because no shares of that class were publicly
issued during the fiscal year ended September 30, 1994. The Fund's
maximum sales charge rate on Class A shares was higher prior to April 1,
1994, and actual investment performance would be affected by that change.
The Fund's advertisement of its performance must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5 and
10-year periods (or the life of the class, if less) as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its yields and total returns and share prices are not guaranteed
and normally will fluctuate on a daily basis. When redeemed, an
investor's shares may be worth more or less than their original cost.
Yields and total returns for any given past period are not a prediction
or representation by the Fund of future yields or rates of return on its
shares. The yields and total returns of Class A, Class B and Class C
shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to a
particular class.
- -- Standardized Yields
-- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, using the current maximum sales charge rate
adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were ______% and ______%,
respectively.
-- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the Class A, Class B or Class C share
dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income
and from realized capital gains declared during a stated period. Under
those calculations, the dividends and/or distributions for that class
declared during a stated period of one year or less (for example, 30 days)
are added together, and the sum is divided by the maximum offering price
per share of that class) on the last day of the period. When the result
is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the current
maximum front-end sales charge. For Class B or Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges. From time
to time similar yield or distribution return calculations may also be made
using the Class A net asset value (instead of its respective maximum
offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
September 30, 1994, were ____% and ____% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended September 30, 1994, was
_____% when calculated at net asset value. The distribution returns on
class A shares for the 30-day period ended September 30, 1994 were _____%
and _____% when calculated at maximum offering price and at net asset
value, respectively. The distribution return on Class B shares for the
30-day period ended September 30, 1994, was _____% when calculated at net
asset value.
- -- Total Return Information
-- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV"), according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
------- = Cumulative Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as discussed below). For Class B shares, the payment of the
current contingent deferred sales charge (4.0% for the first year, 3.0%
for the second year, 2.0% for the third and fourth years, 1.0% in the
fifth year and none thereafter) is applied to the investment result for
the time period shown (unless the total return is shown at net asset
value, as described below). Total returns also assume that all dividends
and capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares
of the Fund for the one year and five year periods ended September 30,
1994 were ____% and _____%, respectively, and for the period from March
10, 1986 (commencement of operations) to September 30, 1994, was _____%.
The cumulative "total return" on Class A shares for the period from March
10, 1986 through September 30, 1994 was _____%. For the fiscal year ended
September 30, 1994 and the period from May 3, 1993 through September 30,
1994, the average annual total return on an investment in Class B shares
of the Fund was ______% and _______%, respectively. The cumulative total
return on an investment in Class B shares of the Fund for the period from
May 3, 1993 through September 30, 1994 was _____.
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions.
The average annual total returns at net asset value on an investment
in Class A shares of the Fund for the one and five-year periods ended
September 30, 1994 and for the period from March 10, 1986 to September 30,
1994 were _____%, _____% and _____%, respectively. The average annual
total returns at net asset value on an investment in Class B shares of the
Fund for the fiscal year ended September 30, 1994 and for the period from
May 3, 1993 to September 30, 1994 were _____% and _____%, respectively.
The cumulative "total returns at net asset value" on the Fund's Class A
shares for the period from March 10, 1986 to September 30, 1994, was
_____%. The cumulative total return at net asset value on the Fund's
Class B shares for the period from May 3, 1993 through September 30, 1994
was _____%.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other short U.S.
Government funds. The Lipper performance rankings are based on total
return that 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 Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S.
Treasury bill returns after considering sales charges and expenses. Risk
reflects fund performance below 90-day Treasury bill monthly returns.
Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a fund's category. Five stars
is the "highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). Morningstar ranks the
Fund's Class A, Class B and Class C shares in relation to other taxable
bond funds. Rankings are subject to change.
The total return on an investment made in Class A, Class B or Class
C shares of the Fund may also be compared with the performance for the
same period of the Lehman Brothers Short U.S. Government Bond Index, an
unmanaged index including all U.S. Treasury issues, publicly- issued debt
of U.S. Government agencies and quasi-public corporation and U.S.
Government-guaranteed corporate debt with maturities of one to five years
that is widely regarded as a measure of the performance of the short-term
U.S. Government bond market, and the Consumer Price Index, which is
generally considered to be a measure of inflation. The foregoing bond
index includes a factor for the reinvestment of interest but does not
reflect expenses or taxes. Other indices may be used from time to
time.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New
York Times. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
When comparing yield, total return and investment risk of an
investment in Class A, Class B or Class C shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while the
Fund's returns will fluctuate and its share values and returns are not
guaranteed. U.S. Treasury securities are guaranteed as to principal and
interest by the full faith and credit of the U.S. government.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and
Distribution and Service Plans for Class B and Class C shares of the Fund
under Rule 12b-1 of the Investment Company Act, pursuant to which the Fund
will reimburse the Distributor for all or a portion of its costs incurred
in connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for the Class B and Class C shares, the
votes were cast by the Manager as the then-sole initial holder of Class
B and Class C shares of the Fund, respectively.
In addition, under the Plans, the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion
increase or decrease the amount of payments they make to Recipients from
their own resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Any 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 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. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by an
exemptive order issued by the Securities and Exchange Commission to obtain
the approval of Class B as well as Class A shareholders for a proposed
material amendment to the Class A Plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the Investment
Company Act), voting separately by class. All material amendments must
be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan and Class
C Plan shall also include the distribution costs for that quarter, and
such costs for previous fiscal periods that are carried forward, as
explained in the Prospectus and below. Those reports, including the
allocations on which they are based, will be subject to the review and
approval of the Independent Trustees in the exercise of their fiduciary
duty. Each Plan further provides that while it is in effect, the
selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. Any unreimbursed
expenses incurred with respect to Class A shares for any fiscal quarter
by the Distributor may not be recovered under the Class A Plan in
subsequent fiscal quarters. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totaled $________, all of which was paid by the Distributor
to Recipients, including $_________ paid to an affiliate of the
Distributor.
The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year Class
B and Class C shares are outstanding, and thereafter on a quarterly basis,
as described in the Prospectus. The advance payment is based on the net
assets of the Class B and Class C shares sold. An exchange of shares does
not entitle the Recipient to an advance payment of the service fee. In
the event Class B or Class C shares are redeemed during the first year
such shares are outstanding, the Recipient will be obligated to repay a
pro rata portion of the advance of the service fee payment to the
Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan and the Class C
Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan and the Class C Plan are
subject to the limitations imposed by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. The Distributor
anticipates that it will take a number of years for it to recoup (from the
Fund's payments to the Distributor under the Class B or Class C Plan and
from contingent deferred sales charges collected on redeemed Class B or
Class C shares) the sales commissions paid to authorized brokers or
dealers. For the fiscal year ended September 30, 1994, payments under the
Class B plan totaled $_______.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B and Class C shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B or
Class C Plan and from contingent deferred sales charges, and such expenses
will be carried forward into future fiscal years, to be recovered from
asset-based sales charges in subsequent fiscal periods, as described in
the Prospectus. The asset-based sales charge paid to the Distributor by
the Fund under the Class B Plan and the Class C Plan are intended to allow
the Distributor to recoup the cost of sales commissions paid to authorized
brokers and dealers at the time of sale, plus financing costs, as
described in the Prospectus. Such payments may also be used to pay for
the following expenses in connection with the distribution of Class B and
Class C shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan and the Class C Plan, (ii) compensation
and expenses of personnel employed by the Distributor to support
distribution of Class B and Class C shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
About Your Account
Alternative Sales Arrangements - Class A, Class B and Class C Shares.
The availability of three classes of shares permits an investor to choose
the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
any order for $1 million or more of Class B or Class C shares on behalf
of a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that investor
to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal
Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Matured Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Matured
Class B shares would occur while such suspension remained in effect.
Although Matured Class B shares could then be exchanged for Class A shares
on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a
taxable event for the holder, and absent such exchange, Class B shares
might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution and/or Service
Plan fees, (ii) incremental transfer and shareholder servicing agent fees
and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of 4:00 P.M. New York time each day The New York Stock Exchange (the
"NYSE") is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The NYSE's most recent annual holiday schedule (which is
subject to change) states that it will close New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day; it may also close on other days. Trading may occur
in U.S. Government Securities at times when the NYSE is closed (including
weekends and holidays or after 4:00 P.M., on a regular business day).
Because the net asset values of the Fund will not be calculated at such
times, if securities held in the Fund's portfolio are traded at such
times, the net asset values per share of Class A, Class B and Class C
shares of the Fund may be significantly affected on such days when
shareholders do not have the ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale prices on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sales
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; (iv) debt securities having a
maturity in excess of 60 days are valued at the mean between the bid and
asked prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; and (v) short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts.
In the case of U.S. Government Securities and mortgage-backed
securities, 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 Fund's Board of Trustees has authorized the
Manager to employ a pricing service to price U.S. Government Securities
for which last sale information is not generally available. The Trustees
will monitor the accuracy of such pricing services by comparing prices
used for portfolio evaluation to actual sales prices of selected
securities.
Calls, puts and Futures held by the Fund are valued at the last sale
prices on the principal exchanges on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i)
above. When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is "marked-to-market" to
reflect the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally three days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a CDSC).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares
in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Transfer Agent, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Checkwriting. When a check is presented to the Bank for
clearance, the Bank will ask the Fund to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the
amount of the check. This enables the shareholder to continue receiving
dividends on those shares until the check is presented to the Fund.
Checks may not be presented for payment at the offices of the Bank or the
Fund's Custodian. This limitation does not affect the use of checks for
the payment of bills or to obtain cash at other banks. The Fund reserves
the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
-- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of such shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to increase the investment, and other terms and conditions
so that the shares would not be involuntarily redeemed.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity
with applicable rules of the Securities and Exchange Commission. The Fund
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net assets of the Fund during
any 90-day period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value
it portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the
redemption price is determined.
-- Wire Redemption Procedures. Under the Wire Redemption Procedure
discussed in the Prospectus, the Federal Funds wire of redemption proceeds
may be delayed if the Fund's Custodian bank is not open for business on
a day when the Fund would normally authorize the wire to be made, which
is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Fund is open for business. No dividends
will be paid on the proceeds of redeemed shares awaiting transfer by wire.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares, (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed or (iii) Class C shares
that were subject to the Class C contingent deferred sales charge when
redeemed. The reinvestment may be made without sales charge only in Class
A shares of the Fund or any of the other OppenheimerFunds into which
shares of the Fund are exchangeable as described below, at the net asset
value next computed after receipt by the Transfer Agent of the
reinvestment order. The shareholder must ask the Distributor for such
privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a capital
loss on the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which
a sales charge was paid are reinvested in shares of the Fund or another
of the OppenheimerFunds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss
or increase the gain recognized from the redemption. However, in that
case, the sales charge would be added to the basis of the shares acquired
by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to
shares redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties
if the distribution is premature; and (iii) conform to the requirements
of the plan and the Fund's other redemption requirements. Participants
(other than self-employed persons) in OppenheimerFunds-sponsored pension
or profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of
the Fund valued at $5,000 or more can authorize the Transfer Agent to
redeem shares (minimum $50) automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
and Class C shareholders should not establish withdrawal plans, because
of the imposition of the contingent deferred sales charges on such
withdrawals (except where the Class B and Class C contingent deferred
sales charge is waived as described in the Prospectus under "Class B
Contingent Deferred Sales Charge" and "Class C Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares. As stated in the Prospectus, shares of a
particular class of OppenheimerFunds having more than one class of shares
may be exchanged only for shares of the same class of other
OppenheimerFunds. Shares of the OppenheimerFunds that have a single class
without a class designation are deemed "Class A" shares for this purpose.
All of the OppenheimerFunds offer Class A shares (except for Oppenheimer
Strategic Diversified Income Fund), but only the following other
OppenheimerFunds offer Class C shares, in addition to Oppenheimer Limited-
Term Government Fund:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Target Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange)
Oppenheimer Strategic Diversified Income Fund
Oppenheimer Main Street Income & Growth Fund
The following other OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Value Stock Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund; shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a contingent
deferred sales charge); and shares of this Fund acquired by reinvestment
of dividends or distributions from any other of the OppenheimerFunds or
from any unit investment trust for which reinvestment arrangements have
been made with the Distributor may be exchanged at net asset value for
shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares
of either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange
if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares. The Class B contingent deferred sales charge
is imposed on Class B shares redeemed within five years of the initial
purchase of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or shares covered by a share
certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B and Class C contingent deferred sales charge
will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and
Class C," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower than dividends on
Class A shares as a result of the asset-based sales charges on Class B and
Class C shares, and will also differ in amount as a consequence of any
difference in net asset value between the classes.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A, Class B and Class C shares will
be reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Any long-term capital gains distributions will be identified
separately when paid and when tax information is distributed by the Fund.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
(although the Fund may have a targeted dividend rate for Class A shares)
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board and the Manager might determine in
a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may
elect to reinvest all dividends and/or capital gains distributions in
shares of the same class of any of the other OppenheimerFunds listed in
"Reduced Sales Charges" above, at net asset value without sales charge.
