Registration No. 33-3076
File No. 811-4576
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 21 [X]
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BOND FUND SERIES - OPPENHEIMER CONVERTIBLE SECURITIES FUND
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(Exact Name of Registrant as Specified in Charter)
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350 Linden Oaks, Rochester, New York 14625
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(Address of Principal Executive Offices) (Zip Code)
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800-552-1149
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
With a copy to: Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue NW, Washington, D.C. 20036
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)(1)
[X] On April 28, 1999 pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment
designates a new effective date for a previously filed post-effective
amendment.
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(OppenheimerFunds logo)
Oppenheimer
Convertible Securities Fund
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Prospectus dated April 28, 1999
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Oppenheimer Convertible Securities Fund is a mutual fund that seeks a high
level of total return as its goal, through a combination of current income and
capital appreciation. It invests primarily in convertible fixed income
securities.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
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Contents
About the Fund
The Fund's Objective and Investment Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
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A B O U T T H E F U N D
The Fund's Objective and Investment Strategies
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What Is the Fund's Investment Objective? The Fund seeks a high level of total
return on its assets through a combination of current income and capital
appreciation.
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What Does the Fund Invest In? The Fund invests at least 65% of its total assets
in convertible securities under normal market conditions. Those convertible
securities include domestic and (to a limited extent) foreign corporate bonds,
notes, warrants and preferred stocks that can be exchanged for (converted into)
common stock of the issuer. The Fund can invest without limit in lower-grade,
high-yield convertible debt securities, sometimes called "junk bonds," and many
of the convertible bonds the Fund buys are below investment grade.
The Fund has no limitations on the range of maturities of the debt
securities in which it can invest and therefore may hold bonds with short-,
medium- or long-term maturities. Additionally, the Fund does not limit its
investments to securities of issuers in a particular market capitalization range
and can hold securities of small-cap, medium-cap and large-cap issuers.
What Are "debt Instruments?" Debt instruments are securities issuers use to
borrow money from investors. The issuer promises to pay interest at a fixed or
variable rate and to pay back the amount borrowed (the "principal") at the
loan's maturity. Some debt securities (zero coupon bonds, discussed below), do
not pay current interest.
While the Fund can also invest up to 35% of its total assets in
non-convertible debt securities and common stocks, not more than 15% of its
total assets can be invested in common stocks that do not pay dividends. The
Fund can also use hedging instruments and certain derivative investments, such
as "structured notes" and "equity-linked debt securities," to try to enhance
income or to try to manage investment risks. These investments are more fully
explained in "About the Fund's Investments," below.
n How Does the Manager Decide What Securities to Buy or Sell? In selecting
securities for the Fund, the Fund's portfolio manager uses a disciplined,
value-oriented investment approach based on a fundamental "bottom-up" analysis
of the financial condition of individual issuers rather than overall market or
industry conditions or trends. The portfolio manager currently focuses on the
factors below (which may vary in particular cases and may change over time): o
The portfolio manager analyzes the balance sheet strength of individual
issuers, including current and historic financial condition, trading
activity in its securities, present and anticipated cash flows,
estimated values in relation to historic cost, the issuer's managerial
expertise, debt maturity schedules, current and future borrowing
requirements and any change in its condition that might affect its
ability to meet future obligations.
o The portfolio manager searches for debt securities that might offer
equity-like returns without excessive price volatility.
o To avoid the volatility of stocks, the portfolio manager generally
sells stocks after they are obtained by converting debt securities the
fund held.
o While the Fund is not required to sell securities to maintain the 65%
standard for investing in convertible securities, if its investments in
non-convertible securities, cash and common stock exceed 35% it will
make new investments only in convertible securities to comply with the
65% standard. .
Who Is the Fund Designed For? The Fund is designed primarily for investors
seeking high total return over the long term from a fund that invests for both
current income and capital appreciation in convertible securities. Those
investors should be willing to assume the credit risks of a fund that typically
invests a significant amount of its assets in lower-grade bonds and the changes
in share prices that can occur when interest rates change. The Fund is intended
as a long-term investment, not a short-term trading vehicle, and may be
appropriate for a part of an investor's retirement plan portfolio. However, the
Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments carry risks to some degree. The Fund's investments in debt
securities are subject to changes in their value from a number of factors. They
include changes in general stock and bond market movements in the U.S. and
abroad (this is referred to as "market risk"), or the change in value of
particular stocks and bonds because of an event affecting the issuer (this is
known as "credit risk"). Changes in interest rates can also affect debt
securities prices (this is known as "interest rate risk").
These risks collectively form the risk profile of the Fund, and can affect
the value of the Fund's investments, its investment performance and its price
per share. These risks mean that you can lose money by investing in the Fund.
When you redeem your shares, they may be worth more or less than what you paid
for them.
The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by carefully researching securities before they are purchased, and in some
cases by using hedging techniques. The Fund attempts to reduce its exposure to
market risks by diversifying its investments, that is, by not holding a
substantial percentage of the securities of any one issuer and by not investing
too great a percentage of the Fund's assets in any one issuer. Also, the Fund
does not concentrate 25% or more of its investments in the securities of issuers
in any one industry.
However, changes in the overall market prices of securities and the income
they pay can occur at any time. The share price and yield of the Fund will
change daily based on changes in market prices of securities and market
conditions, and in response to other economic events. There is no assurance that
the Fund will achieve its investment objective.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced, and if the issuer fails to
repay principal, the value of that bond and of the Fund's shares might be
reduced. Debt securities and preferred stocks issued by domestic and foreign
corporations are subject to risks of default.
o Special Risks of Lower-Grade Securities. Because the Fund can
invest without limit in rated and unrated securities below investment grade to
seek higher income, the Fund's credit risks are greater than those of funds that
buy only investment grade securities. Lower-grade debt securities may be subject
to greater market fluctuations and greater risks of loss of income and principal
than investment-grade debt securities. Securities that are (or that have fallen)
below investment grade are exposed to a greater risk that the issuers of those
securities might not meet their debt obligations. The market for these
securities, especially unrated lower-grade securities, may be thinner than for
investment grade securities, making it difficult for the Fund to sell its
investments when it wants to at an acceptable price. Those risks can reduce the
Fund's share prices and the income it earns.
o Credit Risks of Small-Cap Issuers. While the Fund can buy
convertible securities of companies of small, medium or large market
capitalizations, investments in small-capitalization companies may offer greater
potential for high total return than securities of larger issuers and the Fund
at times may have large investments in convertible securities of small-cap
issuers. These securities may have less of a trading market and may be subject
to greater risks of default than securities of larger issuers.
n Interest Rate Risks. The values of debt securities are subject to change
when prevailing interest rates change. When interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall, and the securities may
sell at a discount from their face amount. The magnitude of these fluctuations
will often be greater for longer-term debt securities than shorter-term debt
securities. The Fund's share prices can go up or down when interest rates change
because of the effect of interest rate changes on the value of the Fund's
investments in debt securities.
n Stock Market Risks. Because most of the Fund's investments are
convertible into common stock, the prices of the Fund's investments in
convertible securities are sensitive to events that can affect the values of the
issuer's common stock. Those events can include broad stock market events as
well as events affecting the particular issuer, such as poor earnings reports,
loss of major customers, major litigation, or regulatory changes affecting the
issuer or its industry. The income offered by fixed-income securities can help
reduce some of that volatility, but the prices of the Fund's fixed-income
convertible securities will be affected by those events.
n There are Special Risks in Using Derivative Investments. The Fund can
use derivatives to seek increased returns or to try to hedge investment risks.
In general terms, a derivative investment is an investment contract whose value
depends on (or is derived from) the value of an underlying asset, interest rate
or index. Options, structured notes, and equity-linked debt securities are
examples of derivatives the Fund can use.
If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might not perform the
way the Manager expected it to perform. If that happens, the Fund's share price
could fall or the Fund could get less income than expected. The Fund has limits
on the amount of particular types of derivatives it can hold. However, using
derivatives can cause the Fund to lose money on its investments and/or increase
the volatility of its share prices.
How Risky is the Fund Overall? The values of debt securities, particularly those
of lower-grade securities, can be affected by a number of factors, such as
interest rate changes and other market factors, and the price of the Fund's
shares can go up and down. The income from the Fund's investments may help
cushion the Fund's total return from changes in prices, but debt securities are
subject to credit risks that can also affect their values and income and the
share prices of the Fund. In the OppenheimerFunds spectrum, the Fund is
generally has more risks than bond funds that focus primarily on U. S.
government securities and investment grade bonds but may be less volatile than
funds that focus solely on investments in stocks.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class M
shares) from year to year for the past ten calendar years and by showing how the
average annual total returns of the Fund's shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class M) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
For the period from 1/1/99 through 3/31/99, the cumulative return (not
annualized) of Class M shares was ____%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown. During the period covered by the bar
chart, the highest return (not annualized) for a calendar quarter was ___%
(__Q'__) and the lowest return (not annualized) for a calendar quarter was ___%
(__Q'__).
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Average Annual Total 1 Year 5 Years
Returns for the periods (or life of (or life of
ended December 31, 1998 class, if less) class, if less) 10 Years
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-----------------
Class M Shares % % %
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Goldman Sachs Conv. Bond -----------------
100 Index % % %
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Lehman Bros. Aggregate -----------------
Bond Index % % %
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Class A Shares (inception -----------------
5/1/95) % % N/A
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Class B Shares (inception -----------------
5/1/95) % % N/A
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Goldman Sachs Conv. Bond -----------------
100 Index % %* N/A
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Lehman Bros.. Aggregate
Bond Index % %* N/A
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Class C Shares (inception
3/11/96) % % N/A
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Goldman Sachs Conv. Bond
100 Index % %* N/A
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Lehman Bros. Aggregate
Bond Index % %* N/A
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* The life-of-class performance of the indices is shown from 4/30/95 for Class A
and Class B and from 2/29/96 for Class C. Class M shares were first publicly
offered 6/3/86 as Class A shares and were re-designated as Class M shares
3/11/96. The Fund's Class Y shares which had been offered since 5/1/95 were
re-designated as Class A shares on 3/11/96.
The Fund's average annual total returns in the table include the current maximum
initial sales charges of 5.75% for Class A and 3.25% for Class M; the contingent
deferred sales charge of 5% (1-year) and 3% (life-of-class) for Class B; and the
1% contingent deferred sales charge for the 1-year period for Class C.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Fund invests in convertible securities, the Fund's
performance is compared to the Goldman Sachs Convertible Bond 100 Index and the
Lehman Brothers Aggregate Bond Index, which measures the performance of domestic
corporate and U.S. government debt securities, as a measure of the broad bond
market. However, it must be remembered that the index performance reflects the
reinvestment of income but does not consider the effects of transaction costs.
The Fund also compares its performance to that of the S&P 500 index, a measure
of the domestic stock market, and that comparison may be found in the Fund's
annual report.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset 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
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
December 31, 1998.
Shareholder Fees (charges paid directly from your investment):
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Class A
Shares Class B Shares Class C Shares Class M Shares
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Maximum Sales Charge
(Load) on purchases None
(as % of offering 5.75% None 3.25%
price)
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Maximum Deferred
Sales Charge (Load)
(as % of the lower of 1%3
the original offering None1 5%2 None
price or redemption
proceeds)
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1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class A Class B Class C Class M
Shares Shares Shares Shares
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Management Fees 0.__% 0.__% 0.___% 0.__%
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Distribution and/or 0.__% 1.00% 0.75%
Service (12b-1) Fees 1.00%
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Other Expenses 0.__% 0.__% 0.___% 0.__%
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Total Annual Operating ___% ___% ____% ___%
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
Examples. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $664 $854 $1,060 $1,652
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Class B Shares $672 $833 $1,118 $1,610
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Class C Shares $271 $530 $913 $1,987
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Class M Shares $466 $766 $1,091 $2,025
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If shares are not
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $664 $854 $1,060 $1,652
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Class B Shares $172 $533 $918 $1,610
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Class C Shares $171 $530 $913 $1,907
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Class M Shares $466 $766 $1,091 $2,025
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses,
since Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
The Fund's Principal Investment Policies. The allocation of the Fund's portfolio
among the different types of permitted investments will vary over time based
upon the evaluation of economic and market trends by the Manager. The Fund's
portfolio might not always include all of the different types of investments
described below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
In selecting securities for the Fund's portfolio and evaluating their
yield potential and credit risk, the Manager does not rely solely on ratings by
rating organizations but evaluates business and economic factors affecting an
issuer as well. The debt securities the Fund buys may be rated by nationally
recognized rating organization such as Moody's Investors Service or Standard &
Poor's, or they may be unrated securities assigned an equivalent rating by the
Manager. Credit ratings evaluate the expectation of scheduled payments of
interest and principal, not market risks. Rating agencies might not always
change their credit ratings of an issuer in a timely manner to reflect the
events that could affect an issuer's ability to make timely payments on its
obligations.
The Fund can invest in debt securities above or below investment grade in
credit quality and at times will invest substantial amounts of its assets in
securities below investment grade to seek higher income as part of its goal.
"Investment-grade" rated securities are those in the four highest rating
categories of national ratings organizations. Those ratings definitions are
included in Appendix A to the Statement of Additional Information.
Convertible Securities. A convertible security is one that can be converted into
or exchanged for a set amount of common stock of an issuer within a particular
period of time at a specified price or according to a price formula. Convertible
debt securities pay interest and convertible preferred stock pays dividends
until they mature or are converted, exchanged or redeemed. Because of the
conversion feature, the price of a convertible security will normally vary in
some proportion to changes in the price of the underlying common stock. In
general, convertible securities: o have higher yields than common stocks but
lower yields than comparable
non-convertible securities,
o may be subject to less fluctuation in value than the underlying stock
because of their income, and
o provide potential for capital appreciation if the market price of the
underlying common stock increases (and in those cases may be thought of as
"equity substitutes").
The Fund does not invest only in securities of issuers of a particular
market capitalization range, and at times the Manager might increase the
relative emphasis of securities of issuers in a particular capitalization range
if the Manager believes they offer greater opportunities for total return.
Securities of smaller, newer companies may offer greater potential for
higher returns, but they are also subject to greater risks of default than
larger, more established issuers. They may have unseasoned management, they may
lack established markets for their products or services and may be dependent on
only a few customers or suppliers for a greater amount of their business. Also,
they may not have the financial strength to sustain them through business
downturns or adverse market conditions. These securities may have less of a
trading market than securities of larger issuers, and it might be harder for the
Fund to dispose of its holdings at an acceptable price when it wants to sell
them. As a result, the Fund's investments in securities of these issuers have
greater risks. The Fund might not achieve its expected returns from them and its
share price may fluctuate more to the extent that it holds these investments.
n Lower-Grade Securities. Lower-grade convertible securities may offer
greater opportunities for higher returns than higher-grade securities.
Lower-grade securities are those rated below "Baa" by Moody's Investors Service,
Inc. or lower than "BBB" by Standard & Poor's Rating Service or similar ratings
by other nationally-recognized rating organizations. The Fund does not invest in
securities rated below "C" or which are in default. While securities rated "Baa"
by Moody's or "BBB" by S&P are considered "investment grade," they have some
speculative characteristics.
While investment-grade securities are subject to risks of non-payment of
interest and principal, in general, higher-yielding lower-grade bonds, whether
rated or unrated, have greater risks than investment-grade securities. They may
be subject to greater market fluctuations and risk of loss of income and
principal than investment-grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest and principal due on the bonds. These risks mean
that the Fund might not achieve the expected income from lower-grade securities,
and that the Fund's net asset value per share could be affected by declines in
value of these securities.
The Fund also invests in investment-grade debt securities. It is not
required to dispose of debt securities whose ratings or fall after the Fund buys
them. However, the portfolio managers will monitor those holdings of issuers who
credit quality falls to determine whether the Fund should sell them.
n Derivative Investments. The Fund can invest in a number of different
kinds of "derivative" investments. In addition to using hedging instruments such
as options, the Fund can use other derivative investments, such as structured
notes and "mandatory-conversion" securities, including "equity-linked" debt
securities, because they offer the potential for increased income and principal
value.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of derivatives. As a result of
these risks the Fund could realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may be illiquid.
o Convertible Preferred Stock. Unlike common stock, preferred stock
typically has a stated dividend rate. Preferred stock dividends may be
cumulative (they remain a liability of the company until they are paid and must
be paid before the company can pay dividends on its common stock) or
non-cumulative. When interest rates rise, the value of preferred stock having a
fixed dividend rate tends to fall. The right to payment of dividends on
preferred stock is generally subordinate to the rights of a corporation's debt
securities. Some convertible preferred stock with a mandatory conversion feature
has a set call price to buy the underlying common stock. If the underlying
common stock price is less than the call price, the holder will pay more for the
common stock than its market price; the issuer might also be able to redeem the
stock prior to the mandatory conversion date, which could diminish the potential
for capital appreciation on the investment.
o "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments whose payments of principal or
interest payments are linked to the value of an index (such as a currency or
securities index) or commodity. The terms of the instrument may be "structured"
by the purchaser (the Fund) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or
more other securities or indices, and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index. They are subject to both credit and interest rate risks and therefore
the Fund could receive more or less than it originally invested when the notes
mature, or it might receive less interest than the stated coupon payment if the
underlying investment or index does not perform as anticipated. Their values may
be very volatile and they may have a limited trading market, making it difficult
for the Fund to sell its investment at an acceptable price.
o "Mandatory-Conversion" Securities. These securities may combine
features of both equity and debt securities and normally have a mandatory
conversion feature and an adjustable conversion ratio. One type of mandatory
conversion security is the convertible preferred stock discussed above. Another
is the "equity-linked" debt security, having a principal amount at maturity that
depends on the performance of a specified equity security, such as the issuer's
common stock. Their values can also be affected by interest rate changes and
credit risks of the issuer. They may be structures in a way that limits their
potential for capital appreciation and the entire value of the security may be
at risk of loss depending on the performance of the underlying equity security.
Since the market for these securities is still relatively new, they may be less
liquid than other convertible securities.
n Can the Fund's Investment Objective and Policies Change? The Fund's
Board of Trustees can change non-fundamental investment policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Fund's outstanding voting
shares. The Fund's objective is a not a fundamental policy, but will not be
changed by the Board without notice to shareholders. Other investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. An investment policy is not fundamental unless this
Prospectus or the Statement of Additional Information says that it is.
n Portfolio Turnover. The Fund may engage in short-term trading to some
degree try to achieve its objective. It does not expect to have a portfolio
turnover rate in excess of 100% annually. Portfolio turnover affects brokerage
costs the Fund pays. If the Fund realizes capital gains when it sells its
portfolio investments, it must generally pay those gains out to shareholders,
increasing their taxable distributions. The Financial Highlights table at the
end of this Prospectus shows the Fund's portfolio turnover rates during the
Fund's five most recent fiscal years.
Other Investment Strategies. To seek its objectives, the Fund can also use the
investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are meant to help
reduce investment or market risks.
n Foreign Securities. The Fund can invest up to 15% of its net assets in
securities issued by foreign issuers. The Fund can buy securities of companies
in both developed markets and emerging markets. The Fund's foreign debt
investments can be denominated in U.S. dollars or in foreign currencies. The
Fund will buy foreign currency only in connection with the purchase and sale of
foreign securities and not for speculation.
o Risks of Foreign Investing. While foreign securities offer special
investment opportunities, there are also special risks that can reduce the
Fund's share prices and returns. The change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar value of
securities denominated in that foreign currency. Currency rate changes can also
affect the distributions the Fund makes from the income it receives from foreign
securities as foreign currency values change against the U.S. dollar. Foreign
investing can result in higher transaction and operating costs for the Fund.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to.
The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and economic factors.
There may be transaction costs and risks from the conversion of certain
European currencies to the euro that commenced in January 1999. For example,
brokers and the Fund's custodian bank must convert their computer systems and
records to reflect the euro values of securities. If they are not prepared,
there could be delays in settlements of securities trades and additional costs
to the Fund.
n Zero-Coupon Securities. Some of the debt securities the Fund buys are
zero-coupon bonds that pay no interest and are issued at a substantial discount
from their face value. Zero-coupon securities are subject to greater
fluctuations in price from interest rate changes than interest-bearing
securities. The Fund may have to pay out the imputed income on zero coupon
securities without receiving the actual cash currently.
n Illiquid and Restricted Securities. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 15% of its net assets in illiquid or restricted securities.
Certain restricted securities that are eligible for resale to qualified
institutional purchasers may not be subject to that limit. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.
n Hedging. The Fund can buy and sell certain kinds of put and call
options. These are all referred to as "hedging instruments." The Fund is not
required to use hedging instruments to seek its objective. The Fund does not use
hedging instruments for speculative purposes, and has limits on its use of them.
The Fund could write covered call options on stocks, purchase put options
on stocks and enter into closing transactions on these options for a number of
purposes. It might do so to try to manage its exposure to the possibility that
the prices of its portfolio securities may fall, or to try to increase its
income.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is exercised on
an investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if the
investment has increased in value above the call price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could not
close out a position because of an illiquid market.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 might also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Fund Is Managed
The Manager. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the
Fund's investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement that states the Manager's responsibilities. The
Agreement sets the fees the Fund pays to the Manager and describes the expenses
that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $95 billion as of March 31, 1999,
and with more than 4 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
n Portfolio Manager. The portfolio manager of the Fund is Michael S.
Rosen. He is a Vice President of the Fund and of the Manager and is the person
principally responsible for the day-to-day management of the Fund's portfolio.
He joined the Manager as a Vice President and portfolio manager in January 1996.
Prior to that he was an officer, portfolio manager and shareholder of the Fund's
prior investment adviser, Fielding Management Company, Inc. and has managed the
Fund's portfolio since its inception in 1986.
n Advisory Fees. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional assets
as the Fund grows: 0.625% of the first $50 million of average annual net assets
of the Fund, 0.50% of the next $250 million, and 0.4375% of average annual net
assets in excess of $300 million. The Fund's management fee for its last fiscal
year ended December 31, 1998 was ___% of average annual net assets for each
class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
How Are Shares Purchased? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, or directly through the Distributor, or automatically through an
Asset Builder Plan under the OppenheimerFunds AccountLink service. The
Distributor may appoint certain servicing agents to accept purchase (and
redemption) orders. The Distributor, in its sole discretion, may reject any
purchase order for the Fund's shares.
|X| Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
|X| Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
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
with a financial advisor before you make a purchase to be sure that the Fund is
appropriate for you.
|X| Buying Shares by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.
|X| Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the Automated Clearing House (ACH)
transfer to buy the shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink,"
below for more details.
|X| Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.
How Much Must 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, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments for as
little as $25. Subsequent purchases of at least $25 can be made by telephone
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans
and 401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be as little as $25.
|_| The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them appears in
the Statement of Additional Information, or you can ask your dealer or call the
Transfer Agent), or reinvesting distributions from unit investment trusts that
have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price (the net
asset value per share plus any initial sales charge that applies). The offering
price that applies to a purchase order is based on the next calculation of the
net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
|_| The net asset value of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. (All references to time in this Prospectus mean "New York time").
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that class
that are outstanding. To determine net asset value, the Fund's Board of Trustees
has established procedures to value the Fund's securities, in general based on
market value. The Board has adopted special procedures for valuing illiquid
restricted securities and obligations for which market values cannot be readily
obtained. Because some foreign securities trade in markets and exchanges that
operate on U.S. holidays and weekends, the value of some of the Fund's foreign
investment may change on days when investors cannot buy or redeem Fund shares.
|_| To receive the offering price for a particular day, in most cases the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes that day. If your order is received on a day
when the Exchange is closed or after it has closed, the order will receive the
next offering price that is determined after your order is received.
|_| If you buy shares through a dealer, your dealer must receive the order
by the close of The New York Stock Exchange and transmit it to the Distributor
so that it is received before the Distributor's close of business on a regular
business day (normally 5:00 P.M.) to receive that day's offering price.
Otherwise, the order will receive the next offering price that is determined.
- ------------------------------------------------------------------------------
What Classes of Shares Does the Fund Offer? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject
to different expenses and will likely have different share prices. When you
buy shares, be sure to specify the class of shares. If you do not choose a
class, your investment will be made in Class A shares.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
|X| Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million for regular accounts or $500,000 for
certain retirement plans). The amount of that sales charge will vary depending
on the amount you invest. The sales charge rates are listed in "How Can I Buy
Class A Shares?" below.
|X| Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but you will pay an annual asset-based sales charge,
and if you sell your shares within six years of buying them, you will
normally pay a contingent deferred sales charge. That contingent deferred
sales charge varies depending on how long you own your shares, as described in
"How Can I Buy Class B Shares?" below.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
|X| Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but you will pay an annual asset-based sales charge, and
if you sell your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1%, as described in "How Can I Buy Class C
Shares?" below.
|X| Class M Shares. If you buy Class M shares, you pay an initial sales
charge. The amount of that sales charge depends on the amount you invest.
Additionally, there is an annual asset-based sales charge.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
|X| 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 or Class M shares may, over time, offset the
effect of paying an initial sales charge on your investment, compared to the
effect over time of higher class-based expenses on shares of Class B or Class C
.
|_| Investing for the Short Term. If you have a relatively
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, Class M
or Class C shares rather than Class B shares. That is because of the effect of
the Class B contingent deferred sales charge if you redeem within six 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 as your investment horizon increases toward six years, Class C or Class M
shares might not be as advantageous as Class A shares. That is because the
annual asset-based sales charge on Class C and Class M 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.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C or Class M shares from a single investor.
|_| Investing for the Longer Term. If you are investing less than
$100,000 for the longer-term, for example for retirement, and do not expect to
need access to your money for seven years or more, Class B shares may be
appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
|X| Are There Differences in Account Features That Matter to You? Some
account features may not be available to Class B, Class C or Class M
shareholders. Other features (such as Automatic Withdrawal Plans) may not be
advisable (because of the effect of the contingent deferred sales charge) for
Class B or Class C shareholders. Therefore, you should carefully review how you
plan to use your investment account before deciding which class of shares to
buy.
Additionally, the dividends payable to Class B, Class C and Class M
shareholders will be reduced by the additional expenses borne by those classes
that are not borne by Class A shares, such as the asset-based sales charges
described below and in the Statement of Additional Information. Share
certificates are not available for Class B and Class C shares, and if you are
considering using your shares as collateral for a loan, that may be a factor to
consider.
|X| How Does It Affect Payments to My Broker? A salesperson, such as a
broker, may receive different compensation for selling one class of shares than
for selling another class. It is important to remember that asset-based sales
charges for Class B, Class C and Class M and the Class B and Class C contingent
deferred sales charges have the same purpose as the front-end sales charge on
sales of Class A shares: to compensate the Distributor for commissions and
expenses it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional compensation from its own resources to securities
dealers or financial institutions based upon the value of shares of the Fund
owned by the dealer or financial institution for its own account or for its
customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions.
How Can I Buy Class A Shares? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
---------------------------------------------------------------------------
Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Net Offering Price
Amount Invested
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
---------------------------------------------------------------------------
|X| Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more other than by those retirement
accounts. For those retirement plan accounts, the commission is 1.0% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of purchases
over $5 million, calculated on a calendar year basis. In either case, the
commission will be paid only on purchases that were not previously subject to a
front-end sales charge and dealer commission.1
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
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") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares at the time of redemption
(excluding shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original net asset value of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable when
shares are redeemed, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of dividends and
capital gains. Then the Fund will redeem other shares in the order in which you
purchased them. The Class A contingent deferred sales charge is waived in
certain cases described in Appendix C to the Statement of Additional
Information.
The Class A contingent deferred sales charge is not charged on exchanges
of shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 calendar months of the end of
the calendar month in which the exchanged shares were originally purchased, then
the sales charge will apply.