Class B and Class C shareholders should be aware that as of the date of
this Statement of Additional Information, not all of the OppenheimerFunds
offer Class B and Class C shares. To elect this option, the shareholder
must notify the Transfer Agent in writing and either have an existing
account in the fund selected for reinvestment or must obtain a prospectus
for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in
effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the
OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About The Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and with the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(formerly named "Oppenheimer Government Securities Fund")
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights (see Parts A and B): To be filed by
amendment.
(2) Independent Auditors' Report (see Part B): To be filed by
amendment.
(3) Statement of Investments (see Part B): To be filed by
amendment.
(4) Statement of Assets and Liabilities (see Part B): To be
filed by amendment.
(5) Statement of Operations (see Part B): To be filed by
amendment.
(6) Statements of Changes in Net Assets (see Part B): To be
filed by amendment.
(7) Notes to Financial Statements (see Part B): To be filed by
amendment.
(b) Exhibits
(1) Amended and Restated Agreement and Declaration of Trust:
To be filed by amendment.
(2) Amended By-Laws as of August, 1990: Previously filed with
Post-Effective Amendment No. 8 to Registrant's Registration Statement,
2/1/91, and incorporated herein by reference.
(3) Not applicable.
(4) (a) Class A Specimen Share Certificate: Previously filed
with Post-Effective Amendment No. 15 to Registrant's Registration
Statement, 12/3/93, and incorporated herein by reference.
(b) Class B Specimen Share Certificate: Previously filed
with Post-Effective Amendment No. 15 to Registrant's Registration
Statement, 12/3/93, and incorporated herein by reference.
(c) Class C Specimen Share Certificate: To be filed by
amendment.
(5) Investment Advisory Agreement dated October 22, 1990: Filed
with Post-Effective Amendment No. 7 to Registrant's Registration
Statement, 12/3/90, and refiled herewith pursuant to Item 102 of
Regulation S-T.
(6) (a) General Distributor's Agreement dated October 13,
1992, with Oppenheimer Fund Management, Inc.: Filed with Post-Effective
Amendment No. 12 of the Registrant's Registration Statement, 12/2/92, and
refiled herewith pursuant to Item 102 of Regulation S-T.
(b) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective Amendment No. 14 Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(c) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(d) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(7) Not applicable.
(8) Custodian Agreement dated 6/1/90 with Citibank, N.A.: Filed
with Post-Effective Amendment No. 8, 2/1/91, to Registrant's Registration
Statement and refiled herewith pursuant to Item 102 of Regulation S-T.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed with Registrant's
Registration Statement and incorporated herein by reference.
(11) Independent Auditors' Consent: To be filed by
amendment.
(12) Not applicable.
(13) Subscription Agreement and Investment letter: Filed with
Registrant's Registration Statement and incorporated herein by reference.
(14) (a) Form of Prototype Standardized and Non-Standardized
Profit Sharing Plans and Money Purchase Pension Plans for self-employed
persons and corporations: Filed with Post-Effective Amendment No. 3 to the
Registration Statement of Oppenheimer Global Growth & Income Fund (File
No. 33-23799), 1/30/92, and incorporated herein by reference.
(b) Form of Individual Retirement Account Trust Agreement:
Filed with Post-Effective Amendment No. 21 to the Registration Statement
of Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and
incorporated herein by reference.
(c) Form of SEP-IRA: Filed with Post-Effective Amendment
No. 36 to the Registration Statement of Oppenheimer Equity Income Fund
(Registration No. 2-33043), 10/23/91, and incorporated herein by
reference.
(d) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt organizations:
Filed with Post-Effective Amendment No. 47 of Oppenheimer Growth Fund
(File No. 2-45272), 10/21/94, and incorporated herein by reference.
(e) Form of SAR-SEP Simplified Employee Pension IRA: Filed
with Post-Effective Amendment No. 19, of Oppenheimer Integrity Funds (Reg.
No. 2-76547), 3/1/94, and incorporated herein by reference.
(15) (a) Service Plan and Agreement for Class A shares dated
6/22/93 pursuant to Rule 12b-1: Previously filed with Post-Effective
Amendment No. 16, 1/27/94 to Registrant's Registration Statement and
incorporated herein by reference.
(b) Distribution and Service Plan and Agreement for
Class B shares dated 2/23/94 pursuant to Rule 12b-1: Filed herewith.
(c) Distribution and Service Plan and Agreement for
Class C shares dated 2/1/95: Filed herewith.
(16) Performance Data Computation Schedule: To be filed by
amendment.
(17) (a) Financial Data Schedule for Class A shares: To be
filed by amendment.
(b) Financial Data Schedule for Class B shares: To be
filed by amendment.
-- Powers of Attorney (including certified Board resolutions):
Filed with Post-Effective Amendment No. 15 to Registrant's Registration
Statement, 12/3/93, and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of
Record Holders as
Title of Class of January , 1995
Shares of Beneficial Interest
of Class A Shares _____
Shares of Beneficial Interest
of Class B Shares _____
Item 27. Indemnification
Reference is made to Article VIII of Registrant's Agreement and
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration
Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser of
the Registrant; it and certain subsidiaries act in the same capacity to
other registered investment companies as described in Parts A and B of
this Registration Statement.
(b) Officers and Directors of Oppenheimer Management Corporation,
their position and other business and other connections during the past
two years:
Lawrence Apolito, Vice President
James Ayer, Assistant Vice President
Vice President and Portfolio Manager of Oppenheimer Gold & Special
Minerals Fund and Oppenheimer Global Emerging Growth Fund. Formerly
a Research Analyst for Brown Brothers Harriman & Co.
Victor Babin, Senior Vice President
Robert J. Bishop, Assistant Vice President
Assistant Treasurer of the OppenheimerFunds (see Appendix A);
previously a Fund Controller for Oppenheimer Management Corporation
(the "Manager"), prior to which he was an Accountant for Resolution
Trust Corporation and previously an Accountant and Commissions
Supervisor for Stuart James Company Inc., a broker-dealer.
Christopher O. Blunt, Vice President
Formerly a Vice President of CIC/DISC Subsidiary.
George Bowen, Senior Vice President and Treasurer
Treasurer of the New York-based OppenheimerFunds; Vice President,
Secretary and Treasurer of the Denver-based OppenheimerFunds. Vice
President and Treasurer of Oppenheimer Funds Distributor, Inc. (the
"Distributor") and HarbourView Asset Management Corporation
("HarbourView"), an investment adviser subsidiary of OMC; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial Asset Management Corporation ("Centennial"), an investment
adviser subsidiary of the Manager; Vice President, Treasurer and
Secretary of Shareholder Services, Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of
OMC; President, Treasurer and Director of Centennial Capital
Corporation; Vice President and Treasurer of Main Street Advisers;
formerly Senior Vice President/Comptroller and Secretary of
Oppenheimer Asset Management Corporation ("OAMC"), an investment
adviser which was a subsidiary of the OMC.
Michael A. Carbuto, Vice President
Vice President and Portfolio Manager of Oppenheimer Tax-Exempt Cash
Reserves, Centennial California Tax Exempt Trust, Centennial New York
Tax Exempt Trust and Centennial Tax Exempt Trust; Vice President of
Centennial.
Lynn Coluccy, Vice President
Formerly Vice President-back slash-Director of Internal Audit of the
Manager.
O. Leonard Darling, Executive Vice President
Formerly Co-Director of Fixed Income for State Street Research &
Management Co.
Robert A. Densen, Vice President
Robert Doll, Jr., Executive Vice President
Vice President and Portfolio Manager of Oppenheimer Special Fund,
Oppenheimer Target Fund and Oppenheimer Growth Fund; Senior Vice
President and Portfolio Manager of Strategic Income & Growth Fund.
John Doney, Vice President
Vice President and Portfolio Manager of Oppenheimer Equity Income
Fund; formerly Senior Vice President and Chief Investment Officer -
Equities of National Securities & Research Corporation (mutual fund
adviser) and Vice President of the National Affiliated Investment
Companies.
Andrew J. Donohue, Executive Vice President & General Counsel
General Counsel of the Manager; Secretary of the New York-based
OppenheimerFunds; Vice President of the Denver-based
OppenheimerFunds; Executive Vice President, Director and General
Counsel of the Distributor; formerly Senior Vice President and
Associate General Counsel of the Manager and the Distributor; Partner
in, Kraft & McManimon (a law firm); an officer of First Investors
Corporation (a broker-dealer) and First Investors Management Company,
Inc. (broker-dealer and investment adviser); director and an officer
of First Investors Family of Funds and First Investors Life Insurance
Company.
Kenneth C. Eich, Executive Vice President/Chief Financial Officer
George Evans, Vice President
Vice President and Portfolio Manager of Oppenheimer Global Securities
Fund.
Scott Farrar, Assistant Vice President
Assistant Treasurer of the OppenheimerFunds; previously a Fund
Controller for the Manager, prior to which he was an International
Mutual Fund Supervisor for Brown Brothers Harriman & Co., a bank, and
previously a Senior Fund Accountant for State Street Bank & Trust
Company, before which he was a sales representative for Central
Colorado Planning.
Katherine P.Feld, Vice President and Secretary
Vice President and Secretary of Oppenheimer Funds Distributor, Inc.;
Secretary of HarbourView, Main Street Advisers, Inc. and Centennial;
Secretary, Vice President and Director of Centennial Capital Corp.
Jon S. Fossel, Chairman of the Board, Chief Executive Officer and Director
President and director of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; President, CEO and a director of
HarbourView; a director of SSI and SFSI; President, Director,
Trustee, and Managing General Partner of the Denver-based
OppenheimerFunds; formerly President of the Manager. President and
Chairman of the Board of Main Street Advisers, Inc.
Samuel Freedman, Jr., Director
Director of Oppenheimer Shareholder Services, a Division of the
Manager; Chairman, CEO and Director of SFSI.
Robert G. Galli, Vice Chairman
Trustee of the New York-based OppenheimerFunds; Vice President and
Counsel of OAC; formerly he held the following positions: a director
of the Distributor, Vice President and a director of HarbourView and
Centennial, a director of SFSI and SSI, an officer of other
OppenheimerFunds and Executive Vice President & General Counsel of
the Manager and the Distributor.
Linda Gardner, Assistant Vice President
Ginger Gonzalez, Vice President
Formerly 1st Vice President/Director of Creative Services for
Shearson Lehman Brothers.
Dorothy Grunwager, Assistant Vice President
Caryn Halbrecht, Vice President
Vice President and Portfolio Manager of Oppenheimer Insured Tax-
Exempt Bond Fund and Oppenheimer Intermediate Tax Exempt Bond Fund;
an officer of other OppenheimerFunds; formerly Vice President of
Fixed Income Portfolio Management at Bankers Trust.
Barbara Hennigar, President and Chief Executive Officer of Oppenheimer
Shareholder Services, a division of OMC; President and Director of
Shareholder Financial Services, Inc.
Alan Hoden, Vice President
Formerly Program Manager/AVP for Citibank.
Merryl Hoffman, Vice President
Formerly a Legal Associate at the law firm of Weil, Gotshal & Manges.
Scott T. Huebl, Assistant Vice President
Stephen Jobe, Vice President
Avram Kornberg, Vice President
Paul LaRocco, Assistant Vice President
Portfolio Manager of Oppenheimer Capital Appreciation Fund; Associate
Portfolio Manager of Oppenheimer Discovery Fund and Oppenheimer Time
Fund. Formerly a Securities Analyst for Columbus Circle Investors.
Mitchell J. Lindauer, Vice President
Loretta McCarthy, Senior Vice President
Bridget Macaskill, President and Director
Director of HarbourView; Director of Main Street Advisers, Inc.; and
Chairman of Shareholder Services, Inc.
Sally Marzouk, Vice President
Denis R. Molleur, Vice President
Kenneth Nadler, Vice President
David Negri, Vice President
Vice President and Portfolio Manager of Oppenheimer Strategic Bond
Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Strategic
Investment Grade Bond Fund, Oppenheimer Asset Allocation Fund,
Oppenheimer Strategic Diversified Income Fund, Oppenheimer Strategic
Income Fund, Oppenheimer Strategic Income & Growth Fund, Oppenheimer
Strategic Short-Term Income Fund, Oppenheimer High Income Fund and
Oppenheimer Bond Fund; an officer of other OppenheimerFunds.
Barbara Niederbrach, Assistant Vice President
Stuart Novek, Vice President
Formerly a Direct Account Supervisor for J. Walter Thompson.
Robert A. Nowaczyk, Vice President
Formerly Director of Human Resources for Vanguard Group Inc.
Julia O'Neal, Assistant Vice President
Robert E. Patterson, Senior Vice President
Vice President and Portfolio Manager of Oppenheimer Main Street
California Tax-Exempt Fund, Oppenheimer Insured Tax-Exempt Bond Fund,
Oppenheimer Intermediate Tax-Exempt Bond Fund, Oppenheimer Florida
Tax-Exempt Fund, Oppenheimer New Jersey Tax-Exempt Fund, Oppenheimer
Pennsylvania Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer New York Tax-Exempt Fund and Oppenheimer Tax-Free Bond
Fund; Vice President of the New York Tax-Exempt Income Fund, Inc.;
Vice President of Oppenheimer Multi-Sector Income Trust.