How Can I Reduce Sales Charges for Class A Share Purchases? You may be eligible
to buy Class A shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information:
|X| Waivers of Class A Sales Charges. The Class A initial and contingent
deferred sales charges are not imposed in the circumstances described in
"Reduced Sales Charges" in the Statement of Additional Information. In order to
receive a waiver of the Class A contingent deferred sales charge, you must
notify the Transfer Agent when purchasing shares whether any of the special
conditions apply.
How Can I Buy Class B Shares? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. The contingent deferred sales charge is not imposed on:
|_| the amount of your account value represented by an increase in net
asset value over the initial purchase price, |_| shares purchased by the
reinvestment of dividends or capital gains distributions, or |_| shares
redeemed in the special circumstances described in Appendix C to the
Statement of Additional Information.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for over 6 years, and
3. shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
- --------------------------------------------------------------------------------
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
0 - 1 5.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 - 2 4.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 - 3 3.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3 - 4 3.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 - 5 2.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5 - 6 1.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6 and following None
- --------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
|X| Automatic Conversion of Class B Shares. Class B shares automatically
convert to Class A shares 72 months after you purchase them. This conversion
feature relieves Class B shareholders of the asset-based sales charge that
applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no 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 the Statement of Additional Information.
How Can I Buy 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. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. 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,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
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.
How Can I Buy Class M Shares? Class M shares are sold at their offering price,
which is normally net asset value plus an initial sales charge.2 In other cases,
reduced sales charges may be available under the Fund's "Right of Accumulation"
or Letter of Intent, as described under Class A procedures above. Out of the
amount you invest, the Fund receives the net asset value to invest for your
account.
2 Accounts holding Class M shares established prior to March 11, 1996, can
purchase additional Class M shares without sales charge, at the offering price
equal to the net asset value per share.
The sales charge varies depending on the amount you purchase. A portion of
the sales charge may be retained by the Distributor or allocated to your dealer
as commission. The Distributor reserves the right to reallow the entire
commission to dealers. The Distributor does not accept purchases of Class M
shares in amounts of $1 million or more. The current sales charge rates and
commissions paid to dealers are as follows:
- --------------------------------------------------------------------------------
Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than $250,000 3.25% 3.36% 3.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$250,000 or more
but less than 2.25% 2.30% 2.00%
$500,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$500,000 or more
but less than $1 1.25% 1.27% 1.00%
million
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Plans.
|X| Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
|X| Distribution and Service Plans for Class B, Class C and Class M
Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C
and Class M shares to pay the Distributor for its services and costs in
distributing shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class B
shares and on Class C shares and an asset-based sales charge of 0.50% on Class M
shares. The Distributor also receives a service fee of 0.25% per year under each
plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% and Class M expenses by 0.75% of the net assets per year of
the respective class. Because these fees are paid out of the Fund's assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class M shares. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after the shares were sold by the dealer. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commission of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge. The Distributor also retains the Class M asset-based sales charge,
but may use all or part of it to pay additional compensation to dealers that
sell Class M shares.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
|_| transmit funds electronically to purchase shares by telephone (through
a service representative or by PhoneLink) or automatically under Asset
Builder Plans, or |_| have the Transfer Agent send redemption proceeds or
transmit dividends and distributions directly to your bank account. Please
call
the Transfer Agent for more information.
You may purchase shares by telephone only after 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, 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.
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.
|X| 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.
|X| 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.
|X| 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.
Can I Submit Transaction Requests by Fax? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.
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. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
Reinvestment Privilege. If you redeem some or all of your Class A, Class M or
Class B shares of the Fund, you have up to 6 months to reinvest all or part of
the redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A or Class M
shares that you purchased subject to an initial sales charge and to Class A or
Class B shares on which you paid a contingent deferred sales charge when you
redeemed them. This privilege does not apply to Class C shares. You must be sure
to ask the Distributor for this privilege when you send your payment.
Retirement Plans. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
|X| Individual Retirement Accounts (IRAs), including regular IRAs, Roth
IRAs, SIMPLE IRAs, rollover and Education IRAs.
|X| SEP-IRAs, which are Simplified Employee Pensions Plan IRAs for small
business owners or self-employed individuals.
|X| 403(b)(7) Custodial Plans, that are tax deferred plans for employees
of eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
|X| 401(k) Plans, which are special retirement plans for businesses.
|X| Pension and Profit-Sharing Plans, designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter or by telephone. You can also set up
Automatic Withdrawal Plans to redeem shares on a regular basis. 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 account, please call the Transfer Agent first, at
1-800-525-7048, for assistance.
|X| Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that also
require a signature guarantee):
|_| You wish to redeem $50,000 or more and receive a check
|_| The redemption check is not payable to all shareholders listed on the
account statement
|_| The redemption check is not sent to the address of record on your
account statement
|_| Shares are being transferred to a Fund account with a different
owner or name
|_| Shares are being redeemed by someone (such as an Executor) other
than the owners
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association,
or by a foreign bank that has a U.S. correspondent bank, or by a U.S.
registered dealer or broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, a registered
securities association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business or as a fiduciary, you must also
include your title in the signature.
|X| Retirement Plan Accounts. There are special procedures to sell shares
in an OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements apply to
distributions from retirement plans. You must submit a withholding form with
your redemption request to avoid delay in getting your money and if you do not
want tax withheld. If your employer holds your retirement plan account for you
in the name of the plan, you must ask the plan trustee or administrator to
request the sale of the Fund shares in your plan account.
|X| Sending Redemption Proceeds by Wire. While the Fund normally sends
your money by check, you can arrange to have the proceeds of the shares you sell
sent by Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The minimum
redemption you can have sent by wire is $2,500. There is a $10 fee for each
wire. To find out how to set up this feature on your account or to arrange a
wire, call the Transfer Agent at 1-800-852-8457.
How Do I Sell Shares by Mail? Write a letter of instructions that includes:
|_| Your name |_| The Fund's name |_| Your Fund account number (from your
account statement) |_| The dollar amount or number of shares to be
redeemed |_| Any special payment instructions |_| Any share certificates
for the shares you are selling |_| The signatures of all registered owners
exactly as the account is
registered, and
|_| Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
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Use the following address for requests by mail:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OppenheimerFunds Services
- ------------------------------------------------------------------------------
P.O. Box 5270
Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------
Send courier or express mail requests to:
- ------------------------------------------------------------------------------
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
How Do I Sell 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 the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan account or under a share certificate by
telephone.
|_| To redeem shares through a service representative, call
1-800-852-8457
|_| To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
|X| Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
|X| Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer 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 transferred.
Can I Sell Shares Through My Dealer? The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. 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 of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A or Class M shares of this Fund only for Class A shares of another fund,
and you cannot exchange shares of other Oppenheimer funds for Class M shares of
this Fund (except for shares of money market funds acquired by exchange from
Class M shares of this Fund). In some cases, sales charges may be imposed on
exchange transactions. For tax purposes, exchanges of shares involve a sale of
the shares of the fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
How Do I Submit Exchange Requests? Exchanges may be requested in writing or
by telephone:
n Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates cannot be
processed unless the Transfer Agent receives the certificates with the request.
|X| Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457, or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
Are There Limitations on Exchanges? 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 that conforms to the policies
described above. It must be received by the close of The New York Stock Exchange
that day, which is normally 4:00 P.M. but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are exchanging into
up to seven days if it determines it would be disadvantaged by a same-day
exchange. For example, the receipt of multiple exchange requests from a "market
timer" might require the Fund to sell securities at a disadvantageous time
and/or price.
|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.
|_| 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
More information about the Fund's policies and procedures for buying, and
selling and exchanging shares is contained in the Statement of Additional
Information.
|X| 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.
|X| 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 the
Transfer Agent receives cancellation instructions from an owner of the account.
|X| 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. The Transfer Agent and the Fund will
not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
|X| 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.
|X| Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
|X| The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less than
their original cost.
|X| Payment for redeemed shares ordinarily is made in cash. It is
forwarded by check or through AccountLink or Federal Funds wire (as elected by
the shareholder) within seven days after the Transfer Agent receives redemption
instructions in proper form. However, under unusual circumstances determined by
the Securities and Exchange Commission, payment may be delayed or suspended. For
accounts registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
|X| 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 10 days from the date
the shares were purchased. That delay may be avoided if you purchase shares by
Federal Funds wire or certified check, or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase payment
has cleared.
|X| 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. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share purchase
orders.
|X| Shares may be "redeemed in kind" under unusual circumstances (such as
a lack of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with liquid securities from the Fund's
portfolio.
|X| "Backup Withholding" of Federal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
|X| To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income on each regular business day and to pay those
dividends to shareholders quarterly in March, June, September and December on a
date selected by the Board of Trustees. Daily dividends will not be declared or
paid on newly-purchased shares until Federal Funds are available to the Fund
from the purchase payment for the shares. Dividends and distributions paid on
Class A shares will generally be higher than dividends for Class B, Class C or
Class M shares, which normally have higher expenses than Class A. The Fund
cannot guarantee that it will pay any dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
|X| 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.
|X| Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains distributions in the Fund while receiving dividends by
check or having them sent to your bank account through AccountLink.
|X| 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 through AccountLink.
|X| Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
|X| Avoid "Buying a Distribution". If you buy shares on or just before the
Fund declares a capital gain distribution, you will pay the full price for the
shares and then receive a portion of the price back as a taxable capital gain.
|X| Remember, There May be Taxes on Transactions. Because the Fund's share
price fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. 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.
Any capital gain is subject to capital gains tax.
|X| Returns of Capital Can Occur. 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. You should consult with your tax adviser about the effect
of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, the Fund's
independent accountants, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
For More Information About Oppenheimer Convertible Securities Fund: The
following additional information about the Fund is available without charge upon
request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
- ---------------------------------------------------------------------------
How to Get More Information:
- ---------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Fund documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-4576
PR0345.001.0499 Printed on recycled paper.
- ------------------------------------------------------------------------------
<PAGE>
Oppenheimer Convertible Securities Fund
- ------------------------------------------------------------------------------
350 Linden Oaks, Rochester, New York 14625
1-800-525-7048
Statement of Additional Information dated April 28, 1999
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated April 28, 1999. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above or by downloading
it from the OppenheimerFunds Internet web site at www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks........2
The Fund's Investment Policies..........................................2
Municipal Securities....................................................3
Other Investment Techniques and Strategies.............................14
Investment Restrictions................................................26
How the Fund is Managed.....................................................28
Organization and History...............................................28
Trustees and Officers of the Fund......................................29
The Manager ...........................................................34
Brokerage Policies of the Fund..............................................35
Distribution and Service Plans..............................................37
Performance of the Fund.....................................................40
About Your Account
How To Buy Shares...........................................................46
How To Sell Shares..........................................................53
How to Exchange Shares......................................................58
Dividends and Taxes.........................................................60
Additional Information About the Fund.......................................62
Financial Information About the Fund
Report of Independent Accountants...........................................64
Financial Statements .......................................................65
Appendix A: Ratings Definitions............................................A-1
Appendix B: Industry Classifications.......................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers C-1
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<PAGE>
A B O U T T H E F U N D
- ------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies of the Fund
are described in the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and the types of
securities that the Fund's investment Manager, OppenheimerFunds, Inc., can
select for the Fund. Additional explanations are also provided about the
strategies the Fund can use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Manager uses will vary over time. The Fund is
not required to use all of the investment techniques and strategies described
below in seeking its goal.
n Convertible Securities. Convertible securities are fixed income
securities that may be exchanged for or converted into the underlying common
stock of the issuer at the option of the holder during a specified period of
time. Convertible securities may take the form of convertible preferred stock,
convertible bonds or notes, or other fixed income securities with stock purchase
warrants. They may have a combination of the features of several of these
securities.
Because of the conversion feature, the price of a convertible security
normally will vary in proportion to changes in the price of the underlying
common stock. Convertible securities in general are subject to less price
volatility than the common stocks into which they are convertible because of
their comparatively higher yields. The investment characteristics of each
convertible security vary widely, and that variety enables the Fund to use
convertible securities in different ways to pursue its investment objective of
high total return. For example, the Fund can invest in: o convertible securities
that provide a relatively high level of income,
with less appreciation potential,
o convertible securities that have high appreciation potential and a
relatively low level of income, and
o convertible securities that provide some combination of both income and
appreciation potential.
Convertible bonds and convertible preferred stocks are fixed income
securities that retain the investment characteristics of fixed income securities
until they have been converted. The holder is entitled to receive the fixed
income of a bond or the dividend preference of a preferred stock until the
holder elects to exercise the conversion privilege. Convertible securities are
senior securities and therefore have a claim against the assets of the issuing
corporation that is superior to the claims of holders of the issuer's common
stock upon liquidation of the corporation. Convertible securities, however, are
generally subordinated to similar non-convertible securities of the same
company. The interest income and dividends from convertible bonds and preferred
stocks provide income potential and yields that are generally higher than common
stocks, but which are generally lower than non-convertible securities of similar
credit quality.
As with all fixed income securities, convertible securities are subject to
changes in value from changes in the level of prevailing interest rates.
However, the conversion feature of convertible securities, giving the owner the
right to exchange them for the issuer's common stock, in general causes the
market value of convertible securities to increase when the value of the
underlying common stock increases, and to fall when the stock price falls. Since
securities prices fluctuate, however, there can be no assurance that the market
value of convertible securities will increase. Convertible securities generally
do not have the same potential for capital appreciation as the underlying stock.
When the value of the underlying common stock is falling, the value of the
convertible security may not experience the same decline as the underlying
common stock. It tends to decline to a level (often called investment value)
approximating the yield-to-maturity basis of non-convertible debt of similar
credit quality.
Many convertible securities sell at a premium over their conversion
values. Conversion value is the number of shares of common stock to be received
upon conversion multiplied by the current market price of the stock. That
premium represents the price investors are willing to pay for the privilege of
purchasing a fixed income security having capital appreciation potential because
of the conversion privilege. If the Fund buys a convertible security at a
premium, there can be no assurance that the underlying common stock will
appreciate enough for the Fund to recover the premium on the convertible
security.
n Convertible Preferred Stock. While preferred stock is an equity
security, some convertible preferred stock has characteristics of both a debt
security and a call option. These securities can be considered derivative
securities because of their call option component, described below. Typically
these stocks are convertible to common stock after a three-year period (although
they are callable by the issuer prior to conversion). They pay a cumulative,
fixed dividend that is senior to, and expected to be in excess of, the dividends
paid on the common stock of the same issuer.
At its mandatory conversion date, the preferred stock is converted into a
share (or a fraction of a share) of the issuer's common stock at the call price
that was established at the time the preferred stock was issued. Generally, the
call price is 30% to 45% above the price of the issuer's common stock at the
time the preferred stock is issued and may be subject to downward adjustment
over time. If the share price of the related common stock on the mandatory
conversion date is less than the call price, the holder of the preferred stock
will nonetheless receive only one share of common stock for each share of
preferred stock (plus cash in the amount of any accrued but unpaid dividends).
At any time prior to the mandatory conversion date, the issuer can redeem
the preferred stock. The issuer must issue to the holder of the preferred stock
the number of shares of common stock equal to the call price of the preferred
stock in effect on the date of redemption divided by the market value of the
common stock. That market value typically is determined one or two trading days
prior to the date notice of redemption is given. The issuer must also pay the
holder of the preferred stock cash in an amount equal to any accrued but unpaid
dividends on the preferred stock.
This convertible preferred stock is subject to the same market risk as the
common stock of the issuer. However that such risk may be mitigated by the
higher dividend paid on the preferred stock. This convertible preferred stock
offers limited opportunity for appreciation, however, because of the call
feature. If the market value of the issuer's common stock increases to the call
price or above the call price of the preferred stock, the issuer can (and would
be expected to) call the preferred stock for redemption at the call price. This
convertible preferred stock is also subject to credit risk of the issuer as to
its ability to pay of the dividend. Generally, convertible preferred stock is
less volatile than the related common stock of the issuer, in part because of
the fixed dividend.
n Mandatory-Conversion Securities. The Fund can also invest in a more
recently-developed variety of convertible securities referred to as
"mandatory-conversion securities." These securities may combine several of the
features of debt securities and equity securities, including both preferred
stock and common stock. Unlike more traditional convertible securities, however,
many of these securities have a mandatory conversion feature and an adjustable
conversion ratio. As a result, many of these securities offer limited potential
for capital appreciation and, in some instances, are subject to unlimited
potential for loss of capital.
These securities are designed and marketed by major investment banking
firms and trade in the marketplace under various acronyms that are proprietary
to the investment banking firm. The Fund may be exposed to counter-party risk to
the extent it invests in synthetic mandatory conversion securities which are
issued by investment banking firms. Those are unsecured obligations of the
issuing firm. Should the firm that issued the security experience financial
difficulty, its ability to perform according to the terms of the security might
become impaired. The mandatory conversion securities which may be purchased by
the Fund include, among others, "equity-linked debt securities," discussed
below, and certain varieties of convertible preferred stock.
o Equity-Linked Debt Securities. The Fund can purchase mandatory
conversion debt securities whose principal amount at maturity depends upon the
performance of a specified equity security. These "equity-linked debt
securities" are a form of derivative security and differ from ordinary debt
securities in that the principal amount received at maturity is not fixed.
Instead, their principal value is based on the price of the linked equity
security at the time the debt security matures. These debt securities usually
mature in three to four years, and during the years to maturity pay interest at
a fixed rate.
Although these debt securities are typically adjusted for events such as
stock splits, stock dividends and certain other events that affect the market
value of the linked equity security, the debt securities are not adjusted if
additional equity securities are issued for cash. An additional issuance of
equity securities of the type to which the debt security is linked could
adversely affect the price of the debt security. In general, however, these debt
securities are less volatile than the equity securities to which they are
linked.
n Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.
While the changes in value of the Fund's portfolio securities after they
are purchased will be reflected in the net asset value of the Fund's shares,
those changes normally do not affect the interest income paid by those
securities (unless the security's interest is paid at a variable rate pegged to
particular interest rate changes). However, those price fluctuations will be
reflected in the valuations of the securities, and therefore the Fund's net
asset values will be affected by those fluctuations.
n Credit Risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds.
The Fund's debt investments can include high yield, non-investment-grade
bonds (commonly referred to as "junk bonds"). Investment-grade bonds are bonds
rated at least "Baa" by Moody's Investors Service, Inc., at least "BBB" by
Standard & Poor's Ratings Service or Duff & Phelps, Inc., or that have
comparable ratings by another nationally-recognized rating organization.
In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research to
evaluate a security's credit-worthiness. If securities the Fund buys are
unrated, they are assigned a rating by the Manager of comparable quality to
bonds having similar yield and risk characteristics within a rating category of
a rating organization.
The Fund does not have investment policies establishing specific maturity
ranges for the Fund's investments, and they may be within any maturity range
(short, medium or long) depending on the Manager's evaluation of investment
opportunities available within the debt securities markets. Generally, however,
it is expected that the Fund's average portfolio maturity will be of a longer
average maturity. The Fund may shift its investment focus to securities of
longer maturity as interest rates decline and to securities of shorter maturity
as interest rates rise.
o Special Risks of Lower-Grade Securities. The Fund can invest
without limit in lower-grade debt securities, and the Fund will normally invest
a significant amount of its assets in these securities to seek the Fund's
objective. Lower-grade securities tend to offer higher yields than investment
grade securities, but also are subject to greater risks of default by the issuer
in its obligations to pay interest and/or repay principal on the maturity of the
security.
"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
considered part of the Fund's portfolio of lower-grade securities. The Fund will
not invest in securities rated below "C" or which are in default at the time the
Fund buys them.
Some of the special credit risks of lower-grade securities are discussed
below. There is a greater risk that the issuer may default on its obligation to
pay interest or to repay principal than in the case of investment grade
securities. The issuer's low creditworthiness may increase the potential for its
insolvency. An overall decline in values in the high yield bond market is also
more likely during a period of a general economic downturn. An economic downturn
or an increase in interest rates could severely disrupt the market for high
yield bonds, adversely affecting the values of outstanding bonds as well as the
ability of issuers to pay interest or repay principal. In the case of foreign
high yield bonds, these risks are in addition to the special risk of foreign
investing discussed in the Prospectus and in this Statement of Additional
Information.
To the extent they can be converted into stock, convertible securities may
be less subject to some of these risks than non-convertible high yield bonds,
since stock may be more liquid and less affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics. Definitions of the debt security ratings categories of the
principal rating organizations are included in Appendix A to this Statement of
Additional Information.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use some of them.
n Foreign Securities. The Fund can invest up to 15% of its net assets in
foreign securities. These primarily will be fixed income debt securities issued
or guaranteed by foreign companies. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States. They may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary over time depending on a number of factors. Those factors
may include the relative yields of foreign and U.S. securities, the economies of
foreign countries, the condition of a country's financial markets, the interest
rate climate of particular foreign countries and the relationship of particular
foreign currencies to the U.S. dollar. The Manager analyzes fundamental economic
criteria (for example, relative inflation levels and trends, growth rate
forecasts, balance of payments status, and economic policies) as well as
technical and political data.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations, because they are not subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the U.S.
dollar will result in a change in the amount of income the Fund has available
for distribution. Because a portion of the Fund's investment income may be
received in foreign currencies, the Fund will be required to compute its income
in U.S. dollars for distribution to shareholders, and therefore the Fund will
absorb the cost of currency fluctuations. After the Fund has distributed income,
subsequent foreign currency losses may result in the Fund's having distributed
more income in a particular fiscal period than was available from investment
income, which could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer high income
potential, or in foreign countries with economic policies or business cycles
different from those of the U.S., or to reduce fluctuations in portfolio value
by taking advantage of foreign securities markets that do not move in a manner
parallel to U.S. markets. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.
o Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example,
currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or
adverse diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign
economies.
In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
o Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets, because the selection of those
securities must be consistent with the Fund's investment objective.
o Risks of Conversion to Euro. On January 1, 1999, eleven countries
in the European Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Fund operationally and also has
potential risks, some of which are listed below. Among other things, the
conversion will affect: o issuers in which the Fund invests, because of changes
in the
competitive environment from a consolidated currency market and
greater operational costs from converting to the new currency. This
might depress securities values.
o vendors the Fund depends on to carry out its business, such as its
Custodian (which holds the foreign securities the Fund buys), the
Manager (which must price the Fund's investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in
settlements and additional costs to the Fund.
o exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between
the affected currencies and the need to update the Fund's contracts
could pose extra costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio managers will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
n Warrants. As a fundamental policy, the Fund can invest not more than 15%
of the value of its net assets in warrants, and not more than 5% of the Fund's
net assets may be invested in warrants that are not listed on The New York Stock
Exchange or The American Stock Exchange. That policy does not limit the Fund's
acquisition of warrants that have been acquired in units or attached to other
securities. This fundamental policy is currently limited by an operational
policy under which the Fund will not invest more than 5% of the value of the its
net assets in warrants. Warrants acquired by the Fund in units or attached to
securities are deemed to be without value for purposes of the limitation imposed
by the operational policy.
A warrant basically is an option to purchase common stock at a specific
price valid for a specific period of time. Usually the price is usually at a
premium above the market value of the applicable common stock at its issuance.
Warrants may have a life ranging from less than a year to twenty years or may be
perpetual. However, many warrants have expiration dates after which they are
worthless unless the warrants are exercised or sold before they expire. In
addition, if the market price of the common stock does not exceed the exercise
price of the warrant during the life of the warrant, the warrant will expire
worthless. Warrants have no voting rights, pay no dividends and have no rights
with respect to the assets of the corporation issuing them. The market price of
a warrant may increase or decrease more than the market price of the optioned
common stock.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for temporary defensive purposes or for
liquidity purposes to meet anticipated redemptions of Fund shares, or pending
the investment of the proceeds from sales of Fund shares, or pending the
settlement of portfolio securities transactions.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to an approved vendor for delivery on an agreed upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks or broker-dealers that have been
designated a primary dealer in government securities, which meet the credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day. Delivery pursuant
to resale typically will occur within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price to
fully collateralize the repayment obligation. Additionally, the Manager will
monitor the vendor's creditworthiness to confirm that the vendor is financially
sound and will continuously monitor the collateral's value. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so.
|X| Illiquid and Restricted Securities. Under policies established by the
Fund's Board of Trustees, the Manager determines the liquidity of some of the
Fund's securities. The Manager monitors holdings of illiquid and restricted
securities on an ongoing basis to determine whether to sell any holdings to
maintain adequate liquidity.
To enable the Fund to sell its holdings of a restricted security not
registered under the Securities Act of 1933, the Fund may have to cause those
securities to be registered. The expenses of registering restricted securities
may be negotiated by the Fund with the issuer at the time the Fund buys the
securities. When the Fund must arrange registration because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the security and the time the security is registered so
that the Fund could sell it. The Fund would bear the risks of any downward price
fluctuation during that period.
The Fund can acquire restricted securities through private placements.
Those securities have contractual restrictions on their public resale. Those
restrictions might limit the Fund's ability to dispose of the securities and
might lower the amount the Fund could realize upon the sale.
The Fund has 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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
n Borrowing for Leverage. The Fund has a fundamental policy that permits
it to borrow from banks on an unsecured basis in amounts limited to a maximum of
5% of its total assets, to invest the borrowed funds in portfolio securities.
This technique is known as "leverage." The Fund may borrow only from banks.
Under applicable law, borrowings can be made only to the extent that the value
of the Fund's assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings (including the proposed borrowing). If the value of
the Fund's assets fails to meet this 300% asset coverage requirement, the Fund
is required to reduce its bank debt within 3 days to meet the requirement. To do
so, the Fund might have to sell a portion of its investments at a
disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. The interest on a loan might be more (or less) than the yield on
the securities purchased with the loan proceeds. Additionally, the Fund's net
asset value per share might fluctuate more than that of funds that do not
borrow.
n Loans of Portfolio Securities. To raise cash for liquidity or income
purposes, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 10% of the value of the Fund's net
assets under guidelines established by the Fund's Board of Trustees. The Fund
currently does not intend to engage in loans of securities.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
n Derivatives. The Fund can invest in a variety of derivative investments
to seek income or for hedging purposes. Some derivative investments the Fund can
use are the hedging instruments described below in this Statement of Additional
Information.
Among the derivative investments the Fund can invest in are "debt
exchangeable for common stock" of an issuer or "equity-linked debt securities"
of an issuer. At maturity, the debt security is exchanged for common stock of
the issuer or it is payable in an amount based on the price of the issuer's
common stock at the time of maturity. Both alternatives present a risk that the
amount payable at maturity will be less than the principal amount of the debt
because the price of the issuer's common stock might not be as high as the
Manager expected.
|X| Hedging. The Fund can use hedging to attempt to protect against
declines in the market value of its portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated, or
to facilitate selling securities for investment reasons. To do so the Fund
could:
o buy puts on such futures or securities, or
|_| write covered calls on securities. Covered calls can also be written
on debt securities to attempt to increase the Fund's income.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
particular options the Fund can use are described below. The Fund may employ
other hedging instruments and strategies in the future, if those investment
methods are consistent with the Fund's investment objective and fundamental
policies, are permissible under applicable regulations governing the Fund and
are approved by the Fund's Board of Trustees.
The Fund can buy and sell certain kinds of put options (puts) and call
options (calls). The Fund limits its options trading activity to writing covered
calls on stocks (including the stock underlying a convertible security the Fund
owns), purchasing put options on stocks, and entering into closing transactions.
These strategies are described below.
|_| Writing Covered Call Options. The Fund can write (that is,
sell) call options on stocks. The Fund's call writing is subject to a number
of restrictions:
(1) Calls the Fund sells must be listed on a national securities exchange.