Tilghman G. Pitts III, Executive Vice President and Director
Chairman and Director of the Distributor.
Russell Read, Assistant Vice President
Formerly an International Finance Consultant for Dow Chemical.
Thomas Reedy, Vice President
Vice President of Oppenheimer Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust; an officer of other
OppenheimerFunds; formerly a Securities Analyst for the Manager.
David Rosenberg, Vice President
Vice President and Portfolio Manager of Oppenheimer Limited-Term
Government Fund and Oppenheimer U.S. Government Trust. Formerly Vice
President and Senior Portfolio Manager for Delaware Investment
Advisors.
Richard H. Rubinstein, Vice President
Vice President and Portfolio Manager of Oppenheimer Asset Allocation
Fund, Oppenheimer Fund and Oppenheimer Multiple Strategies Fund; an
officer of other OppenheimerFunds; formerly Vice President and
Portfolio Manager/Security Analyst for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick, Assistant Vice President
Formerly a Vice President of Dollar Dry Dock Bank.
Ellen Schoenfeld, Assistant Vice President
Nancy Sperte, Senior Vice President
Donald W. Spiro, Chairman Emeritus and Director
President and Trustee of the New York-based OppenheimerFunds;
formerly Chairman of the Manager and the Distributor.
Arthur Steinmetz, Senior Vice President
Vice President and Portfolio Manager of Oppenheimer Strategic
Diversified Income Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund, Oppenheimer Strategic
Investment Grade Bond Fund, Oppenheimer Strategic Short-Term Income
Fund; an officer of other OppenheimerFunds.
Ralph Stellmacher, Senior Vice President
Vice President and Portfolio Manager of Oppenheimer Champion High
Yield Fund and Oppenheimer High Yield Fund; an officer of other
OppenheimerFunds.
James C. Swain, Vice Chairman of the Board of Directors and Director
Chairman, CEO and Trustee, Director or Managing Partner of the
Denver-based OppenheimerFunds; President and a Director of
Centennial; formerly President and Director of OAMC, and Chairman of
the Board of SSI.
James Tobin, Vice President
Formerly a Senior Manager - Tax Department for K.P.M.G. Peat Marwick.
Jay Tracey, Vice President
Portfolio Manager of Oppenheimer Discovery Fund and Oppenheimer Time
Fund; from February 1994 through September 1994, he was a Managing
Director of Buckingham Capital Management, prior to which he was
Portfolio Manager and Vice President of the Fund and other
OppenheimerFunds and a Vice President of the Manager. Before that,
he was Senior Vice President of Founders Asset Management, Inc. (a
mutual fund adviser), prior to which he was a securities analyst and
portfolio manager for Berger Associates, Inc. (investment adviser).
Gary Tyc, Vice President, Assistant Secretary and Assistant Treasurer
Assistant Treasurer of the Distributor and SFSI.
Ashwin Vasan, Vice President
Vice President of Oppenheimer Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust: an officer of other
OppenheimerFunds; formerly a Securities Analyst for the manager,
prior to which he was a Securities Analyst for Citibank, N.A.
Valerie Victorson, Vice President
John Wallace, Vice President
Vice President and Portfolio Manager of Oppenheimer Total Return
Fund, Oppenheimer Main Street Income and Growth Fund; an officer of
other OppenheimerFunds; formerly a Securities Analyst and Assistant
Portfolio Manager for the Manager.
Dorothy Warmack, Vice President
Vice President and Portfolio Manager of Daily Cash Accumulation Fund,
Inc., Oppenheimer Cash Reserves, Centennial America Fund, L.P.,
Centennial Government Trust and Centennial Money Market Trust; Vice
President of Centennial.
William L. Wilby, Senior Vice President
Vice President and Portfolio Manager of Oppenheimer Global Fund and
Oppenheimer Global Growth & Income Fund; Vice President of
HarbourView; an officer of other OppenheimerFunds; formerly
international investment strategist at Brown Brothers, Harriman &
Co., prior to which he was a Managing Director and Portfolio Manager
at AIG Global Investors.
Carol Wolf, Vice President
Vice President and Portfolio Manager of Oppenheimer Money Market
Fund, Inc., Centennial America Fund, L.P., Centennial Government
Trust, Centennial Money Market Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of Oppenheimer Multi-Sector Income Trust;
Vice President of Centennial.
Robert G. Zack, Senior Vice President and Assistant Secretary
Associate General Counsel of the Manager; Assistant Secretary of the
OppenheimerFunds; Assistant Secretary of SSI, SFSI; an officer of
other OppenheimerFunds.
Eva A. Zeff, Assistant Vice President
Vice President and Portfolio Manager of Oppenheimer Mortgage Income
Fund; an officer of other OppenheimerFunds; formerly a Securities
Analyst for the Manager, prior to which she was an Assistant
Portfolio Manager for National Securities & Research Corp., an
investment adviser.
Arthur J. Zimmer, Vice President
Vice President and Portfolio Manger of Centennial America Fund, L.P.,
Oppenheimer Money Fund, Centennial Government Trust, Centennial Money
Market Trust and Daily Cash Accumulation Fund, Inc.; Vice President
of Oppenheimer Multi-Sector Income Trust; Vice President of
Centennial; an officer of other OppenheimerFunds; formerly Vice
President of Hanifen Imhoff Management Company (mutual fund
investment adviser).
Item 29. Principal Underwriters
(a) Oppenheimer Funds Distributor, Inc. is the General Distributor
of the Registrant's shares and is also the general distributor of certain
of the other open-end registered investment companies for which
Oppenheimer Management Corporation is the investment adviser, as described
in Parts A and B of the Registration Statement.
(b)
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ---------------- --------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice President,
Secretary and
Treasurer
Julie Bowers Vice President
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President
1940 Cotswold Drive
Orlando, FL 32825
Mary Ann Bruce* Senior Vice President
Robert Coli Vice President
52 Edgewood Road
Bedminster, NJ 07921
Ronald T. Collins Vice President
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Mary Crooks+ Vice President
Paul Delli-Bovi Vice President
750 West Broadway, Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Vice President
President & Director
Kent Elwell Vice President
41 Craig Place
Cranford, NJ 07016
Wendy H. Ehrlich Vice President
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President
2301 Overview Dr. NE
Tacoma, WA 98422
Gregory Farley* Vice President
Patricia Gadecki* Vice President
Katherine Phoebe Feld* Vice President & Secretary
Mark Ferro Vice President
43 Market Street
Breezy Point, NY 11697
Wendy Fishler* Vice President -
Financial Institution Div.
Wayne Flanagan Vice President -
36 West Hill Road Financial Institution Div.
Brookline, NH 03033
Ronald R. Foster Vice President -
11339 Avant Lane Eastern Division Manager
Cincinnati, OH 45249
Luiggino Galleto Vice President
8705 Tamarron Drive
Charlotte, NC 28277
Mark Giles Vice President -
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant Vice President/National
6 Jamson Court Sales Manager - Financial
Westport, CT 06880 Institution Div.
Sharon Hamilton Vice President
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President
609 Chimney Bluff Drive
Mt. Pleasant, SC 29464
Terry Lee Kelley Vice President -
1431 Woodview Lane Financial Institution Div.
Commerce Township, MI 48382
Michael Keogh* Vice President
Richard Klein Vice President
1150 Hennepin Avenue
Apt. 903
Minneapolis, NM 55403
Hans Klehmet II Vice President
26542 Love Lane
Ramona, CA 92065
Ilene Kutno* Assistant Vice President
Wayne A. LeBlang Vice President/
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President/
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President
30 John Street
Cranford, NJ 07016
Laura Mulhall* Vice President/
Director of Key Accounts
Gina Munson Vice President
120 Fisherville Road
Apt. 136
Concord, NH 03301
Charles Murray Vice President
50 Deerwood Drive
Littleton, CO 80127
Patrick Palmer Vice President
958 Blue Mountain Circle
West Lake Village, CA 91362
Randall Payne Vice President -
1307 Wandering Way Drive Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President
1900 Eight Avenue
San Francisco, CA 94116
Tilghman G. Pitts, III* Chairman & Director
Elaine Puleo* Vice President -
Financial Institution Div.
Minnie Ra Vice President -
109 Peach Street Financial Institution Div.
Avenel, NJ 07001
David Robertson Vice President
9 Hawks View
Hoeoye Falls, NY 14472
Robert Romano Vice President
1512 Fallingbrook Drive
Fishers, IN 46038
James Ruff* President
Timothy Schoeffler Vice President
3118 N. Military Road
Arlington, VA 22207
Mark Schon Vice President
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President
785 Beau Chene Dr.
Mandeville, LA 70448
James A. Shaw Vice President -
5155 West Fair Place Financial Institution Div.
Littleton, CO 80123
Robert Shore Vice President -
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker* Vice President -
Financial Institution Div.
Michael Stenger Vice President
C/O America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
Paul Stickney Vice President
1314 Log Cabin Lane
St. Louis, MO 63124
George Sweeney Vice President
1855 O'Hara Lane
Middletown, PA 17057
Philip St. John Trimble Vice President
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer
Mark Stephen Vandehey+ Vice President
Gregory K. Wilson Vice President
2 Side Hill Road
Westport, CT 06880
Bernard J. Wolocko Vice President
33915 Grand River
Farmington, MI 48335
William Harvey Young+ Vice President
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
Appendix A
The OppenheimerFunds include the New York-based OppenheimerFunds and the
Denver-based OppenheimerFunds set forth below
New York-based OppenheimerFunds
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt trust
Oppenheimer Fund
Oppenheimer Growth Fund
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Time Fund
Oppenheimer Limited-Term Government Fund
Denver-based OppenheimerFunds
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax-Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax-Exempt Trust
Centennial Tax-Exempt Trust
Oppenheimer Champion High Yield Fund
Daily Cash Accumulation Fund, Inc.
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Money Market Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Exempt Bond Fund
Oppenheimer Variable Account Funds
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 30th day of November, 1994.
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
By: /s/ James C. Swain*
----------------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ James C. Swain* Chairman of the
- ------------------ Board of Trustees November 30, 1994
James C. Swain
/s/ Jon S. Fossel* Chief Executive
- -------------------- Officer and November 30, 1994
Jon S. Fossel Trustee
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting November 30, 1994
George C. Bowen Officer
/s/ Robert G. Avis* Trustee November 30, 1994
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee November 30, 1994
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee November 30, 1994
- -----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee November 30, 1994
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee November 30, 1994
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee November 30, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee November 30, 1994
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Registration No. 33-02769
Post-Effective Amendment No. 19
Index to Exhibits
Exhibit No. Description
24(b)(5) Investment Advisory Agreement dated 10/22/90
24(b)(6)(a) General Distributor's Agreement dated 10/13/92
24(b)(8) Custodian Agreement dated 6/1/90
24(b)(15)(b) Distribution and Service Plan and Agreement dated
2/23/94 for Class B shares
24(b)(15)(c) Distribution and Service Plan and Agreement dated 2/1/95
for Class C shares
Exhibit 24(b)(5)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 22nd day of October, 1990, by and between FIRST TRUST
FUND, a Massachusetts business trust (hereinafter referred to as the
"Fund"), and OPPENHEIMER MANAGEMENT CORPORATION (hereinafter referred to
as "OMC").
WHEREAS, the Fund is an open-end, diversified 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 OMC is a registered investment adviser;
WHEREAS, the Fund wishes to employ OMC as investment adviser of the Fund
for that series of the Fund's shares called the U.S. Government Series
(hereinafter, the term "Fund" shall refer to the Fund and such series, as
the context may require) on the terms and conditions set forth below;
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 Fund hereby employs OMC and OMC 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. OMC shall, in all
matters, give to the Fund and the Fund'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 Fund as amended from time to time; (iv) policies and determinations
of the Board of Trustees of the Fund; (v) the fundamental policies and
investment restrictions of the Fund as reflected in the Fund'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
Fund in effect from time to time. The appropriate officers and employees
of OMC shall be available upon reasonable notice for consultation with any
of the Trustees and officers of the Fund with respect to any matters
dealing with the business and affairs of the Fund including the valuation
of portfolio securities of the Fund which securities are either not
registered for public sale or not traded on any securities market.
(b) At its option, OMC may appoint a subadviser to perform all or
such responsibilities of OMC under this Agreement as shall be delegated
by OMC to such subadviser, provided, however, that the appointment of any
subadviser and the assumption by such subadviser of any responsibilities
of OMC shall be subject to the approval of the Board of Trustees of the
Fund, and, to the extent necessary, the shareholders of the Series. OMC
agrees to give the Fund prompt written notice of the termination of, or
any notice to terminate, any subadviser agreement.