(2) Each call the Fund writes must be "covered" while it is outstanding. That
means the Fund must own the stock on which the call was written or must own a
security convertible into the stock on which the option is written.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying investment to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has retained the risk
of loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised. In that case the Fund would
keep the cash premium and the investment.
The Fund's custodian bank, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the Fund's
entering into a closing purchase transaction.
The Fund may buy calls only to close out a call it has written, as
discussed above. Calls the Fund buys must be listed on a securities exchange. To
terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction." The Fund will then
realize a profit or loss, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call the Fund wrote was
more or less than the price of the call the Fund purchased to close out the
transaction. 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 tax purposes,
as are premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income.
|_| Purchasing Puts. The Fund may buy only those puts that relate to
stocks, including stocks underlying the convertible securities that the Fund
owns. The Fund may not sell puts other than puts it has previously purchased, to
close out a position.
When the Fund purchases a put, it pays a premium. The Fund then 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 a stock enables the Fund to protect itself during the put period against
a decline in the value of the underlying investment below the exercise price. If
the market price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will lose its premium
payment and the right to sell the underlying investment. A put may be sold prior
to expiration (whether or not at a profit).
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's returns.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The Fund could pay a brokerage commission each time it buys a call or put, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a call or put. Such commissions might be higher on a relative basis
than the commissions for direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of the underlying investments. Consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets. 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. 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.
An option position may be closed out only on a market that provides
secondary trading for options of the same series. There is no assurance that a
liquid secondary market will exist for a particular option. If the Fund could
not effect a closing purchase transaction due to a lack of a market, it would
have to hold the callable investment until the call lapsed or was exercised, and
could experience losses.
|_| Regulatory Aspects of Hedging Instruments. Transactions in
options by the Fund are subject to limitations established by the option
exchanges. The exchanges limit the maximum number of options that may be written
or held by a single investor or group of investors acting in concert. Those
limits apply regardless of whether the options were written or purchased on the
same or different exchanges, or are held in one or more accounts or through one
or more different exchanges or through one or more brokers. Thus, the number of
options that the Fund may write or hold may be affected by options written or
held by other entities, including other investment companies having the same
adviser as the Fund (or an adviser that is an affiliate of the Fund's adviser).
The exchanges also impose position limits on futures transactions. An exchange
may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or |_| more than 50% of the
outstanding shares.
The Fund's investment objective is not a fundamental policy, but will not
be changed without approval by the Fund's Board of Trustees and notice to
shareholders. Other policies described in the Prospectus or this Statement of
Additional Information are "fundamental" only if they are identified as such.
The Fund's Board of Trustees can change non-fundamental policies without
shareholder approval. However, significant changes to investment policies will
be described in supplements or updates to the Prospectus or this Statement of
Additional Information, as appropriate. The Fund's most significant investment
policies are described in the Prospectus.
[_] Does the Fund Have Additional Fundamental Policies? The
following investment restrictions are fundamental policies of the Fund:
o The Fund may not invest more than 25% of the value of the Fund's total
assets in the securities of any one issuer or any group of issuers in
the same industry. However, this restriction does not prevent the Fund
from investing more than 25% of its total assets in securities of the
United States government, or its agencies or instrumentalities.
o With respect to 50% of its total assets, the Fund must limit its
investments to cash, cash items, U.S. Government securities and
securities of issuers in which its investments are limited to not more
than 5% of the value of its total assets in the securities of any one
issuer and not more than 10% of its total assets in the outstanding
voting securities of any one issuer.
o The Fund may not purchase securities on margin. However, the Fund can
obtain unsecured loans to purchase securities. The aggregate of all
unsecured loans, however, may not exceed 50% of the Fund's total
assets. It can also borrow amounts equivalent to up to 5% of the Fund's
net assets for temporary, extraordinary or emergency purposes.
o The Fund may not make short sales on securities or maintain a short
position. An exception the Fund can do so if at all times when a
short position is open, the Fund owns an equal amount of the
securities sold short or the Fund owns securities that are
convertible into or exchangeable for securities of the same issue
as, and equal in amount to, the securities sold short, without
payment of further consideration. Not more than 10% of the Fund's
total assets may be held as collateral for these short sales at any
one time.
o The Fund may not purchase or sell put and call options nor write put or
call options, except as set forth in the Prospectus or this Statement
of Additional Information.
o The Fund may not invest in warrants in amounts in excess of 15% of the
value of its net assets. The valuation of warrants for the purpose
of that limitation shall be determined at the lower of cost or
market value. Warrants acquired by the Fund as part of a unit or
attached to securities at the time of purchase do not count against
that percentage limitation. Not more than 5% of the Fund's net
assets may be invested in warrants that are not listed on The New
York Stock Exchange or The American Stock Exchange.
o The Fund may not make loans. However, this policy does not prohibit the
Fund from (1) making loans of its portfolio securities, (2) purchasing
notes, bonds or other evidences of indebtedness, (3) making deposits
with banks and other financial institutions, or (4) entering into
repurchase agreements.
o The Fund may not purchase or sell real estate or real estate mortgage
loans. However, the Fund may invest not more than 5% of its total
assets in marketable securities of real estate investment trusts.
o The Fund may not deal in commodities or commodities contracts.
o The Fund may not purchase or retain securities of any issuer if any of
its officers and trustees, or any of the officers and directors of the
Manager or the Distributor own individually beneficially more than 0.5%
of the outstanding securities of that issuer, or if all of those
persons together own more than 5% of that issuer's securities.
o The Fund may not invest more than 5% of the value of its total assets
in securities of any company (including its predecessors) that has not
been in business for at least three consecutive years.
o The Fund may not issue any securities that are senior to shares of the
Fund.
o The Fund may not underwrite securities of other issuers.
o The Fund may not acquire securities of any other investment company, if
as a result of that acquisition, the Fund would own in the aggregate:
(1) more than 3% of the voting stock of that investment company; (2)
securities of that investment company having an aggregate value in
excess of 5% of the value of the total assets of the Fund; or (3)
securities of that investment company and of any other investment
companies (but excluding treasury stock of those funds) having an
aggregate value in excess of 10% of the total assets of the Fund.
However, none of these limitations applies to a security received as a
dividend or as a result of an offer of exchange, a merger or plan of
reorganization.
Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund has a
number of other investment restrictions that are not fundamental policies, which
means that they can be changed by the Board of Trustees without shareholder
approval. While these operating investment policies do not require shareholder
approval to be changed, as a matter of operating policy, the Fund has agreed not
to change these policies without prior notice to its shareholders. These
operating policies provide that the Fund may not do any of the following:
o The Fund may not invest in any issuer for the purpose of exercising
control or management of that issuer, unless approved by the Fund's
Board of Trustees.
o The Fund may not invest any part of its total assets in interests in
oil, gas, or other mineral exploration or development programs,
although it may invest in securities of companies which invest in or
sponsor such programs. The Fund may not invest in oil, gas or other
mineral leases.
o The Fund may not invest more than 5% of the value of its in warrants,
valued at the lower of cost or market value. The Fun can buy warrants
that are not listed on The New York Stock Exchange or The American
Stock Exchange, but they count toward the 5% limit on warrants
described above and may not exceed 2% of the value of the Fund's net
assets. Warrants acquired by the Fund in units or attached to
securities are not covered by this restriction.
o With respect to 75% of its total assets, the Fund cannot buy securities
issued or guaranteed by any one issuer if more than 5% of the Fund's
total assets would be invested in securities of that issuer or if the
Fund would then own more than 10% of that issuer's voting securities.
That restriction does not apply to cash or cash items or securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
Unless the Prospectus or Statement of Additional Information states that a
percentage restriction applies on an ongoing basis, it applies only at the time
the Fund makes an investment. In that case the Fund need not sell securities to
meet the percentage limits if the value of the investment increases in
proportion to the size of the Fund.
In carrying out its policy with respect to concentration of investments,
the Fund applies that policy to prohibit the Fund from making an investment in
the securities of any one issuer or group of issuers in the same industry if
that investment would cause 25% or more of the value of the Fund's total assets
to be invested in that industry.
In carrying out its policy prohibiting the issuance of senior securities,
the Fund interprets that policy not to prohibit certain investment activities
for which assets of the Fund are designated as segregated to cover the related
obligations. Examples of those activities include borrowing money, repurchase
agreements, and contracts to buy or sell derivatives.
How the Fund Is Managed
Organization and History. The Fund is a series of Bond Fund Series, a
Massachusetts business trust organized in 1986 as an open-end, diversified
management investment company with an unlimited number of authorized shares of
beneficial interest (that trust is referred to in this section as the "Fund's
parent Trust" or the "Trust"). The Trust was originally named Rochester
Convertible Fund and was renamed Rochester Fund Series, which was its name until
it was renamed Bond Fund Series in 1997. The Fund is currently the only series
of the Trust and is a diversified fund. It was called The Bond Fund for Growth
until 1997. In 1997 it was re-named Oppenheimer Bond Fund for Growth. The Fund's
name was changed to Oppenheimer Convertible Securities Fund in 1998.
The Fund and its parent Trust are 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
(and the Trust's) activities, review its performance, and review the actions of
the Manager.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares, Class A, Class B, Class C and Class M. All classes invest in the same
investment portfolio. Shares are freely transferable. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each class of shares: o has its own
dividends and distributions, o pays certain expenses which may be different for
the different classes, o may have a different net asset value, o may have
separate voting rights on matters in which the interests of
one class are different from the interests of another class, and o
votes as a class on matters that affect that class alone.
|X| Meetings of Shareholders. As a Massachusetts business trust, the Trust
is not required to hold, and does not plan to hold, regular annual meetings of
shareholders of the Fund. The Trust will hold meetings when required to do so by
the Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote
of two-thirds of the outstanding shares of the Trust, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of its outstanding shares.
If the Trustees receive a request from at least 10 shareholders stating that
they wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Trust's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's or the Trust's obligations. It also provides for indemnification and
reimbursement of expenses out of the Trust's property for any shareholder held
personally liable for its obligations. The Declaration of Trust also states that
upon request, the Trust shall assume the defense of any claim made against a
shareholder for any act or obligation of the Trust and shall satisfy any
judgment on that claim. Massachusetts law permits a shareholder of a business
trust (such as the Trust) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund shareholder will incur
financial loss from being held liable as a "partner" of the Fund's parent Trust
is limited to the relatively remote circumstances in which the Trust would be
unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under the Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. The contracts further
state that the Trustees shall have no personal liability to any such person, to
the extent permitted by law.
Trustees and Officers. The Trustees and officers and their principal occupations
and business affiliations during the past five years are listed below. Trustees
denoted with an asterisk (*) below are deemed to be "interested persons" of the
Fund under the Investment Company Act. Mr. Cannon is a Trustee of the Trust,
Rochester Portfolio Series and Rochester Fund Municipals. All of the other
Trustees are also trustees or directors of the following Oppenheimer funds:
<PAGE>
Oppenheimer Quest For Value Funds, a Rochester Portfolio Series, a series fund
series fund having the following having one series: series: Limited-Term New
York Municipal Fund Oppenheimer Quest Small Cap Value Bond Fund Series, a series
fund having one Fund, series: Oppenheimer Quest Balanced Value Oppenheimer
Convertible Securities Fund Fund and Oppenheimer Quest Opportunity Value
Rochester Fund Municipals Fund Oppenheimer Quest Global Value Fund, Oppenheimer
MidCap Fund Inc. Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest
Value Fund, Inc.
Ms. Macaskill and Messrs. Bishop, Bowen, Donohue, Farrar and Zack, who are
officers of the Fund, respectively hold the same offices of the other
Oppenheimer funds listed above. As of April 1, 1999, the Trustees and the
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. The foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms.
Macaskill and Mr. Donohue are trustees of that plan.
Bridget A. Macaskill*, Chairman of the Board of Trustees and President; Age: 50
Two World Trade Center, New York, New York 10048-0203 President (since June
1991), Chief Executive Officer (since September 1995) and a Director (since
December 1994) of the Manager; President and director (since June 1991) of
HarbourView Asset Management Corp., an investment advisor subsidiary of the
Manager; Chairman and a director of Shareholder Services, Inc. (since August
1994) and Shareholder Financial Services, Inc. (since September 1995), transfer
agent subsidiaries of the Manager; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; President (since September 1995) and a director (since
November 1989) of Oppenheimer Partnership Holdings, Inc., a holding company
subsidiary of the Manager; a director of Oppenheimer Real Asset Management, Inc.
(since July 1996); President and a director (since October 1997) of
OppenheimerFunds International Ltd., an offshore fund management subsidiary of
the Manager and of Oppenheimer Millennium Funds plc; President and a director of
other Oppenheimer funds; a director of Hillsdown Holdings plc (a U.K. food
company).
John Cannon, Trustee; Age: 69
620 Sentry Parkway West, Suite 220, Blue Bell, Pennsylvania 19422 Independent
Consultant; Chief Investment Officer of CDC Associates, a registered investment
advisor; a Director of Neuberger & Berman Income Managers Trust, Neuberger &
Berman Income Funds and Neuberger & Berman Trust (since 1995); formerly Chairman
and Treasurer of CDC Associates (1993 - February 1996), and President
(1976-1991) and Senior Vice President (1991-1993) of AMA Investment Advisers,
Inc., a mutual fund investment adviser.
Paul Y. Clinton, Trustee; Age: 68
39 Blossom Avenue, Osterville, Massachusetts 02655
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; Trustee or Director of Capital Cash Management Trust,
Narrangansett Tax-Free Fund, OCC Accumulation Trust, OCC Cash Reserves,
investment companies; formerly Director, External Affairs, Kravco Corporation, a
national real estate owner and property management corporation.