2. Investment Management.
(a) OMC shall, subject to the direction and control by the Fund's
Board of Trustees, (i) regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities; (ii) supervise
continuously the investment program of the Fund and the composition of its
portfolio and determine what securities shall be purchased or sold by the
Fund; and (iii) arrange, subject to the provisions of paragraph 6 hereof,
for the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the Fund's portfolio.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 6 hereof, OMC may obtain investment
information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect OMC from
willful misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard of its obligations and duties under this
Agreement, OMC shall not be liable for any loss sustained by reason of
good faith errors or omissions in connection with any matters to which
this Agreement relates.
(d) Nothing in this Agreement shall prevent OMC or any officer
thereof from acting as investment adviser for any other person, firm or
corporation or in any way limit or restrict OMC 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 OMC of its duties
and obligations under this Agreement.
3. Other Duties of OMC.
OMC 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 and state securities laws for continuous public
sale of shares of the Fund. OMC shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
OMC 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 OMC
under this Agreement, or to be paid by the Distributor of the shares of
the Fund, shall be paid by the Fund, including, but not limited to: (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums
for fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its trustees other than those associated or
affiliated with OMC; (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
including without limitation the cost of share certificates; (ix) fees and
expenses, other than as hereinabove provided, incident to the registration
under Federal law of shares of the Fund for public sale and for qualifying
additional shares of the Fund for sale under the securities laws of the
various states after the initial registration of the Fund's shares in such
states; (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;
(xii) expenses incurred in connection with the valuation of portfolio
securities and the calculation of its net asset value; (xiii) membership
dues in the Investment Company Institute or any similar organization; and
(xiv) such extraordinary non-recurring expenses as may arise, including
litigation, affecting the Fund and any legal obligation which the Fund may
have (on behalf of the Fund) to indemnify its officers and trustees with
respect thereto. Any officers or employees of OMC or any entity
controlling, controlled by or under common control with OMC who also serve
as officers, trustees or employees of the Fund shall not receive any
compensation from the Fund for their services.
5. Compensation of OMC.
(a) The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee computed on the
aggregate net assets of the Fund as of the close of each business day and
payable monthly at the following annual rate:
.500% of the first $100 million of net assets;
.450% of the next $150 million;
.425% of the next $250 million; and
.400% of the net assets in excess of $500 million.
(b) OMC's compensation for any fiscal year of the Fund shall be
reduced by the amount, if any, by which the Series' expenses for such
fiscal year exceed the most stringent applicable expense limitation
prescribed by any statute or regulatory authority of any jurisdiction in
which the Series' shares are qualified for offer and sale, as such
limitation is set forth in the most recent notice thereof furnished by OMC
to the Series. For purposes of this paragraph there shall be excluded
from the computation of the Series' expenses any amount borne directly or
indirectly by the Series which is permitted to be excluded from the
computation of such limitation by such statute or regulatory authority.
If for any month the expenses of the Series properly included in such
calculation exceed 1/12 of the amount permitted annually by such expense
limitation, the payment to OMC for that month shall be reduced or
eliminated, as necessary, and, if necessary, OMC shall reimburse the Fund
for the amount of its fee which exceeds such limitation. Such
computations and payments shall be adjusted at the end of the Fund's
fiscal year so that the aggregate fee payable to OMC for the year is equal
to the fee calculated under subparagraph (a) of this section, reduced by
the amount required so that such fee does not exceed such expense
limitation on an annual basis.
6. Portfolio Transactions and Brokerage.
(a) OMC 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 6, the benefit of such investment information or research as
will be of significant assistance to the performance by OMC of its
investment management functions.
(b) OMC 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 OMC 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) OMC 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 OMC 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
Fund to pay such broker-dealers a commission for effecting a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect such transaction
would have charged for effecting that transaction, if OMC 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 OMC or its affiliates with respect to the accounts as
to which they exercise investment discretion. In reaching such
determination, OMC 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, OMC shall be prepared to show that
all commissions were allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a representative
period selected by the Fund's trustees were reasonable in relation to the
benefits to the Fund.
(d) OMC 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 Fund and the provisions of
this paragraph 6.
(e) The Fund recognizes that an affiliated broker-dealer (i) may act
as one of the Fund's regular brokers so long as it is lawful for it so to
act; (ii) may be a major recipient of brokerage commissions paid by the
Fund; and (iii) may effect portfolio transactions for the Fund only if the
commissions, fees or other remuneration received or to be received by it
are determined in accordance with procedures contemplated by any rule,
regulation or order adopted under the Investment Company Act for
determining the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 6, OMC may
also consider sales of shares of the Fund and the other funds advised by
OMC and its affiliates as a factor in the selection of broker-dealers for
its portfolio transactions.
7. Duration.
This Agreement will take effect on the date first set forth above.
Unless earlier terminated pursuant to paragraph 9 hereof, this Agreement
shall continue in effect until December 31, 1991, and thereafter from year
to year, so long as such continuance shall be approved at least annually
by the Fund's Board of Trustees, including the vote of the majority of the
trustees of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
approval, or by the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund and by such
a vote of the Fund's Board of Trustees.
8. Disclaimer of Shareholder and Trustee Liability.
OMC understands and agrees that this Agreement is executed and
delivered by the Fund by its duly authorized officer, and OMC is expressly
put on notice of the limitation of shareholder and Trustee liability set
forth in the Fund's Declaration of Trust which is on file with the
Secretary of the Commonwealth of Massachusetts, and that this Agreement
has been executed by and on behalf of the Fund by its officer as such
officer and not individually, and the obligations of the Fund under this
Agreement are not binding upon any shareholder, officer or Trustee of the
Fund individually, but bind only the assets and property of the Fund or
a particular series of the Fund.
9. Termination.
This Agreement may be terminated: (i) by OMC at any time without
penalty upon sixty days' written notice to the Fund (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OMC (which notice may be waived by OMC)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the trustees of the Fund then in
office or by the vote of the holders of a "majority" of the outstanding
voting securities of the Fund (as defined in the Investment Company Act).
10. Assignment or Amendment.
This Agreement may not be amended or the rights of OMC hereunder
sold, transferred, pledged or otherwise in any manner encumbered without
the affirmative vote or written consent of the holders of a "majority" of
the outstanding voting securities of the Fund. This Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
11. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in the Investment Company Act.
FIRST TRUST FUND
Attest:
/s/ Sara Badler By: /s/ Robert G. Galli
- ------------------------ ------------------------------
Sara Badler Robert G. Galli, Vice President
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
/s/ Sara Badler By: /s/ Katherine P. Feld
- ------------------------ ----------------------------------
Sara Badler Katherine P. Feld
Vice President & Secretary
Exhibit 24(b)(6)(a)
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER GOVERNMENT SECURITIES FUND
AND
OPPENHEIMER FUND MANAGEMENT, INC.
Date: October 13, 1992
OPPENHEIMER FUND MANAGEMENT, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER GOVERNMENT SECURITIES FUND, (formerly "First Trust Fund -
U.S. Government Series") a Massachusetts business trust (the "Fund"), is
registered as an investment company under the Investment Company Act of
1940 (the "1940 Act"), and an indefinite number of one or more classes of
its shares of beneficial interest ("Shares") have been registered under
the Securities Act of 1933 (the "1933 Act") to be offered for sale to the
public in a continuous public offering in accordance with the terms and
conditions set forth in the Prospectus and Statement of Additional
Information ("SAI") included in the Fund's Registration Statement as it
may be amended from time to time (the "current Prospectus and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the
sale and distribution of Shares which have been registered as described
above and of any additional Shares which may become registered during the
term of this Agreement. You have advised the Fund that you are willing
to act as such General Distributor, and it is accordingly agreed by and
between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you as
the sole General Distributor, pursuant to the aforesaid continuous public
offering of its Shares, and the Fund further agrees from and after the
date of this Agreement, that it will not, without your consent, sell or
agree to sell any Shares otherwise than through you, except (a) the Fund
may itself sell shares without sales charge as an investment to the
officers, trustees or directors and bona fide present and former full-time
employees of the Fund, the Fund's Investment Adviser and affiliates
thereof, and to other investors who are identified in the current
Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Fund may issue shares in connection with a merger,
consolidation or acquisition of assets on such basis as may be authorized
or permitted under the 1940 Act; (c) the Fund may issue shares for the
reinvestment of dividends and other distributions of the Fund or of any
other Fund if permitted by the current Prospectus and/or SAI; and (d) the
Fund may issue shares as underlying securities of a unit investment trust
if such unit investment trust has elected to use Shares as an underlying
investment; provided that in no event as to any of the foregoing
exceptions shall Shares be issued and sold at less than the then-existing
net asset value.
2. Sale of Shares. You hereby accept such appointment and agree to
use your best efforts to sell Shares, provided, however, that when
requested by the Fund at any time because of market or other economic
considerations or abnormal circumstances of any kind, or when agreed to
by mutual consent of the Fund and the General Distributor, you will
suspend such efforts. The Fund may also withdraw the offering of Shares
at any time when required by the provisions of any statute, order, rule
or regulation of any governmental body having jurisdiction. It is
understood that you do not undertake to sell all or any specific number
of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value
plus a front-end sales charge not in excess of 8.5% of the offering price,
but which front-end sales charge shall be proportionately reduced or
eliminated for larger sales and under other circumstances, in each case
on the basis set forth in the Fund's current Prospectus and/or SAI. The
redemption proceeds of shares offered and sold at net asset value with or
without a front-end sales charge may be subject to a contingent deferred
sales charge ("CDSC") under the circumstances described in the current
Prospectus and/or SAI. You may reallow such portion of the front-end
sales charge to dealers or cause payment (which may exceed the front-end
sales charge, if any) of commissions to brokers through which sales are
made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and
brokers shall collectively include all domestic or foreign institutions
eligible to offer and sell the Shares), and in the event the Fund has more
than one class of Shares outstanding, then you may impose a front-end
sales charge and/or a CDSC on Shares of one class that is different from
the charges imposed on Shares of the Fund's other class(es), in each case
as set forth in the current Prospectus and/or SAI, provided the front-end
sales charge and CDSC to the ultimate purchaser do not exceed the
respective levels set forth for such category of purchaser in the Fund's
current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept
or reject orders for the purchase of Shares at your
discretion. Any consideration which you may receive in
connection with a rejected purchase order will be returned
promptly.
(b) You agree promptly to issue or to cause the duly appointed
transfer or shareholder servicing agent of the Fund to issue
as your agent confirmations of all accepted purchase orders
and to transmit a copy of such confirmations to the Fund.
The net asset value of all Shares which are the subject of
such confirmations, computed in accordance with the
applicable rules under the 1940 Act, shall be a liability of
the General Distributor to the Fund to be paid promptly
after receipt of payment from the originating dealer or
broker (or investor, in the case of direct purchases) and
not later than eleven business days after such confirmation
even if you have not actually received payment from the
originating dealer or broker or investor. In no event shall
the General Distributor make payment to the Fund later than
permitted by applicable rules of the National Association of
Securities Dealers, Inc.
(c) If the originating dealer or broker shall fail to make
timely settlement of its purchase order in accordance with
applicable rules of the National Association of Securities
Dealers, Inc., or if a direct purchaser shall fail to make
good payment for shares in a timely manner, you shall have
the right to cancel such purchase order and, at your account
and risk, to hold responsible the originating dealer or
broker, or investor. You agree promptly to reimburse the
Fund for losses suffered by it that are attributable to any
such cancellation, or to errors on your part in relation to
the effective date of accepted purchase orders, limited to
the amount that such losses exceed contemporaneous gains
realized by the Fund for either of such reasons with respect
to other purchase orders.
(d) In the case of a canceled purchase for the account of a
directly purchasing shareholder, the Fund agrees that if
such investor fails to make you whole for any loss you pay
to the Fund on such canceled purchase order, the Fund will
reimburse you for such loss to the extent of the aggregate
redemption proceeds of any other shares of the Fund owned by
such investor, on your demand that the Fund exercise its
right to claim such redemption proceeds. The Fund shall
register or cause to be registered all Shares sold to you
pursuant to the provisions hereof in such names and amounts
as you may request from time to time and the Fund shall
issue or cause to be issued certificates evidencing such
Shares for delivery to you or pursuant to your direction if
and to the extent that the shareholder account in question
contemplates the issuance of such certificates. All Shares
when so issued and paid for, shall be fully paid and non-
assessable by the Fund (which shall not prevent the
imposition of any CDSC that may apply) to the extent set
forth in the current Prospectus and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are
appointed and shall act as Agent of the Fund. You are
authorized, for so long as you act as General Distributor of
the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund ("Shares")
on the basis of orders received from each dealer
("authorized dealer") with which you have a dealer agreement
for the sale of Shares and permitting resales of Shares to
you, provided that such authorized dealer, at the time of
placing such resale order, shall represent (i) if such
Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been
delivered to it by the registered owner with a request for
the redemption of such Shares executed in the manner and
with the signature guarantee required by the then-currently
effective prospectus of the Fund, or (ii) if such Shares are
uncertificated, that the registered owner(s) has delivered
to the dealer a request for the redemption of such Shares
executed in the manner and with the signature guarantee
required by the then-currently effective prospectus of the
Fund.