Thomas W. Courtney, Trustee; Age 65
833 Wyndemere Way, Naples, Florida 34105
Principal of Courtney Associates, Inc., a venture capital firm; Director or
Trustee of OCC Cash Reserves, Inc., OCC Accumulation Trust, Cash Assets Trust,
Hawaiian Tax-Free Trust and Tax Free Trust of Arizona, investment companies;
Director of several privately owned corporations; former General Partner of
Trivest Venture Fund, a private venture capital fund; former President of
Investment Counseling Federated Investors, Inc., an investment advisory firm;
former Director of Financial Analysts Federation.
Robert G. Galli, Trustee; Age: 65
19750 Beach Road, Jupiter, Florida 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 to
December 1997); Vice President (June 1990 to March 1994) and General Counsel of
Oppenheimer Acquisition Corp.; Executive Vice President (December 1977 to
October 1995), General Counsel and a director (December 1975 to October 1993) of
the Manager; Executive Vice President and a director (July 1978 to October 1993)
and General Counsel of the Distributor, OppenheimerFunds Distributor, Inc.;
Executive Vice President and a director (April 1986 to October 1995) of
HarbourView Asset Management Corp.; Vice President and a director (October 1988
to October 1993) of Centennial Asset Management Corporation, an investment
advisor subsidiary of the Manager; and an officer of other Oppenheimer funds.
Lacy B. Herrmann, Trustee; Age: 69
380 Madison Avenue, Suite 2300, New York, New York 10017
Chairman and Chief Executive Officer of Aquila Management Corporation, the
sponsoring organization and manager, administrator and/or Sub-Advisor to the
following open-end investment companies, and Chairman of the Board of Trustees
and President of each: Churchill Cash Reserves Trust, Aquila Cascadia Equity
Fund, Pacific Capital Cash Assets Trust, Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director, Secretary, and formerly Treasurer of
Aquila Distributors, Inc., distributor of the above funds; President and
Chairman of the Board of Trustees of Capital Cash Management Trust, and a former
officer and Trustee/Director of its predecessors; President and Director of STCM
Management Company, Inc., sponsor and advisor to Capital Cash Management Trust;
Chairman, President and a Director of InCap Management Corporation, a fund
Sub-Advisor and administrator; Director of OCC Cash Reserves, Inc., and Trustee
of OCC Accumulation Trust, open-end investment companies; Trustee Emeritus of
Brown University.
George Loft, Trustee; Age: 84
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of OCC Cash Reserves, Inc., and Trustee of OCC
Accumulation Trust, open-end investment companies.
Michael S. Rosen, Vice President; Age: 38
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Vice President
(since January 1996) of the Manager; formerly President of the Rochester
Division of the Manager (January 1996-1998); prior to joining the Manager in
January 1996, he was Vice President and portfolio manager of the Fund (since
1985), a Trustee of the Trust, (until January 1996), Vice President, Secretary
and a director of Fielding Management Company, Inc. (June 1993-January 1996),
the Fund's prior investment advisor, Vice President and Secretary of Rochester
Fund Services, Inc. (1986-1995), the Fund's prior transfer agent, and of
Rochester Fund Distributors, Inc. (1988 - 1990), the Fund's prior distributor;
President of Rochester Fund Distributors, Inc. (1990 - January 1996); Vice
President of The Rochester Funds (1985 - January 1996).
Ted Everett, Assistant Vice President and Assistant Portfolio Manager; Age: 32
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Assistant Vice
President of the Manager (since January 1996); formerly a Portfolio Manager for
Fielding Management Company, Inc. (July 1993 - January 1996).
Andrew J. Donohue, Secretary; Age: 48
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp., Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and (since September 1995) Oppenheimer
Partnership Holdings, Inc.; President and a director of Centennial Asset
Management Corporation (since September 1995); President, General Counsel and a
director of Oppenheimer Real Asset Management, Inc. (since July 1996); General
Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George C. Bowen, Treasurer; Age: 62
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView Asset Management Corp.; Senior Vice President (since
February 1992), Treasurer (since July 1991) and a director (since December 1991)
of Centennial Asset Management Corporation; Vice President and Treasurer (since
August 1978) and Secretary (since April 1981) of Shareholder Services, Inc.;
Vice President, Treasurer and Secretary (since November 1989) of Shareholder
Financial Services, Inc.; Assistant Treasurer (since March 1998) of Oppenheimer
Acquisition Corp.; Treasurer (since November 1989) of Oppenheimer Partnership
Holdings, Inc.; Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Treasurer of OppenheimerFunds International
Ltd. and Oppenheimer Millennium Fund plc (since October 1997); a director or
trustee and an officer of other Oppenheimer funds.
Robert Bishop, Assistant Treasurer; Age: 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Adele A. Campbell, Assistant Treasurer; Age 35
350 Linden Oaks, Rochester, New York 14265
Assistant Vice President of the Manager (since 1995); formerly Assistant Vice
President (1994-1996) and Assistant Manager of Fund Accounting (1992-1994) of
Rochester Fund Services, Inc. (1994-1996), the prior service agent of the Fund.
Scott T. Farrar, Assistant Treasurer; Age: 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 50
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
n Remuneration of Trustees. The officers of the Fund and one Trustee, Ms.
Macaskill, are affiliated with the Manager and receive no salary or fee from the
Fund. The remaining Trustees received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended December 31,
1998. The table below also shows the total compensation from all of the
Oppenheimer funds listed above, including the compensation from the Fund. That
amount represents compensation received as a director, trustee, or member of a
committee of the Board during the calendar year 1998.
<PAGE>
- --------------------------------------------------------------------------------
Total Compensation
Aggregate Retirement From all Oppenheimer
Compensation Benefits Accrued Quest/Rochester
Trustee's Name From the Fund 1 as Part of Fund Funds2
Expenses
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
John Cannon $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Paul Y. Clinton $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thomas W. Courtney $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli $ 3 $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lacy B. Herrmann $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
George Loft $ $ $
- --------------------------------------------------------------------------------
1. Aggregate compensation includes fees and any retirement plan benefits accrued
for a Trustee.
2. For the 1998 calendar year. For Trustees other than Mr. Cannon, the total
includes compensation for a portion of the year paid by Oppenheimer Quest
Officers Value Fund, which was reorganized into another fund in June 1998.
Each series of an investment company is considered a separate "fund" for this
purpose. For Mr. Galli, compensation is for the period from 6/2/98 (when he
joined the Board) to 12/31/98. For Mr. Cannon, the total compensation is from
the Fund, Rochester Fund Municipals and Limited Term New York Municipal Fund.
3. For Mr. Galli, the aggregate compensation from the Fund is for the period
from 6/2/98 to 12/31/98. His total compensation for the 1998 calendar year
also includes compensation from 20 other Oppenheimer funds for which he
serves as a trustee or director.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as Trustee for any of
the Oppenheimer Quest/Rochester/MidCap funds listed above for at least 15 years
to be eligible for the maximum payment. Each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of service.
Therefore the amount of those benefits cannot be determined at this time, nor
can the Fund estimate the number of years of credited service that will be used
to determine those benefits.
|X| Deferred Compensation Plan for Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for disinterested trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Fund. Under the plan, the compensation deferred by
a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The
amount paid to the Trustee under the plan will be determined based upon the
performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
|X| Major Shareholders. As of April 1, 1999, the only person who owned of
record or who were known by the Fund to own beneficially 5% or more of any class
of the Fund's outstanding shares was:
Merrill Lynch Pierce Fenner & Smith Inc. 4800 Deer Lake Drive East, Floor 3,
Jacksonville, Florida 32246, which owned ____________ Class A shares
(approximately ____% of the Class A shares then outstanding), _________________
Class B shares (approximately ___% of the Class B shares then outstanding,
_____________ Class C shares (approximately ___% of the Class C shares then
outstanding), and _______________ Class X shares (approximately ____% of the
Class X shares then outstanding), for the benefit of its customers.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The portfolio manager of the Fund is principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of the
Manager's fixed-income portfolio department, in particular Ted Everett, an
Assistant Portfolio Manager of the Fund, provide the Fund's portfolio manager
with research and support in managing the Fund's portfolio.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to day business. That agreement
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective corporate administration for the Fund. Those
responsibilities include the compilation and maintenance of records with respect
to the Fund's operations, the preparation and filing of specified reports, and
the composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The investment advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to interest, taxes, fees to
disinterested Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs,
brokerage commissions, and non-recurring expenses, including litigation cost.
The management fees paid by the Fund to the Manager are calculated at the rates
described in the Prospectus, which are applied to the assets of the Fund as a
whole. The fees are allocated to each class of shares based upon the relative
proportion of the Fund's net assets represented by that class. The management
fees paid by the Fund to the Manager during its last three fiscal years are
listed below.
The investment advisory agreement contains an indemnity of the Manager. In
the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties, or reckless disregard for its obligations and duties
under the investment advisory agreement, the Manager is not liable for any loss
sustained by reason of any investment of the Fund assets made with due care and
in good faith. The agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the Manager may withdraw the Fund's right to use the name
"Oppenheimer" as part of its name.
o Accounting and Record-Keeping Services. The Manager provides
accounting and record-keeping services to the Fund pursuant to an Accounting and
Administration Agreement approved by the Board of Trustees. Under that
agreement, the Manager maintains the general ledger accounts and records
relating to the Fund's business and calculates the daily net asset values of the
Fund's shares. The fee is $12,000 for the first $30 million of the Fund's net
assets and $9,000 for each additional $30 million of net assets.
- -------------------------------------------------------------------------------
Accounting and
---------------------------- Administrative Services
Fiscal Year Ended Management Fee Paid to Fee Paid to
12/31 OppenheimerFunds, Inc. OppenheimerFunds, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 $2,132,1101 $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $3,705,530 $239,689
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $4,873,274 $312,803
- -------------------------------------------------------------------------------
1. The Fund paid its prior investment advisor, Fielding Management Company,
Inc., $16,104 for services in the fiscal year ended 12/31/96.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to those
of the Fund. Those other funds may purchase or sell the same securities as the
Fund at the same time as the Fund, which could affect the supply and price of
the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the Manager
and its affiliates. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
- --------------------------------------------------------------------------------
Fiscal Year Ended 12/31: Total Brokerage Commissions Paid by the Fund1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 $184,835
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 $374,622
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $ 2
- --------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
2. In the fiscal year ended 12/31/98, the amount of transactions directed to
brokers for research services was $_______________ and the amount of the
commissions paid to broker-dealers for those services was
$------------.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund's
parent corporation, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The Distributor is not obligated to sell a specific number of shares. Expenses
normally attributable to sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
<PAGE>
- -------------------------------------------------------------------------------
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Fiscal Sales Sales Shares Shares Shares
Year Charges on Charges Advanced by Advanced by Advanced by
Ended Class A Retained by Distributor1 Distributor1 Distributor1
12/31: Shares Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 $1,744,103 $571,488 $ $ $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $1,867,289 $564,844 $ $ $
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $ $ $ $ $
- -------------------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- -------------------------------------
Aggregate Class M
Fiscal Front-End Front-End
Year Sales Sales
Ended Charges on Charges
12/31: Class M Retained by
Shares Distributor
- -------------------------------------
- -------------------------------------
1996 $1,939,722 $125,679
- -------------------------------------
- -------------------------------------
1997 $760,191 $96,399
- -------------------------------------
- -------------------------------------
1998 $ $
- -------------------------------------
- --------------------------------------------------------------------------------
Class A Class B
Contingent Contingent Class C Class M
Fiscal Deferred Sales Deferred Sales Contingent Contingent
Year Charges Charges Deferred Sales Deferred Sales
Ended Retained by Retained by Charges Retained Charge Retained
12/31 Distributor Distributor by Distributor by Distributor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $ $ $ $
- --------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class M
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class.
Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees3, cast in person at a meeting called for
the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the Manager as the sole initial holder of
Class C shares of the Fund.
3. In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund (or its parent
corporation) and who do not have any direct or indirect financial interest in
the operation of the distribution plan or any agreement under the plan.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (at no direct cost to
the Fund) to make payments to brokers, dealers or other financial institutions
for distribution and administrative services they perform. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each class, voting separately by class.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each Plan states that while it is in effect, the selection and nomination
of those Trustees of the Fund's parent Trust who are not "interested persons" of
the Trust (or the Fund) is committed to the discretion of the Independent
Trustees. This does not prevent the involvement of others in the selection and
nomination process as long as the final decision as to selection or nomination
is approved by a majority of the Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
n Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. While the plan permits the Board
to authorize payments to the Distributor to reimburse itself for services under
the plan, the Board has not yet done so. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed 0.25% of the average annual
net assets consisting of Class A shares held in the accounts of the recipients
or their customers.
For the fiscal year ended December 31, 1998 payments under the Class A
Plan totaled $________________, all of which was paid by the Distributor to
recipients. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years. The
Distributor may not use payments received under the Class A Plan to pay any of
its interest expenses, carrying charges, or other financial costs, or allocation
of overhead.
n Class B, Class C and Class M Service and Distribution Plan Fees. Under
each plan, service fees and distribution fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B and Class C plans
provide for the Distributor to be compensated at a flat rate for its services,
whether its costs in distributing Class B and Class C shares and servicing
accounts are more or less than the amounts paid by the Fund under the plan for
the period for which the fee is paid. The Class M plan allows the Distributor to
be reimbursed for its services and costs in distributing Class M shares and
servicing accounts. The types of services that recipients provide are similar to
the services provided under the Class A service plan, described above.
Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding, the Distributor
makes service fee payments quarterly on those shares. The advance payment is
based on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If shares are redeemed during the
first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment of the service fee made on those shares.
The Distributor retains the asset-based sales charge on Class B and Class M
shares. It may pay dealers who sell Class M shares a portion of the asset-based
sales charge it receives on Class M shares, as additional compensation. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. It pays the asset-based sales charge as
an ongoing commission to the recipient on Class C shares outstanding for a year
or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge (and the Class M
asset-based sales charge allows investors to buy shares at a reduced front-end
sales charge) while allowing the Distributor to compensate dealers that sell
those shares. The Fund pays the asset-based sales charges to the Distributor for
its services rendered in distributing Class B, Class C and Class M shares. The
payments are made to the Distributor in recognition that the Distributor: o pays
sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing
from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
The Distributor's actual expenses in selling Class B, Class C and Class M
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and from the Fund under the plans. If
any plan is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor for
distributing shares before the plan was terminated. The plans allow for the
carry-forward of distribution expenses, to be recovered from asset-based sales
charges in subsequent fiscal periods.
<PAGE>
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 12/31/98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Class: Total Amount Unreimbursed Expenses as %
Payments Retained by Expenses Under Plan of Net Assets
Under Plan Distributor of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $ $ $ %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $ $ $ %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class M Plan $ $ $ %
- --------------------------------------------------------------------------------
All payments under the plans are subject to the limitations imposed by the
Conduct Rules of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield," "dividend
yield," "average annual total return," "cumulative total return," "average
annual total return at net asset value" and "total return at net asset value."
An explanation of how yields and total returns are calculated is set forth
below. The charts below show the Fund's performance as of its most recent fiscal
year end for its classes of shares that are currently offered to investors. You
can obtain current performance information by calling the Fund's Transfer Agent
at 1-800-525-7048 or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1-, 5- and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
|_| Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
|_| The Fund's performance returns do not reflect the effect of taxes on
dividends or capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred
to just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in the
30-day period, but is a hypothetical yield based upon the net investment income
from the Fund's portfolio investments for that period. It may therefore differ
from the "dividend yield" for the same class of shares, described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC formula assumes that the standardized yield for
a 30-day period occurs at a constant rate for a six-month period and is
annualized at the end of the six-month period. Additionally, because each class
of shares is subject to different expenses, it is likely that the standardized
yields of the Fund's classes of shares will differ for any 30-day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and the
sum is multiplied by 12 (to annualize the yield) and divided by the maximum
offering price on the last day of the dividend period. The formula is shown
below:
Dividend Yield = dividends paid x 12/maximum offering price
(payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge.
-----------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 12/31/98
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class of
Shares Standardized Yield Dividend Yield
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class A % % % %
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class B % N/A % N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class C % N/A % N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class M % % % %
-----------------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75%, and for Class M, the current maximum initial sales charge of
3.25% (as a percentage of the offering price) is deducted from the initial
investment ("P") (unless the return is shown without sales charge, as described
below). For Class B shares, payment of the applicable contingent deferred sales
charge is applied, depending on the period for which the return is shown: 5.0%
in the first year, 4.0% in the second year, 3.0% in the third and fourth years,
2.0% in the fifth year, 1.0% in the sixth year and none thereafter. For Class C
shares, the 1% contingent deferred sales charge is deducted for returns for the
1-year period.
|_| Average Annual Total Return. The "average annual total return"
of each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class M
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.
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 12/31/98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Returns (10 years
or life of class)
Class of
Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-Years 10-Years
1-Year (or life of (or life of
class) class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A %1 % % % % %1 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B %2 % % % % %2 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C %3 % % % % %3 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class M4 % % % % % % % %
- --------------------------------------------------------------------------------
1. Life-of-class performance is shown from inception of Class A: 5/1/95
2. Life-of-class performance is shown from inception of Class B: 5/1/95
3. Life-of-Class performance is shown from inception of Class C: 3/11/96
4. Inception of Class M: 6/3/86
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
("Lipper"). Lipper is a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods based on
categories relating to investment objectives. The performance of the Fund is
ranked by Lipper against all other bond funds, other than money market funds,
and all convertible securities funds. The Lipper performance rankings are based
on total returns that include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes into consideration.
Lipper also publishes "peer-group" indices of the performance of all mutual
funds in a category that it monitors and averages of the performance of the
funds in particular categories.
|X| Morningstar Rankings. From time to time the Fund may publish the star
ranking of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories: domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds. The Fund is ranked among municipal
bond funds.
Morningstar star rankings are based on risk-adjusted total investment
return. Investment return measures a fund's (or class's) one, three, five and
ten-year average annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after considering the
fund's sales charges and expenses. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and investment 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%
of funds in a category), four stars is "above average" (next 22.5%), three stars
is "average" (next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). The current star ranking is the fund's (or class's)
3-year ranking or its combined 3- and 5-year ranking (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year ranking (weighted 40%, 30%
and 30%, respectively), depending on the inception date of the fund (or class).
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the Fund's returns to the return on
fixed-income investments available from banks and thrift institutions. Those
include certificates of deposit, ordinary interest-paying checking and savings
accounts, and other forms of fixed or variable time deposits, and various other
instruments such as Treasury bills. However, the Fund's returns and share price
are not guaranteed or insured by the FDIC or any other agency and will fluctuate
daily, while bank depository obligations may be insured by the FDIC and may
provide fixed rates of return. Repayment of principal and payment of interest on
Treasury securities is backed by the full faith and credit of the U.S.
government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A and Class M 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 Appendix C
to this Statement of Additional Information because the Distributor or dealer or
broker incurs little or no selling expenses.
n Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A or Class M shares, you and your spouse can
add together:
o Class A, Class M and Class B shares you purchase for your individual
accounts, or for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
o current purchases of Class A, Class M and Class B shares of the Fund
and Class A and Class B shares other Oppenheimer funds to reduce the
sales charge rate that applies to current purchases of Class A or
Class M shares, and
o Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge
to reduce the sales charge rate for current purchases of Class A or
Class M shares, provided that you still hold your investment in one
of the Oppenheimer funds.
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. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
n The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Limited-Term Government Fund
Oppenheimer California Municipal Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Main Street Growth & Income
Fund
Oppenheimer Convertible Securities Fund Oppenheimer MidCap Fund Oppenheimer
Developing Markets Fund Oppenheimer Multiple Strategies Fund Oppenheimer
Disciplined Allocation Fund Oppenheimer Municipal Bond Fund Oppenheimer
Disciplined Value Fund Oppenheimer New York Municipal Fund Oppenheimer Discovery
Fund Oppenheimer New Jersey Municipal Fund Oppenheimer Enterprise Fund
Oppenheimer Pennsylvania Municipal Fund Oppenheimer Equity Income Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Europe Fund Oppenheimer Quest
Capital Value Fund,
Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Global Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer Gold & Special Minerals Oppenheimer Quest Value Fund, Inc.
Fund
Oppenheimer Growth Fund Oppenheimer Real Asset Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer World Bond Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Rochester Fund Municipals
Company Fund
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the other Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
n Letters of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class M shares of the Fund and Class A and Class B shares of other
Oppenheimer funds during a 13-month period, you can reduce the sales charge rate
that applies to your purchases of Class A or Class M shares. The total amount of
your intended purchases of Class A, Class M and Class B shares will determine
the reduced sales charge rate for the Class A or Class M shares purchased during
that period. You can include purchases made up to 90 days before the date of the
Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A or Class M shares or Class A
and Class B shares of the Fund (and Class A or Class B shares of other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"). At
the investor's request, this may 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 of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter.
A Letter enables an investor to count the Class A, Class M and Class B
shares purchased under the Letter to obtain the reduced sales charge rate on
purchases of Class A or Class M shares of the Fund (and other Oppenheimer funds)
that applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that applies to a single lump-sum
purchase of shares in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the Application used
for a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
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.
o 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 up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the 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 purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
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 a Letter) include: (a) Class A shares sold
with a front-end sales charge or subject to a Class
A contingent deferred sales charge, (b) Class M shares sold with a
front-end sales charge,
(c) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(d) Class A or Class B shares acquired by exchange of either (1) Class A
shares of one of the other Oppenheimer funds that were acquired subject
to a Class A initial or contingent deferred sales charge or (2) Class B
shares of one of the other Oppenheimer funds that were acquired subject
to a contingent deferred 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 "How to Exchange Shares" and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. The amount of the
Asset Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the Plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B,
Class C or Class M shares and the dividends payable on those shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B, Class C and Class M are
subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C or Class M shares on
behalf of a single investor (not including dealer "street name" or omnibus
accounts). That is because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund.
n Class B Conversion. The conversion of Class B shares to Class A shares
after six years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable event for the shareholder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class B
shares would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge or fee,
such exchange could constitute a taxable event for the shareholder, and absent
such exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.
n Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days and the values of some of the Fund's
portfolio securities may change significantly on these days, when shareholders
may not purchase or redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is completed before the
close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
n Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows: (1) if last sale information is regularly reported, they are
valued at the
last reported sale price on the principal exchange on which
they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid"
and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways: (1) at the last sale price available to the
pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
o Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry: (1) debt instruments that have a
maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 60
days or less.
o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.
o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on Nasdaq, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on Nasdaq on the valuation
date. If not, the value shall be the closing bid price on the principal exchange
or on Nasdaq on the valuation date. If the put, call or future is not traded on
an exchange or on Nasdaq, it shall be valued by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call written by the Fund is
exercised, the proceeds are increased by the premium received. If a call written
by the Fund expires, the Fund has a gain in the amount of the premium. If the
Fund enters into a closing purchase transaction, it will have a gain or loss,
depending on whether the premium received was more or less than the cost of the
closing transaction. If the Fund exercises a put it holds, the amount the Fund
receives on its sale of the underlying investment is reduced by the amount of
premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o Class A or Class M shares purchased subject to an initial sales charge
or Class A shares on which a contingent deferred sales charge was paid, or
o Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
shares. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such amendment,
suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the 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 Oppenheimer funds 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.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board 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. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to 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 or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Sending Redemption Proceeds by Wire. The 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.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must (1) state the reason for the
distribution; (2) state the owner's awareness of tax penalties if the
distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
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 on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owners on the redemption
documents must be 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
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have 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 Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
and Class M share purchases, shareholders should not make regular additional
Class A or Class M share 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
charge on such withdrawals (except where the contingent deferred sales charge is
waived as described in Appendix C to this Statement of Additional Information.
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares (of
the same class) of other Oppenheimer funds 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. 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
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another 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. 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 Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048. o All of the Oppenheimer funds
currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt
Trust, and Centennial America Fund, L.P., which only offer Class A
shares.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares.
o Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds-sponsored 401 (k) plans.
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
shares of any other Fund.
o Class M shares of this Fund may be exchanged only for Class A shares of
other Oppenheimer funds. Class M shares of this Fund may not be
acquired by exchange of shares of any Class of any other Oppenheimer
fund with the exception of Class A shares of Oppenheimer Money Market
Fund, Inc. or Oppenheimer Cash Reserves that were acquired by exchange
of Class M shares of this Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sales charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
a contingent deferred sales charge.
Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge. To
qualify for that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must
supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
n How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds 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. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years of the
initial purchase of the exchanged Class B shares. 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.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
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 which class of shares they with to exchange.
n Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
n Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. For full or partial exchanges of
an account made by telephone, any special account features such as Asset Builder
Plans and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
n Processing Exchange Requests. Shares to be exchanged are redeemed on the
regular business day the Transfer Agent receives an exchange request in proper
form (the "Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by either
fund up to five business days if it determines that it would be disadvantaged by
an immediate transfer of the redemption proceeds. The Fund reserves the right,
in its discretion, to refuse any exchange request that may disadvantage it. For
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund, the Fund may refuse the request.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
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 will not be declared or paid
on newly purchased shares until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order.
Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three business days following the
trade date (that is, up 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.
The Fund has no fixed dividend rate and there can be no assurance as to
the payment of any dividends or the realization of any capital gains. The
dividends and distributions paid by a class of shares will vary from time to
time depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class. Dividends are
calculated in the same manner, at the same time, and on the same day for each
class of shares. However, dividends on Class B, Class C and Class M shares are
expected to be lower than dividends on Class A shares. That is because of the
effect of the asset-based sales charge on Class B, Class C and Class M shares.
Those dividends will also differ in amount as a consequence of any difference in
the net asset values of the different classes of shares.
Dividends, distributions and proceeds of the 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.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized capital
gains to shareholders without having to pay tax on them. This avoids a double
tax on that income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund (unless the Fund's
shares are held in a retirement account or the shareholder is otherwise exempt
from tax). 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. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. The Transfer Agent receives an annual
fixed fee per account from the Fund and a payment based on the Fund's average
daily net assets. It also acts as shareholder servicing agent for the other
Oppenheimer funds. Shareholders should direct inquiries about their accounts to
the Transfer Agent at the address and toll-free numbers shown on the back cover.
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Accountants. PricewaterhouseCoopers LLP are the independent
accountants of the Fund. They 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>
A-1
Appendix A
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RATINGS DEFINITIONS
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Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
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Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
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Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation. CC: An
obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- ------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
<PAGE>
Duff & Phelps Credit Rating Co. Ratings
- ------------------------------------------------------------------------------
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
- ------------------------------------------------------------------------------
Industry Classifications
- ------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-1
Appendix C
- ------------------------------------------------------------------------------
OppenheimerFunds Special Sales Charge Arrangements and Waivers
- ------------------------------------------------------------------------------
In certain cases, the initial sales charge that applies to purchases of
Class A shares of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived. That is
because of the economies of sales efforts realized by the Distributor or the
dealers or other financial institutions offering those shares to certain classes
of investors or in certain transactions.
Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares of
those funds are not available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds that were merged into
or became Oppenheimer funds.
For the purposes of some of the waivers described below and in the
Prospectus and Statement of Additional Information of the applicable Oppenheimer
funds, the term "Retirement Plan" refers to the following types of plans: (1)
plans qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans1 (4)
Group Retirement Plans2 (5) 403(b)(7) custodial plan accounts (6) SEP-IRAs,
SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a waiver
in a particular case is determined solely by the Distributor or the Transfer
Agent of the fund. These waivers and special arrangements may be amended or
terminated at any time by the applicable Fund and/or the Distributor. Waivers
that apply at the time shares are redeemed must be requested by the shareholder
and/or dealer in the redemption request.