(b) You shall (a) have the right in your discretion to accept or
reject orders for the repurchase of Shares; (b) promptly
transmit confirmations of all accepted repurchase orders;
and (c) transmit a copy of such confirmation to the Fund,
or, if so directed, to any duly appointed transfer or
shareholder servicing agent of the Fund. In your
discretion, you may accept repurchase requests made by a
financially responsible dealer which provides you with
indemnification in form satisfactory to you in consideration
of your acceptance of such dealer's request in lieu of the
written redemption request of the owner of the account; you
agree that the Fund shall be a third party beneficiary of
such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or
shareholder servicing agent of any certificate(s) (if any
has been issued) for repurchased Shares and a written
redemption request of the registered owner(s) of such Shares
executed in the manner and bearing the signature guarantee
required by the then-currently effective Prospectus or SAI
of the Fund, the Fund will pay or cause its duly appointed
transfer or shareholder servicing agent promptly to pay to
the originating authorized dealer the redemption price of
the repurchased Shares (other than repurchased Shares
subject to the provisions of part (d) of Section 5 of this
Agreement) next determined after your receipt of the
dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of
this Agreement, repurchase orders received from an
authorized dealer after the determination of the Fund's
redemption price on a regular business day will receive that
day's redemption price if the request to the dealer by its
customer to arrange such repurchase prior to the
determination of the Fund's redemption price that day
complies with the requirements governing such requests as
stated in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all
reasonably available measures to assure the accurate
performance of all services to be performed by you hereunder
within the requirements of any statute, rule or regulation
pertaining to the redemption of shares of a regulated
investment company and any requirements set forth in the
then-current Prospectus and/or SAI of the Fund. You shall
correct any error or omission made by you in the performance
of your duties hereunder of which you shall have received
notice in writing and any necessary substantiating data; and
you shall hold the Fund harmless from the effect of any
errors or omissions which might cause an over- or under-
redemption of the Fund's Shares and/or an excess or non-
payment of dividends, capital gains distributions, or other
distributions.
(f) In the event an authorized dealer initiating a repurchase
order shall fail to make delivery or otherwise settle such
order in accordance with the rules of the National
Association of Securities Dealers, Inc., you shall have the
right to cancel such repurchase order and, at your account
and risk, to hold responsible the originating dealer. In
the event that any cancellation of a Share repurchase order
or any error in the timing of the acceptance of a Share
repurchase order shall result in a gain or loss to the Fund,
you agree promptly to reimburse the Fund for any amount by
which any loss shall exceed then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of
its current Prospectus and SAI. The Fund agrees that it will use its best
efforts to continue the effectiveness of the Registration Statement under
the 1933 Act. The Fund further agrees to prepare and file any amendments
to its Registration Statement as may be necessary and any supplemental
data in order to comply with the 1933 Act. The Fund will furnish you at
your expense with a reasonable number of copies of the Prospectus and SAI
and any amendments thereto for use in connection with the sale of Shares.
7. 1940 Act Registration. The Fund has already registered under the
1940 Act as an investment company, and it will use its best efforts to
maintain such registration and to comply with the requirements of the 1940
Act.
8. State Blue Sky Qualification. At your request and expense, the
Fund will take such steps as may be necessary and feasible to qualify
Shares for sale in states, territories or dependencies of the United
States, the District of Columbia, the Commonwealth of Puerto Rico and in
foreign countries, in accordance with the laws thereof, and at the Fund's
expense to renew or extend any such qualification; provided, however, that
the Fund shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem such
qualification disadvantageous to the Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only; and
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of 1933
in any reports or registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent with the
information contained in the current Prospectus and/or SAI;
and
(d) You shall maintain such records as may be reasonably
required for the Fund or its transfer or shareholder
servicing agent to respond to shareholder requests or
complaints, and to permit the Fund to maintain proper
accounting records, and you shall make such records
available to the Fund and its transfer agent or shareholder
servicing agent upon request; and
(e) In performing under this Agreement, you shall comply with
all requirements of the Fund's current Prospectus and/or SAI
and all applicable laws, rules and regulations with respect
to the purchase, sale and distribution of Shares.
10. Allocation of Costs. The Fund shall pay the cost of printing and
mailing of sufficient copies of its Prospectus and SAI as shall be
required for annual distribution to its shareholders, and the fees for
registering Shares for sale under federal securities laws. The Fund shall
also pay the cost of preparing and using Share certificates, all expenses
of any Federal or state original issue tax or transfer tax payable upon
the issuance, transfer or delivery of Shares by the Fund to the
Distributor, the costs and expenses in connection with the composition,
printing and mailing of notices, proxies and proxy statements and other
communications to shareholders in connection with meetings of
shareholders, and of annual, semi-annual or other reports or
communications sent to shareholders. Other than as set forth in this
paragraph 10, you shall pay the expenses normally attributable to the sale
of Shares, other than as paid under the Fund's Distribution Plan under
Rule 12b-1 of the 1940 Act, including the cost of printing and mailing of
the Prospectus (other than those furnished to existing shareholders) and
any sales literature used by you in the public sale of the Shares and for
initially registering shares under state blue sky laws pursuant to
paragraph 8.
11. Duration. This Agreement shall take effect on the date first
written above, and shall supersede any and all prior General Distributor's
Agreements by and among the Fund and you. Unless earlier terminated
pursuant to paragraph 12 hereof, this Agreement shall remain in effect
until September 30, 1993. This Agreement shall continue in effect from
year to year thereafter, provided that such continuance shall be
specifically approved at least annually: (a) by the Fund's Board of
Trustees or by vote of a majority of the voting securities of the Fund;
and (b) by the vote of a majority of the Trustees, who are not parties to
this Agreement or "interested persons" (as defined the 1940 Act) of any
such person, cast in person at a meeting called for the purpose of voting
on such approval.
12. Termination. This Agreement may be terminated (a) by the General
Distributor at any time without penalty by giving sixty days' written
notice (which notice may be waived by the Fund); (b) by the Fund at any
time without penalty upon sixty days' written notice to the General
Distributor (which notice may be waived by the General Distributor); or
(c) by mutual consent of the Fund and the General Distributor, provided
that such termination by the Fund shall be directed or approved by the
Board of Trustees of the Fund or by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund. In the event
this Agreement is terminated by the Fund, the General Distributor shall
be entitled to be paid the CDSC under paragraph 3 hereof on the redemption
proceeds of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except
in writing and shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors; however, this Agreement
shall not be assigned by either party and shall automatically terminate
upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property; the General
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming Trustee and shareholder
liability for acts or obligations of the Fund.
15. Section Headings. The heading of each section is for descriptive
purposes only, and such headings are not to be construed or interpreted
as part of this Agreement.
If the foregoing is in accordance with your understanding, so
indicate by signing in the space provided below.
OPPENHEIMER GOVERNMENT SECURITIES
FUND
By /s/ James C. Swain
---------------------------------
Chairman
Accepted:
OPPENHEIMER FUND MANAGEMENT, INC.
By /s/ George C. Bowen
- ----------------------------------
Vice President
Exhibit 24(b)(8)
CUSTODIAN AGREEMENT
I. DESIGNATION OF CUSTODIAN
FIRST TRUST FUND (the "Fund"), an open-end series management
investment company organized as a Massachusetts business trust having an
office at 3410 South Galena Street, Denver, Colorado 80231, hereby
designates Citibank, N.A. (the "Bank"), a National Banking Corporation
incorporated under the laws of the United States of America and having an
office at 399 Park Avenue, New York, NY 10043, as Custodian of the
Property (as defined in Section III) of the Fund. By its acceptance, the
Bank agrees to serve as such Custodian upon the terms and conditions set
forth in this Agreement.
II. DELIVERY OF DOCUMENTS
(a) Documents delivered. The Fund delivers to the Bank herewith the
following documents:
(i) Resolutions authorizing the appointment of the Bank as
the custodian of the Fund and the execution by the Fund
of this Agreement;
(ii) copies, certified by the appropriate officer or officers,
of the charter and the by-laws of the Fund; and
(iii) incumbency and signature certificates identifying and
containing the signatures of the officers of the Fund
and/or other signatories authorized to sign Instructions
(as defined below) on behalf of the Fund, specifying the
number of signatures required for Instructions and
identifying the trustees and the other officers, if any,
of the Fund.
(b) Changes. In case of any change or changes affecting any of the
documents described in this Section II, the Fund shall deliver new
documents to the Bank, to the extent necessary to reflect such change or
changes. Unless and until such new documents are delivered and an
authorized signatory of the Bank has issued a receipt for the delivery
thereof, the Bank shall be under no obligation to act (or omit to act),
in accordance with any such change, nor shall the Bank be liable for
failure so to act (or omit to act), but the Bank shall act in accordance
with the documents which such new documents are to replace.
(c) Additional information. The Fund shall furnish to the Bank any
additional information and documentation relating to the Fund and the
Fund's management company (if any) which the Bank may reasonably request.
(d) "Resolutions" defined. The term "Resolutions," as used in this
Agreement, means (i) if the trustees of the Fund are authorized to
transact business of the Fund by signing an instrument setting forth such
business, resolutions signed by the number of trustees of the Fund so
authorized and (ii) in all other cases, copies of resolutions of the
trustees of the Fund, certified by the appropriate officer or officers of
the Fund.
(e) "Depository" defined. The term "Depository" as used in this
Agreement means any "system" or "person" contemplated by Section 17 (f)
of the Investment Company Act of 1940 in which the Banks may, under that
Section and any rules, regulations or orders thereunder, deposit all or
part of the Fund's securities with the consent of the Fund, and to which
the Fund has consented.
(f) "Receipt" of payment defined. Whenever this Agreement
contemplates receipt of payment by the Bank, such receipt shall mean
receipt by the Bank of (i) cash or check of a national securities exchange
certified or issued by a bank (which term, as used in this Agreement,
shall include a trust company and a Federal Reserve Bank), or a
Depository; or (ii) written or telegraphic advice from a bank, registered
clearing agency or a Depository that funds have or will be credited to the
account of the Fund or the Bank at one or more of the foregoing; or (iii)
a bank wire from a correspondent bank of the Bank; or (iv) payment other
than the foregoing, if specified in Instructions relating to the
transaction in question.
III. THE PROPERTY
(a) Property delivered. The Fund shall deliver the Property, or
cause the Property to be delivered, to the Bank or a Depository, subject
to the provisions of this Agreement. Upon delivery, the securities at the
time included in the Property, unless held by a Depository, shall be in
bearer form or shall be registered in the name of a nominee of the Bank
(with or without indication of fiduciary status) or shall be properly
endorsed and in form for transfer satisfactory to the Bank.
(b) "Property" defined. The term "Property," as used in the
Agreement, means:
(i) any and all securities and other property which the Fund
may from time to time deposit, or cause to be deposited,
with the Bank or a Depository,
(ii) all income, including option premiums, in respect of any
of such securities or other property,
(iii) all proceeds of the sale of any such securities or other
property,
(iv) all proceeds, of the sale of securities issued by the
Fund, which are received by the Bank from time to time
from the Fund or its transfer agent, and
(v) any stocks, shares, bonds, financial futures contracts,
indexes, debentures, notes, mortgages and other
obligations, and any certificates, receipts, warrants or
other financial instruments representing absolute or
conditional rights or options to receive, purchase,
subscribe for or sell the same or evidencing or
representing any other rights or interests therein, or
any other property or assets, irrespective of their form,
the name by which they may be described, whether
considered as securities or commodities, or the character
or form of the entities by which they are issued or
created.
(c) Holding of Securities. The Bank shall hold in a separate
account, and physically segregate at all times from those of any other
persons, firms or corporations, pursuant to the provisions hereof, all
securities which are part of the Property, other than those held by a
Depository. All such securities are to be held or disposed of by the
Bank, or by a Depository, subject at all times to Instructions pursuant
to the terms of this Agreement. The Bank shall have no power or authority
to (or to cause a Depository to) assign, hypothecate, pledge, or otherwise
dispose of any such securities except pursuant to Instructions and only
for the account of the Fund, as set forth in Section VI of this Agreement.
The Bank will, upon receipt of proper Instructions, segregate
cash and/or securities of the Fund into escrow accounts in the name of a
designated broker or exchange clearing organization which is a party with
the Fund to an agreement relating to the financial futures contracts
described in paragraph (b) of this Section III. The Bank will confirm the
terms of such escrow to the broker or clearing organization and provide
a copy of such confirmation to the Fund. The Bank will not, however, make
any payment or transfer from any such escrow account except to the named
broker or clearing organization upon receipt of written notice by such
broker or clearing organization representing that the Fund is in default
of a specified obligation for which the escrow was established and setting
forth the amount represented to be due by the Fund to such broker or
clearing organization.
IV. REGISTRATION OF SECURITIES:
COMMERCIAL ACCOUNTS; OVERDRAFTS; RECEIPT OF SECURITIES
(a) Registration of securities. The securities included in the
Property shall, unless held by a Depository, be held in bearer form or in
the name of one or more nominees of the Bank.
(b) Commercial accounts. The Bank shall open and maintain a
commercial account or accounts in the name of the Fund, subject only to
the Bank's draft or order after receipt of Instructions, and the Bank
shall deposit in such account or accounts all cash constituting, or which
is to become, part of the Property. The Bank shall make payments of cash
to or for the account, of the Fund from such cash accounts only pursuant
to Section VI of this Agreement or as otherwise specifically provided in
this Agreement.
(c) Overdrafts. At the sole discretion of the Bank, the Bank will
permit the incurrence of cash overdrafts in any account of the Fund with
the Bank (i) in aid of the timely and orderly clearance of securities
transactions in the course of the Fund's normal business, trading and
investment operations or (ii) in connection with payments to Shareholders
all or a portion of whose shares in the Fund have been or are being
Redeemed, but only upon receipt by the Bank of Instructions to do so. The
Bank shall not be obligated to incur or permit the incurrence of any such
overdraft and the Bank shall not be liable to the Fund or any third party
for any refusal, failure or neglect on the part of the Bank to incur or
permit the incurrence of any such overdraft. As used in this Agreement,
the terms "Redeem" and "Redemption" refer to redemptions, purchases and
other acquisitions by the Fund of shares in the Fund from Shareholders,
and the term "Shareholder" means a shareholder or former shareholder of
the Fund.
(d) Payment of overdrafts; interest. The Fund shall pay to the
Bank, and the Bank may deduct from the Property, the amount of each
overdraft referred to in Section IV (c), together with interest thereon
at such rate as the Bank may from time to time notify to the Fund (such
rate not to exceed the rate at such time charged by the Bank to its prime
commercial borrowers by more than 1-1/2 percentage points), upon the
Bank's demand therefore.
(e) "Receipt" of securities defined. Whenever this Agreement
contemplates receipt of securities by the Bank, such receipt shall mean
receipt by the Bank of (i) securities in bearer form or in form of
transfer satisfactory to the Bank; or (ii) written or telegraphic advice
from a Depository that securities have been credited to the account of the
Fund or the Bank at the Depository; or (iii) written or telegraphic advice
from any bank or responsible commercial agent doing business in the United
States or any foreign country and designated by the Bank as its agent for
this purpose that such securities have been deposited with it.
V. INSTRUCTIONS
(a) "Instructions" defined. As used in this Agreement, the term
"Instructions" means instructions, with respect to any specified
transaction (except as otherwise indicated in this Agreement), in writing
or by telecopier, tested telegram, cable or Telex or by facsimile sending
device, signed in the name of the Fund by the requisite number of Fund
officers or authorized signatories of the Fund as the Board of Trustees
or executive committee of the Fund has authorized to give the particular
class of Instructions in question. Different persons may be authorized
to give Instructions for different purposes. Instructions may be general
or specific in terms.
(b) Instructions consistent with charter, etc. Although the Bank
may take cognizance of the provisions of the charter and by-laws of the
Fund as from time to time amended, the Bank may assume that any
Instructions received hereunder are not in any way inconsistent with any
provision of such charter or by-laws or any vote, resolution or proceeding
of the shareholders or the trustees, or of any committee of either
thereof, of the Fund.
(c) Authority of Fund's signatories. The incumbency and signature
certificates most recently delivered to the Bank pursuant to Section II
(a) (iii) shall constitute evidence of the authority of the signatories
designated therein to act on behalf of the Fund.
VI. TRANSACTIONS REQUIRING INSTRUCTIONS
(a) Payments of cash. The Bank shall make payments of cash to or
for the account of the Fund only as follows or as otherwise specifically
provided in this Agreement:
(i) upon receipt of Instructions to do so, the Bank shall
make payment for and receive all securities purchased for
the account of the Fund (insofar as cash is available, or
insofar as the Bank is willing to permit an overdraft or
overdrafts in the Fund's account or accounts with the
Bank, for such purpose), payment to be made only upon
receipt of the securities, provided that, if any such
securities (or any securities to be received free for the
Fund's account) are not received by the Bank on or before
the thirtieth day following the date of the Bank's
receipt of the Instructions to receive such securities,
the Bank may, but need not, consider such Instructions
cancelled unless and until the Bank received further
Instructions reinstating such original Instructions;
(ii) upon receipt of Instructions to do so, the Bank shall
make payment to a bank of principal of or interest on
bank loans made to the Fund;
(iii) upon receipt of Instructions to do so, the Bank shall
make payments for the Redemption of shares of the Fund
(subject to the provisions of Section VIII (a) of this
Agreement);
(iv) upon receipt of Instructions to do so, the Bank shall
make payments for the payment of dividends, taxes,
management or supervisory fees or operating expenses
(including, without limitation thereto, fees for legal,
accounting and auditing services);
(v) upon receipt of Instructions to do so, the Bank shall
make payments in connection with conversion, exchange or
surrender of securities owned or subscribed to by the
Fund held by or to be received by the Bank;
(vi) upon receipt of Instructions to do so, the Bank will make
payments pursuant to a specified agreement for loaning
the Fund's securities (which Instructions shall identify
the loan agreement under which the payment is to be made,
the date of payment, the name of the borrower and the
securities to be received, if any in exchange for the
payment); and
(vii) upon receipt of Instructions to do so, the Bank shall
make payment for other proper corporate purposes, but
only on receipt of a Resolution certified as set forth in
the definition of that term and countersigned by another
officer of the Fund specifying the amount of such
payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom such payment is to be made.
(b) Transfer, Exchange or Delivery of Securities. The bank shall
transfer, exchange or deliver securities which are part of the Property
only as follows: upon receipt of Instructions to do so, the Bank shall
deliver (or cause a Depository to deliver) securities against such payment
or other consideration or written receipt therefor as shall be specified
in such Instructions, in the following cases: (i) upon sales of such
securities for the account of the Fund and receipt by the Bank of payment
therefor; (ii) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom; (iii) for payment when
such Property has been called, redeemed or retired, or has otherwise
become payable at the option of the holder thereof; (iv) in exchange for,
or for conversion into, other securities and/or cash pursuant to any plan
of merger, consolidation or reorganization, recapitalization, readjustment
or other rearrangement of the issuer; (v) for deposit with a
reorganization committee or protective committee pursuant to a deposit
agreement; (vi) for conversion into or exchange for other securities, or
into or for other securities and cash, in accordance with any conversion
or exchange right or option relating thereto; (vii) in the case of
warrants, rights or other similar securities, upon the exercise thereof;
(viii) in the case of interim receipts or temporary securities, upon the
surrender thereof for definitive securities; (ix) upon the exercise of
a call written by the Fund for which the Bank (or a Depository) has
written an escrow receipt (which term, as used in this Agreement, shall
include an option guarantee letter), subject to the provisions of Section
VI(e); (x) for the deposit of securities in a Depository; (xi) for the
purpose of Redemption in kind of shares of the Fund (subject to Section
VIII(a) of this Agreement); (xii) for the purpose of loaning securities
against receipt by the Bank of collateral therefor (the Instructions as
to which shall specify the securities to be delivered, the loan agreement
under which the delivery is to be made, the date of delivery, the name of
the borrower and the amount of collateral to be received in connection
therewith); and (xiii) for other proper corporate purposes. The Bank
shall make a delivery described in Section VI(c)(xiii) only on receipt of
a Resolution certified as set forth in the definition of that term and
countersigned by another officer of the Fund specifying the securities,
setting forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose and naming the person or
persons to whom said delivery is to be made.
(c) Exercise of rights, etc. The Bank shall deal with rights,
warrants and similar securities received by it hereunder only in the
manner and to the extent ordered by Instructions received by the Bank.
(d) Voting. Neither the Bank nor its nominees shall vote any of the
securities included in the Property or authorize the voting of any such
securities or give any consent, approval or waiver with respect thereto,
except as directed by Instructions received by the Bank. The Bank shall
promptly deliver, or cause to be executed and delivered, to the Fund all
notices, proxies and proxy soliciting materials with relation to such
securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund) but
without indicating the manner in which such proxies are to be voted.
(e) Escrow receipts. In accordance with mutually agreed-upon
arrangements and upon receipt of Instructions to do so, the Bank will
execute, or cause a Depository to execute, an escrow receipt relating to
a call written by the Fund upon receipt of payment for the premium
therefor. Such Instructions shall contain all information necessary for
the issuance of such receipts and will authorize the deposit of the
securities named in such Instructions into an escrow account of the Fund.
Securities so deposited into an escrow account will be held by the Bank
or Depository subject to the terms of such escrow receipt. However, the
Bank agrees that it will not deliver, or cause a Depository to deliver,
any securities deposited in an escrow account pursuant to an exercise
notice unless the Bank has received Instructions to do so or (i) the Bank
has duly requested the issuance of such Instructions, (ii)
at least two business days have elapsed since the receipt of such request
by the Fund, and (iii) the Fund has not advised the Bank by Instructions
that it has purchased securities that are to be delivered by the Bank or
a Depository pursuant to the exercise notice. The Fund agrees that it
will not issue any Instructions to the Bank with respect to the Property
which shall conflict with the terms of any escrow receipt executed by the
Bank or any Depository in relation to the Fund and which is then in
effect. The parties understand that the Fund may write calls on
securities ("underlying securities") which are not part of the Property
and issue Instructions to the Bank to execute, or cause a Depository to
execute, an escrow receipt on securities ("convertible securities") which
are, or are to be, part of the Property and are convertible into the
underlying securities. In such event, the Fund agrees that (i) any
Instructions by it as to the execution of the escrow receipt will relate
only to such convertible securities, and (ii) any Instructions by it as
to the delivery of securities relating to such call will relate only to
such convertible securities without responsibility on the part of the Bank
to effect any conversion thereof.
VII. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
(a) Collection of income and other payments. In the absence of
contrary instructions, the Bank shall:
(i) collect and receive, for the account of the Fund, all
income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants
and similar items, included or to be included in the
Property, and promptly advise the Fund of such receipt;
(ii) take any action which may be necessary and proper in
connection with the collection and receipt of such income
and other payments and distributions, including (without
limitation) the execution of ownership and exemption
certificates, the presentation of coupons and other
interest items, the presentation for payment of
securities which have become payable as a result of their
being called, redeemed or retired, or otherwise becoming
payable, otherwise than at the option of the holder
thereof, and the endorsement for collection of checks,
drafts and other negotiable instruments; and
(iii) receive and hold for the account of the Fund all
securities received as a distribution on securities held
by the Fund as a result of a stock dividend, share split-
up or reorganization, recapitalization, readjustment or
other rearrangement or distribution of rights or similar
securities issued with respect to any securities of the
Fund held by the Bank hereunder, provided that the Bank
shall not be required to transact any item of business
referred to in this Section VII(a) with respect to a
security which is not covered by a published securities
manual reasonably available to the Custodian Services
Department of the Bank (or the successor to such
Department in the event of any administrative
rearrangement of the Bank) unless and until such
Custodian Services Department (or its successor) has
received a notice specifying (x) the item of business in
question and (y) such additional information as will
permit the Bank to transact such item of business
properly and without unreasonable inconvenience to such
Custodian Services Department (or its successor).
(b) Cash disbursements. In the absence of contrary Instructions,
the Bank may make cash disbursements for minor expenses in handling
securities and for similar items in connection with the Bank's duties
under this Agreement. The Bank shall promptly advise the Fund of
disbursements so made.
(c) Delivery of information and documents. The Bank shall promptly
deliver to the Fund all information and documents received by the Bank and
relating to the Property including (without limitation) pendency of calls
and maturities of securities and expiration of rights in connection
therewith received by the Bank from issuers of securities being held for
the Fund. With respect to tender or exchange offers, the Bank shall
transmit promptly to the Fund all written information received from
issuers of the securities whose tender or exchange is being sought and
from the party (or his agents) making the tender or exchange offer.
VIII TRANSACTIONS REQUIRING SPECIAL INSTRUCTIONS
(a) Redemptions. Upon receipt of Instructions to do so, the Bank
shall deliver Property in connection with Redemptions (insofar as monies
or, in a case referred to in clause (iii) below, other Property is
available, or insofar as the Bank is willing to permit an overdraft or
overdrafts in the Fund's account or accounts with the Bank for such
purpose), provided that the Instructions covering each Redemption shall
contain (i) the number of shares Redeemed, (ii) the net asset value
(determined pursuant to the regulations of the Fund, as from time to time
amended, which govern determination of net asset value) of such shares on
the effective date of such Redemption and (iii) specification of any
Property other than cash which the Bank is to deliver pursuant thereto.
(b) Extraordinary transactions. In the case of any of the following
transactions, not in the ordinary course of the business of the Fund:
(i) the merger or consolidation of the Fund and another
investment company,
(ii) the sale by the Fund of all or substantially all of its
assets, or
(iii) liquidation of the Fund or dissolution of the Fund and
distribution of its assets,
the Bank shall deliver Property only upon receipt of Instructions and
advice of counsel satisfactory to the Bank (who may be counsel for the
Fund, at the option of the Bank) to the effect that all necessary
corporate action therefor has been taken, or will be taken concurrently
with the Bank's action.
IX. RIGHT TO RECEIVE ADVICE
(a) Advice of Fund. If the Bank shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the
Fund directions or advice, including Instructions where appropriate.
(b) Advice of counsel. If the Bank shall be in doubt as to any
questions of law involved in any action to be taken or omitted by the
Bank, it may request advice from counsel of its own choosing (who may be
counsel for the Fund, at the option of the Bank).
(c) Conflicting advice. In case of conflict between directions,
advice or Instructions received by the Bank pursuant to Section IX(a) and
advice received by the Bank pursuant to Section IX(b), the Bank shall be
entitled to rely on and follow the advice received pursuant to Section
IX(b) alone.
(d) Absolute protection to Bank. The Bank shall be absolutely
protected in any action or inaction which it takes in reliance on any
directions, advice or Instructions received pursuant to Section IX(a) or
(b) or which the Bank, after receipt of any such directions, advice or
Instructions, in good faith believes to be consistent with such
directions, advice or Instructions, as the case may be. However, nothing
in this Section IX shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Instructions, or (ii)
to act in accordance with such directions or advice when received, unless,
under the terms of another provision of this Agreement, the same is a
condition to the Bank's properly taking or omitting to take such action.
X. STATEMENTS
The Bank shall render to the Fund statements of the transactions in
the accounts of the Fund at the following times: the Bank shall furnish
the Fund both on a daily and a monthly basis with a statement summarizing
all transactions and entries for the account of the Fund. The Bank shall
furnish the Fund at the end of every month with a list of the portfolio
securities held by it or a Depository as custodian for the Fund, adjusted
for all commitments confirmed by the Fund as of such time, certified by
a duly authorized officer of the Bank. The books and records of the Bank
pertaining to its actions under this Agreement shall be open to inspection
and audit at all times by officers of the Fund, its auditors and officers
of its investment adviser.
XI. COMPENSATION
(a) Ordinary services. The Fund shall pay to the Bank, and the Bank
may deduct from the Property, for its services under this Agreement (other
than the services referred to in Section XI(c)) compensation based on a
schedule of charges to be agreed from time to time.
(b) Expenses. The Fund shall reimburse the Bank for all expenses,
taxes and other charges (including, without limitation, interest and other
items charged by brokers in respect of debit balances and delayed
deliveries) paid by the Bank with respect to the property of the Fund, or
incurred by the Bank on behalf of the Fund in the performance of the
Bank's duties hereunder, provided that the Bank shall be entitled to
reimbursement with respect to the fees and disbursements of counsel only
(i) as set forth in Sections XI(c) and XII or (ii) when the Fund breaches
or threatens to breach, or the Fund's management company (if any)
threatens to cause a breach, of this Agreement or when it would reasonably
appear to a man untrained in the law that such a breach exists or is
threatened, to the extent that the fees and disbursements of such counsel
relate to such actual or apparent breach or threatened breach. If the
Bank submits to the Fund a bill for such reimbursement and the Fund does
not, within 15 days after such submission, notify the Bank that the bill
is disapproved and make a reasonable counter-offer in writing, the bill
shall be deemed approved and the Bank may deduct such reimbursement from
the Property.
(c) Extraordinary services. The Fund shall pay to the Bank, and the
Bank may deduct from the Property, for its services as the Fund's agent
in paying a Shareholder consideration, consisting wholly or partially of
property other than cash, in connection with the Redemption of all or any
part of such Shareholder's shares in the Fund compensation equal to 1/10
of 1% of the amount computed by subtracting from the aggregate Redemption
price of such shares the cash, if any, paid to such Shareholder in respect
of such Redemption. Without limiting the generality of the provisions of
Section XI(b),
the Fund shall reimburse to the Bank, and the Bank may deduct from the
Property reimbursement for, the fees and disbursements of the Bank's
counsel attributable to such counsel's services in respect of each such
Redemption.
XII. INDEMNIFICATION
The Fund, as sole owner of the Property, will indemnify the Bank and
each of the Bank's nominees, and hold the Bank and such nominees harmless,
and the Bank may deduct from the Property indemnification, against all
costs, liabilities (including, without limitation, liabilities under the
Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940 and any state and foreign securities and
blue sky laws, all as from time to time amended) and expenses, including
(without limitation) attorney's fees and disbursements, arising directly
or indirectly (i) from the fact that securities included in the Property
are registered in the name of any such nominee, or (ii) without limiting
the generality of the foregoing clause (i), from any action or thing which
the Bank takes or does or omits to take or do, (A) at the request or on
the directions or in reliance on the advice of the Fund, or of the Fund's
management company (if any), or (B) upon Instructions, provided that
neither the Bank nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expense incident to
such liability) arising out of (x) the Bank's or such nominee's own
willful misfeasance, bad faith, negligence or reckless disregard of its
duties under this Agreement or (y) the Bank's own negligent failure to
perform its duties under Section VII(a)(ii).
XIII. RESPONSIBILITY: COLLECTIONS
(a) Responsibility of Bank. The Bank shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein
or as may be specifically agreed to by the Bank in writing. In the
performance of the Bank's duties hereunder, the Bank shall be obligated
to exercise care and diligence, but the Bank shall not be liable for any
act or omission which does not constitute gross negligence, willful
misfeasance or bad faith on the part of the Bank or reckless disregard by
the Bank of its duties under this Agreement, provided that the Bank shall
be responsible for its own negligent failure to perform any of its duties
under this Agreement. Without limiting the generality of the foregoing
or of any other provisions of this Agreement, the Bank shall not be under
any duty or obligation to inquire into and shall not be liable for or in
respect of (i) the validity or invalidity or authority or lack thereof of
any Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, if any, and which the Bank
reasonably believes to be genuine, or (ii) the validity or invalidity of
the issuance of any securities included or to be included in the Property,
the legality or illegality of the purchase of such securities, or the
propriety or impropriety of the amount paid therefor, or (iii) the
legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged), nor shall the Bank be under any duty or obligation to
ascertain whether any property at any time delivered to or held by the
Bank may properly be held by or for the Fund.
(b) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property shall be at the sole
risk of the Fund.
(c) Depositories. In using the facilities of a Depository, the Bank
undertakes to comply with the requirements of Rule 17f-4(d) insofar as the
same apply to a custodian, and shall be responsible for the prompt and
effective enforcement of its rights against the Depository in respect of
the property including the proper replacement of any certificated security
which has been lost, destroyed, wrongfully taken, mislaid or erroneously
delivered while in the custody of the Depository.
XIV. ADVERTISING
No printed or other matter in any language which mentions the Bank's
name other than in the context of the Bank's rights, powers or duties as
the custodian of the Fund shall be issued by the Fund or on the Fund's
behalf unless the Bank shall first have been given notice thereof.
XV. EFFECTIVE DATE; TERMINATION; SUCCESSOR; DISSOLUTION
(a) Effective date. This Agreement shall become effective as of the
date entered in the final paragraph of this Agreement and shall continue
in effect until terminated in the manner set forth below.
(b) Termination. Either party to this Agreement may terminate this
Agreement, without penalty, upon at least two weeks' prior written notice
to the other. The effective date of such notice shall be specified in
such notice, except that, at the option of the party receiving the notice
of termination, the effective date of termination may be postponed, by
notice (given prior to the effective date specified in the termination
notice) to the other party, to a date not more than sixty days from the
date of the notice of termination, provided that the Fund shall have no
right so to postpone the effective date of termination if the Fund is at
the time in default under the provisions of Section XIV.
(c) Successor custodian. The Bank shall, in the event of such
termination, deliver the Property, or cause it to be delivered, to any new
custodian which may be designated in Instructions received by the Bank.
(d) Successor custodian not available. In the event that no new
custodian can be found by the Fund at the time of termination of this
Agreement, the Fund shall, before authorizing the delivery of the Property
to anyone other than a successor custodian, submit to its shareholders the
question of whether the Fund shall be liquidated or shall function without
a custodian. The Bank shall, pending the finding of such a new custodian,
the dissolution of the Fund or the decision of the Fund's shareholders
that the Fund shall function without a custodian, continue to hold the
Property in safekeeping subject to the terms of this Agreement, but the
Bank will not carry out any transaction requiring Instructions, the
Instructions with respect to which are received by the Bank subsequent to
the effective date of the termination of this Agreement, or issue any
advice provided for by Section VII or any statement provided for by
Section X, provided that, upon its receipt of Instructions to do so, the
Bank will deliver the Property to a new custodian (which shall be a
person, firm or corporation having aggregate capital, surplus and
undivided profits of at least $2,000,000 as shown by its last published
report, and meeting such other requirements as may be imposed by
applicable law), distribute the Property (after liquidating any part of
the Property which does not consist of cash, if such Instructions so
order) upon dissolution of the Fund or deliver the Property to any other
person if the Fund's shareholders have decided that the Fund shall
function without a custodian. The Bank shall not be liable to the Fund
or any third party on account of any incidents or omissions occurring
during such period of safekeeping except those arising through the Bank's
own willful misconduct or negligence.
(e) Dissolution; no successor custodian. Upon its receipt of
Instructions to do so, the Bank shall distribute the Property (after
liquidating any part of the Property which does not consist of cash, if
such Instructions so order) upon dissolution of the Fund or deliver the
Property to any person who is to take the place of the Fund's custodian
if the Fund's shareholders have decided that the Fund shall function
without a custodian, provided, in either case, that such Instructions
shall be accompanied by a certified copy of the minutes of the meeting of
the Fund's shareholders at which the same was approved.
XVI. NOTICES
All notices and other communications, including Instructions
(collectively referred to as "Notices" in this Section XVI), hereunder
shall be in writing or by tested telegram, cable or Telex. Notices shall
be addressed (i) if to the Bank, at the Bank's address set forth at the
head of this Agreement, marked for the attention of the Custodian Services
Department (or its successor, referred to in Section VII(a)), (ii) if to
the Fund, at the address of the Fund set forth at the head of this
Agreement, or (iii) if to either of the foregoing, at such other address
as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address
of the addressee thereof are, at the time of sending, more than 100 miles
apart, the Notice shall be sent by airmail, in which case it shall be
deemed given three days after it is sent, or by tested telegram, cable or
Telex, in which case it shall be deemed given immediately, and, if the
location of the sender of a Notice and the address of the addressee
thereof are, at time of sending, not more than 100 miles apart, the Notice
may be sent by first-class mail, in which case it shall be deemed given
two days after it is sent, or by messenger, in which case it shall be
deemed given on the day it is delivered, or by tested telegram or Telex,
in which case it shall be deemed given immediately, provided that the Bank
shall in no event be liable in respect of any delay in its actual receipt
of any Notice. All postage, cable, telegraph and Telex charges arising
from the Sending of a Notice hereunder shall be paid by the sender.
XVII. DEPOSITORIES; ASTRA
The Fund authorizes the Bank, for any securities held hereunder, to
use the services of any United States central securities depository
permitted to perform such services for registered investment companies and
their custodians under Rule 17f-4 under the Act ("System"), the use of
which is subject to the terms and conditions of this Section XVII.
The terms of the use of any System under this Agreement shall be
governed by the terms and conditions of Rule 17f-4 under the Investment
Company Act of 1940, to which terms and conditions the parties hereto
agree as if set forth in full in this Agreement. The parties also agree
that such terms and conditions shall supersede any conflicting provisions
of this Agreement. Nothing herein shall be deemed to require that the
Custodian ascertain, as a condition to the use of any System, that any
required action has been taken by the Board of Trustees of the Fund.
If and to the extent that a System permits the withdrawal of a
security from that System in certificate form and the Fund requires a
certificate for making a loan or otherwise, the Bank shall take all
necessary and appropriate action to obtain such certificate upon receipt
of an officer's certificate requesting the same.
The liability of the Bank to the Fund in connection with the use of
any System shall be subject to the provisions of Section XIII of this
Agreement.
The Bank agrees that it will effectively enforce such rights as it
may have against any System and will use its best efforts, and will
enforce any such rights as it may have against any System, to require that
such System shall take all appropriate and necessary steps to obtain
replacement of any certificated security in such System which has been
lost, apparently destroyed, wrongfully taken, mislaid or erroneously
delivered while in the custody of the System.
The Fund can have dial-up access to its own custodian account in the
Bank's computerized accounting system (the "ASTRA System") in order to:
(i) accept or reject executed securities transactions (other than in
foreign securities) as submitted for confirmation by brokers and dealers
through the Institutional Delivery ("ID") System of Depository Trust
Company ("DTC") in which the Bank is a participant; and (ii) issue
instructions for the settlement of accepted transactions by the Bank
(through the ID System of DTC or otherwise) pursuant to the terms of this
Agreement.
1. The Bank will provide such current instructions and password as
may be necessary for the Fund to have dial-up access to its own custody
account in the ASTRA System, which instructions and password, including
any changed instructions or password, will be delivered personally or by
certified mail, return receipt requested, to such officer(s) of the Fund
as may, from time to time, be designated in a written instruction given
by the Fund in accordance with Article V of this Agreement and signed by
the Secretary, Assistant Secretary or Treasurer of the Fund.
2. The Bank will change such instructions or password as frequently
as may reasonably be requested by the Fund for security reasons.
3. The Bank is obligated and authorized to act and rely upon any
instructions received by it through the ASTRA System, as fully as in the
case of instructions given pursuant to Article V of this Agreement,
regardless of whether such instructions have been authorized by the Fund,
provided that such instructions are accompanied by the code password and
account identification information furnished, from time to time, by the
Bank to the Fund as hereinabove provided. Any such instructions received
by the Bank through the ASTRA System will be considered "Instructions" for
all purposes under this Agreement, including without limitation the
indemnification provisions of Article XII hereof.
4. Both the Fund and the Bank will keep for at least five years and
produce on request, in machine readable form, copies of any instructions
sent or received pursuant to the provisions hereof.
XVIII. MISCELLANEOUS
(a) Amendments, etc. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought. The
headings in this Agreement are for convenience of reference only, are not
a part of this Agreement and shall be disregarded in connection with any
interpretation of all or any part of this Agreement.
(b) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings, relating to the subject matter hereof,
provided that the parties hereto may embody in one or more separate
documents their agreement, if any, with respect to delegated and/or oral
Instructions.
(c) Successors and assigns; assignment. All terms of this Agreement
shall be binding upon the respective successors and assigns of the parties
hereto, the Fund's management company (if any) and the Fund's shareholders
and shall inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns, provided that this Agreement
shall not be assignable in whole or in part by either party hereto without
the written consent of the other party hereto.
(d) Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original but all
of which, taken together, shall constitute one and the same Agreement.
(e) Disclaimer of Shareholder Liability. The Bank understands that
the obligations of the Fund under this Agreement are not binding upon any
trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Bank represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
(f) Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by the hands of their signatories thereunto duly authorized
as of the 1st day of June, 1990.
CITIBANK, N.A.
By: /s/ Reginald Monachino
------------------------------
Vice President
------------------------------
(Name and Title)
FIRST TRUST FUND
By: /s/ Robert G. Galli
-------------------------------------
Robert G. Galli, Vice President
Exhibit 24(b)(c)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER GOVERNMENT SECURITIES FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd
day of February, 1994 by and between OPPENHEIMER GOVERNMENT SECURITIES
FUND (the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for a
portion of its costs incurred in connection with the distribution of
Shares, and the personal service and maintenance of shareholder accounts
that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to
the terms of this Plan. The Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day (the "Service
Fee"), plus (ii) within ten (10) days of the end of each month, in
the aggregate amount of 0.0625% (0.75% on an annual basis) of the
average during the month of the aggregate net asset value of Shares
computed as of the close of each business day (the "Asset-Based Sales
Charge") outstanding for six years or less (the "Maximum Holding
Period"). Such Service Fee payments received from the Fund will
compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board
with respect to Accounts. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor and Recipients
for providing distribution assistance in connection with the sales
of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by
its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of Shares computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to the Distributor on demand a pro rata portion of such Advance
Service Fee Payments, based on the ratio of the time such shares were
held to one (1) year. The Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time decrease
and thereafter adjust the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rate set forth above,
and/or direct the Distributor to increase or decrease the Maximum
Holding Period, the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings, Maximum Holding Period or Minimum Holding Period,
if any, and the rate of payments hereunder applicable to Recipients,
and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice. The Distributor may
make Plan payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor if such affiliated person qualifies as a
Recipient.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than the Maximum Holding Period, in each case computed as of the
close of each business day during that period and subject to
reduction or elimination of such amounts under the limits to which
the Distributor is, or may become, subject under Article III, Section
26, of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution
assistance and administrative support services in connection with the
sale of Shares to be rendered by the Distributor may include, but
shall not be limited to, the following: (i) paying sales commissions
to any broker, dealer, bank or other institution that sells Shares,
and\or paying such persons Advance Service Fee Payments in advance
of, and\or greater than, the amount provided for in Section 3(a) of
this Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and
other borrowing costs on unreimbursed Carry Forward Expenses (as
hereafter defined) at the rate paid by the Distributor or, if such
amounts are financed by the Distributor from its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which
shall mean the most preferential interest rate on corporate loans at
large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is
no longer so reported, such other rate as may be designated from time
to time by the Distributor with the approval of the Independent
Trustees); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on
unreimbursed Carry Forward Expenses, second, to reduce any
unreimbursed Carry Forward Expenses, third, to reduce Distribution
and Service Costs during that quarter, and fourth, to reduce the
Asset-Based Sales Charge payments by the Fund to the Distributor in
that quarter. Carry Forward Expenses shall be carried forward by the
Fund until payment can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on February 23, 1994 for the purpose of
voting on this Plan, and replaces the Fund's Distribution and Service Plan
and Agreement dated June 22, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until October 31, 1994 and from year
to year thereafter or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Trustees. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
OPPENHEIMER GOVERNMENT SECURITIES FUND
By: /s/ Andrew J. Donohue
--------------------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
--------------------------------------
Katherine P. Feld, Vice President & Secretary
Exhibit 25(b)(15)(c)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 1st day
of February, 1995, by and between OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"),
pursuant to which the Fund will compensate the Distributor for a portion
of its costs incurred in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold
Shares ("Accounts"). The Fund may act as distributor of securities of
which it is the issuer, pursuant to the Rule, according to the terms of
this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a)"Recipient" shall mean any broker, dealer, bank or other institution
which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative
support services with respect to Shares held by Customers (defined
below) of the Recipient; (ii) shall furnish the Distributor (on behalf
of the Fund) with such information as the Distributor shall reasonably
request to answer such questions as may arise concerning the sale of
Shares; and (iii) has been selected by the Distributor to receive
payments under the Plan. Notwithstanding the foregoing, a majority of
the Fund's Board of Trustees (the "Board") who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of this Plan or in any
agreements relating to this Plan (the "Independent Trustees") may
remove any broker, dealer, bank or other institution as a Recipient,
whereupon such entity's rights as a third-party beneficiary hereof
shall terminate.
(b)"Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed owned
by more than one Recipient for purposes of this Plan. In the event
that two entities would otherwise qualify as Recipients as to the same
Shares, the Recipient which is the dealer of record on the Fund's books
shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a)The Fund will make payments to the Distributor, within forty-five
(45) days of the end of each calendar quarter, in the aggregate amount
(i) of 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares
computed as of the close of each business day (the "Service Fee"), plus
(ii) 0.1875% (0.75% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares
computed as of the close of each business day (the "Asset Based Sales
Charge"). Such Service Fee payments received from the Fund will
compensate the Distributor and Recipients for providing administrative
support services of the type approved by the Board with respect to
Accounts. Such Asset Based Sales Charge payments received from the
Fund will compensate the Distributor and Recipients for providing
distribution assistance in connection with the sale of Shares.
The administrative support services in connection with the Accounts
to be rendered by Recipients may include, but shall not be limited to,
the following: answering routine inquiries concerning the Fund,
assisting in establishing and maintaining accounts or sub-accounts in
the Fund and processing Share redemption transactions, making the
Fund's investment plans and dividend payment options available, and
providing such other information and services in connection with the
rendering of personal services and/or the maintenance of Accounts, as
the Distributor or the Fund may reasonably request. The distribution
assistance in connection with the sale of Shares to be rendered by
Recipients may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those
furnished to current holders of the Fund's Shares ("Shareholders"), and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably
request. It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it to
payments under the Plan. In the event that either the Distributor or
the Board should have reason to believe that, notwithstanding the level
of Qualified Holdings, a Recipient may not be rendering appropriate
distribution assistance in connection with the sale of Shares or
administrative support services for the Accounts, then the Distributor,
at the request of the Board, shall require the Recipient to provide a
written report or other information to verify that said Recipient is
providing appropriate distribution assistance and/or services in this
regard. If the Distributor still is not satisfied, it may take
appropriate steps to terminate the Recipient's status as such under the
Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
(b)The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of each business day
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not
to exceed (i) 0.25% of the average during the calendar quarter of the
aggregate net asset value of Shares computed as of the close of
business on the day such Shares are sold, constituting Qualified
Holdings sold by the Recipient during that quarter and owned
beneficially or of record by the Recipient or by its Customers, plus
(ii) 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares computed
as of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. The
Advance Service Fee Payments described in part (i) of the preceding
sentence may, at the Distributor's sole option, be made more often than
quarterly, and sooner than the end of the calendar quarter. In
addition, the Distributor shall make asset-based sales charge payments
to any Recipient quarterly, within forty-five (45) days of the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares computed as of the close of each
business day constituting Qualified Holdings owned beneficially or of
record by the Recipient or its Customers for a period of more than one
(1) year. However, no such service fee or asset-based sales charge
payments (collectively, the "Recipient Payments") shall be made to any
Recipient for any such quarter in which its Qualified Holdings do not
equal or exceed, at the end of such quarter, the minimum amount
("Minimum Qualified Holdings"), if any, to be set from time to time by
a majority of the Independent Trustees. A majority of the Independent
Trustees may at any time or from time to time decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rates set forth above, and/or direct
the Distributor to increase or decrease the Minimum Holding Period or
the Minimum Qualified Holdings. The Distributor shall notify all
Recipients of the Minimum Qualified Holdings or Minimum Holding Period,
if any, and the rates of Recipient Payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of
such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice. The Distributor may
make Plan payments to any "affiliated person" (as defined in the 1940
Act) of the Distributor if such affiliated person qualifies as a
Recipient.
(c)The Distributor is entitled to retain from the payments described
in Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period, (ii) the Asset-
Based Sales Charge on Shares outstanding for not more than one (1)
year, plus (iii) any additional Asset-Based Sales Charge payment which
no Recipient qualifies to receive, in each case computed as of the
close of each business day during that period and subject to reduction
or elimination of such amounts under the limits to which the
Distributor is, or may become, subject under Article III, Section 26,
of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution assistance
and administrative support services in connection with the sale of
Shares to be rendered by the Distributor may include, but shall not be
limited to, the following: (i) paying sales commissions to any broker,
dealer, bank or other institution that sell Shares, and\or paying such
persons Advance Service Fee Payments in advance of, and\or greater
than, the amount provided for in Section 3(a) of this Agreement; (ii)
paying compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) paying of or
reimbursing the Distributor for interest and other borrowing costs on
unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of
1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of
the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by the
Distributor with the approval of the Independent Trustees); (iv) other
direct distribution costs of the type approved by the Board, including
without limitation the costs of sales literature, advertising and
prospectuses (other than those furnished to current Shareholders) and
state "blue sky" registration expenses; and (v) any service rendered
by the Distributor that a Recipient may render pursuant to part (a) of
this Section 3. The Distributor's costs of providing the above-
mentioned services are hereinafter collectively referred to as
"Distribution and Service Costs." "Carry Forward Expenses" are
Distribution and Service Costs that are not paid in the fiscal quarter
in which they arise because they exceed the Quarterly Limitation. In
the event that the Board should have reason to believe that the
Distributor may not be rendering appropriate distribution assistance
or administrative support services in connection with the sale of
Shares, then the Distributor, at the request of the Board, shall
provide the Board with a written report or other information to verify
that the Distributor is providing appropriate services in this regard.
(d)The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first to interest on unreimbursed
Carry Forward Expenses, second to reduce any unreimbursed Carry Forward
Expenses, third to reduce Distribution and Service Costs during that
quarter, and fourth, to reduce the Asset Based Sales Charge payments
by the Fund to the Distributor in that quarter. Carry Forward Expenses
shall be carried forward by the Fund until payment can be made under
the Quarterly Limitation.
(e)Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources, from Asset Based Sales Charge payments or from its
borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of Shares
in conjunction with the Board's annual review of the continuation of the
Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on June 28, 1994 for the purpose of voting
on this Plan, and takes effect as of February 1, 1995. Unless terminated
as hereinafter provided, it shall continue in effect from year to year
from the date first set forth above or as the Board may otherwise
determine only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast
in person at a meeting called for the purpose of voting on such
continuance. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the Class C
Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. In the event of such termination, the Board and its
Independent Trustees shall determine whether the Distributor is entitled
to payment from the Fund of all Carry Forward Expenses and related costs
properly incurred in respect of Shares sold prior to the effective date
of such termination, and whether the Fund shall continue to make payment
to the Distributor in the amount the Distributor is entitled to retain
under part (c) of Section 3 hereof, until such time as the Distributor has
been reimbursed for all such amounts by the Fund and by retaining CDSC
payments.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund under this Plan are not
binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property. The Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder and Trustee liability for acts or obligations of
the Fund.
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
By: /s/ Robert G. Zack
----------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
----------------------------------------
Katherine P. Feld, Vice President and Secretary