- --------------
1. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
2. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
<PAGE>
- ------------------------------------------------------------------------------
Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
- ------------------------------------------------------------------------------
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on these purchases the Distributor will pay the
applicable commission described in the Prospectus under "Class A Contingent
Deferred Sales Charge": o Purchases of Class A shares aggregating $1 million or
more. o Purchases by a Retirement Plan that: (1) buys shares costing $500,000 or
more, or (2) has, at the time of purchase, 100 or more eligible participants or
total plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
o Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
o Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM"), that are made available under a
Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or
managed by MLAM (the funds described in (a) and (b) are referred
to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and
Merrill Lynch. On the date the plan sponsor signs the record
keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
- ------------------------------------------------------------------------------
Waivers of Class A Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------------------------
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.
Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees.
|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are identified
as such to the Distributor) or with the Distributor. The purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients. Those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the
purchases are made through a broker or agent or other financial intermediary
that has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who buy shares
for their own accounts may also purchase shares without sales charge but only if
their accounts are linked to a master account of their investment advisor or
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements .
Each of these investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which is the
beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
|_| Retirement plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in each
case if those purchases are made through a broker, agent or other financial
intermediary that has made special arrangements with the Distributor for those
purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, if that arrangement was consummated and share
purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.
Class A shares issued or purchased in the following transactions are not subject
to sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.
|_| Shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner. This waiver must be requested when the purchase
order is placed for shares of the Fund, and the Distributor may require evidence
of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate acts as
sponsor.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies," in
the Prospectus).
|_| For distributions from Retirement Plans, deferred compensation
plans or other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary. The death or disability
must occur after the participant's account was established.
(2) To return excess contributions.
(3) To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.
(5) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To establish "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
(8) For retirement distributions or loans to participants or beneficiaries.
(9) Separation from service.
(10)Participant-directed redemptions to purchase shares of a mutual
fund other than a fund managed by the Manager or a subsidiary. The fund
must be one that is offered as an investment option in a Retirement
Plan in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor. (11) Plan termination
or "in-service distributions," if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
|_| For distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
- ------------------------------------------------------------------------------
Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------------------------
The Class B and Class C contingent deferred sales charges will not be
applied to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| 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 (the death or disability must
have occurred after the account was established).
|_| Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
grantor trust or revocable living trust for which the trustee is also the sole
beneficiary. The death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration.
|_| Returns of excess contributions to Retirement Plans.
|_| Distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request.
|_| Distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans:
(1) for hardship withdrawals;
(2) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code;
(3) to meet minimum distribution requirements as defined in the Internal
Revenue Code;
(4) to make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code;
(5) for separation from service; or (6) for loans to participants or
beneficiaries.
|_| Distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust
from accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is
a party.
- ------------------------------------------------------------------------------
Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of the Former Quest for Value Funds
- ------------------------------------------------------------------------------
The initial and contingent deferred sales charge rates and waivers for
Class A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Balanced Value Fund,
Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap
Value Fund and Oppenheimer Quest Global Value Fund, Inc.
These arrangements also apply to shareholders of the following funds when
they merged into various Oppenheimer funds on November 24, 1995:
Quest for Value U.S. Government Income Fund, Quest for Value Investment
Quality Income Fund, Quest for Value Global Income Fund, Quest for Value
New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and
Quest for Value New York Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of
an Oppenheimer fund that was one of the Former Quest for Value Funds or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of the Former
Quest for Value Funds into that other Oppenheimer fund on November 24, 1995.
Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest
for Value Funds Shareholders
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if that Association purchased shares of any of the Former Quest for
Value Funds or received a proposal to purchase such shares from OCC Distributors
prior to November 24, 1995.
- --------------------------------------------------------------------------------
Number of Eligible Initial Sales
Employees or Initial Sales Charge as a % of Commission as % of
Members Charge as a % of Net Amount Invested Offering Price
Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but
not more than 49 2.00% 2.04% 1.60%
- --------------------------------------------------------------------------------
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders who were shareholders of the AMA Family of Funds on
February 28, 1991 and who acquired shares of any of the Former Quest for Value
Funds by merger of a portfolio of the AMA Family of Funds.
|_| Shareholders who acquired shares of any Former Quest for Value Fund by
merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account, and
|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum value of
such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the
U.S. Social Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for Class B
or Class C shares) where the annual withdrawals do not exceed 10% of the initial
value of the account; and
|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum account
value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
- ------------------------------------------------------------------------------
Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds
Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
- ------------------------------------------------------------------------------
The initial and contingent deferred sale charge rates and waivers for
Class A and Class B shares described in the Prospectus or this Appendix for
Oppenheimer U. S. Government Trust, Oppenheimer Bond Fund, Oppenheimer
Disciplined Value Fund and Oppenheimer Disciplined Allocation Fund (each is
included in the reference to "Fund" below) are modified as described below for
those shareholders who were shareholders of Connecticut Mutual Liquid Account,
Connecticut Mutual Government Securities Account, Connecticut Mutual Income
Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return
Account, CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced
Account and CMIA Diversified Income Account (the "Former Connecticut Mutual
Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment
adviser to the Former Connecticut Mutual Funds.
Prior Class A CDSC and Class A Sales Charge Waivers
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's policies
on Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (1) any purchaser, provided the total initial amount
invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation features
available at the time of the initial purchase and such investment is
still held in one or more of the Former Connecticut Mutual Funds or a
Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Trustees of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
Class A and Class B Contingent Deferred Sales Charge Waivers
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Trustees of the Fund.
- ------------------------------------------------------------------------------
Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
- ------------------------------------------------------------------------------
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity
Income Fund who acquired (and still hold) shares of those funds as a result of
the reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund
- ------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
The Bank of New York.
One Wall Street
New York, New York 10015
Independent Accountants
PricewaterhouseCoopers LLP
950 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
67890
PX0345.0499
<PAGE>
BOND FUND SERIES
OPPENHEIMER CONVERTIBLE SECURITIES FUND
FORM N1-A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust as filed with the Commonwealth of
Massachusetts on 4/9/98, effective 4/7/98: Previously filed with Registrant's
Post-Effective Amendment No. 18, 4/28/98, and incorporated herein by reference.
(b) (i) By-Laws dated 4/15/87: Previously filed with Registrant's Post-Effective
Amendment filed 5/1/87, and incorporated herein by reference.
(ii) Amendment No.1 to By-Laws dated 7/22/98: Filed herewith.
(c) (i) Specimen Class A Share Certificate of Oppenheimer Convertible
Securities Fund, a portfolio of the Registrant: Previously filed with
Registrant's Post-Effective Amendment No. 18, 4/28/98, and incorporated herein
by reference.
(ii) Specimen Class B Share Certificate of Oppenheimer
Convertible Securities Fund, a portfolio of the Registrant: Previously filed
with Registrant's Post-Effective Amendment No. 18, 4/28/98, and incorporated
herein by reference.
(iii) Specimen Class C Share Certificate of Oppenheimer
Convertible Securities Fund, a portfolio of the Registrant: Previously filed
with Registrant's Post-Effective Amendment No. 18, 4/28/98, and incorporated
herein by reference.
(iv) Specimen Class M Share Certificate of Oppenheimer
Convertible Securities Fund, a portfolio of the Registrant: Previously filed
with Registrant's Post-Effective Amendment No. 18, 4/28/98, and incorporated
herein by reference.
(d) Investment Advisory Agreement dated 1/4/96 with Oppenheimer Management
Corporation: Previously filed with Post-Effective Amendment No. 15 of the
Registrant, 1/11/96 and incorporated herein by reference.
(e) (i) General Distributor's Agreement dated 1/4/96 with
Oppenheimer Funds Distributor, Inc: Previously filed with Registrant's
Post-Effective Amendment No. 15, 1/11/96, and incorporated herein by
reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor,
Inc.: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(f) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 43 to the
Registration Statement of Oppenheimer Quest For Value Funds (Reg. No.
33-15489), 12/21/98, and incorporated herein by reference.
(g) Custody Agreement dated 4/4/96: Filed herewith.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 2/24/97: Previously filed with the
Registrant's Rule 24f-2 Notice, 2/27/97.
(j) Independent Auditors Consent: To be filed by Post-Effective Amendment.
(k) Not applicable.
(l) Investment Letter from OppenheimerFunds, Inc. dated 3/11/96 relating to
Class C shares investment: Previously filed with Registrant's Post Effective
Amendment No. 16, 3/5/96 and incorporated by reference.
(m) (i) Amended and Restated Service Plan and Agreement with Oppenheimer
Funds Distributor, Inc. dated 1/4/96 for Class A Shares: Previously
filed with Post-Effective Amendment No. 15 of the Registrant, 1/11/96
and incorporated by reference.
(ii) Amended and Restated Distribution and Service Plan and Agreement for
Class B shares dated 2/3/98: Previously filed with Registrant's Post-Effective
Amendment No. 18, 4/28/98, and incorporated herein by reference.
(iii) Amended and Restated Distribution and Service Plan and Agreement for
Class C shares dated 2/3/98: Previously filed with Registrant's Post-Effective
Amendment No. 18, 4/28/98, and incorporated herein by reference.
(iv) Amended and Restated Distribution and Service Plan and Agreement for
Class M shares dated 1/4/96: Previously filed with Registrant's Post Effective
Amendment No. 16, 3/5/96, and incorporated herein by reference.
(n) (i) Financial Data Schedule for Class A Shares: To be filed by
Post-Effective Amendment.
(ii) Financial Data Schedule for Class B Shares: To be filed by
Post-Effective Amendment.
(iii) Financial Data Schedule for Class C Shares: To be filed by
Post-Effective Amendment.
(iv) Financial Data Schedule for Class M Shares: To be filed by
Post-Effective Amendment.
(o) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/25/98: Previously filed with Post-Effective Amendment No. 70 to the
Registration Statement of Oppenheimer Global Fund (Reg. No. 2-31661),
9/14/98, and incorporated herein by reference.
- -- Powers of Attorney (including Certified Board resolutions): Previously
filed with Registrant's Post-Effective Amendment No. 15, 1/11/96, and
incorporated herein by reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other investment
companies, including with limitation those described in Parts A and B hereof and
listed in Item 26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the investment management subsidiary of
The Guardian Life Insurance Company
(since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President,
Securities Analyst for Morgan Stanley
Dean Witter (May 1997 - April 1998); and
Research Analyst (July 1996 - May 1997),
Portfolio Manager (February 1992 - July
1996) and Department Manager (June 1988
to February 1992) for The Bank of New
York.
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly,
Vice President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President
of HarbourView Asset Management
Corporation ("HarbourView"); prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama Series
Fund, Inc. (the "Company") and other
mutual funds and pension funds managed by
G.R. Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment adviser,
which was a subsidiary of Connecticut
Mutual Life Insurance Company; he was
also responsible for managing the common
stock department and common stock
investments of Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly, a
Vice President and Senior Portfolio
Manager at First of America Investment
Corp.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group
Executive, and Senior Systems Officer for
American International Group (October
1994 - May, 1998).
John R. Blomfield,
Vice President Formerly Senior Product Manager
(November, 1995 - August, 1997) of
International Home Foods and American
Home Products (March, 1994 - October,
1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January
1992 - February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting
(since May 1996); an officer of other
Oppenheimer funds; formerly, an
Assistant Vice President of OFI/Mutual
Fund Accounting (April 1994-May 1996),
and a Fund Controller for OFI.
Chad Boll,
Assistant Vice President None
George C. Bowen,
Senior Vice President, Treasurer
and Director Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice
President (since February 1992),
Treasurer (since July 1991)and a director
(since December 1991) of Centennial;
President, Treasurer and a director of
Centennial Capital Corporation (since
June 1989); Vice President and Treasurer
(since August 1978) and Secretary (since
April 1981) of Shareholder Services, Inc.
("SSI"); Vice President, Treasurer and
Secretary of Shareholder Financial
Services, Inc. ("SFSI") (since November
1989); Assistant Treasurer of Oppenheimer
Acquisition Corp. ("OAC") (since March,
1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since
November 1989); Vice President and
Treasurer of ORAMI (since July 1996);
an officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Nancy Bush,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Chief Executive Officer and
Senior Manager of HarbourView Asset
Management Corporation; Trustee (1993 -
present) of Awhtolia College - Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January, 1995 - January, 1996),
Fidelity Investments FMR Co. (January,
1996 - June, 1997) and Fidelity
Investments FTPG (June, 1997 - January,
1998).
Robert Doll, Jr.,
Executive Vice President and
Chief Investment Officer and
Director An officer and/or portfolio manager of
certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January
1992) of the Distributor; Executive Vice
President, General Counsel and a director
of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc.
since (September 1995); President and a
director of Centennial (since September
1995); President and a director of ORAMI
(since July 1996); General Counsel
(since May 1996) and Secretary (since
April 1997) of OAC; Vice President and
Director of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October
1997); an officer of other Oppenheimer
funds; formerly, an Assistant Vice
President of OFI/Mutual Fund Accounting
(April 1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView,
and Centennial; Secretary, Vice President
and Director of Centennial Capital
Corporation; Vice President and Secretary
of ORAMI.
<PAGE>
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since
1994) of St. John's College; Director
(since 1994 - present) of International
Museum of Photography at George Eastman
House. Formerly, he held the following
positions: formerly, Chairman of the
Board and Director of Rochester Fund
Distributors, Inc. ("RFD"); President and
Director of Fielding Management Company,
Inc. ("FMC"); President and Director of
Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester
Capital Advisors, L.P., President and
Director of Rochester Fund Services, Inc.
("RFS"); President and Director of
Rochester Tax Managed Fund, Inc.;
Director (1993 - 1997) of VehiCare Corp.;
Director (1993 - 1996) of VoiceMode.
Patricia Foster,
Vice President Formerly, she held the following
positions: An officer of certain former
Rochester funds (May, 1993 - January,
1996); Secretary of Rochester Capital
Advisors, Inc. and General Counsel (June,
1993 - January 1996) of Rochester Capital
Advisors, L.P.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations
Department (July 1996-November 1998).
Jennifer Foxson,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for
Schroder Capital Management International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President and
Chief Financial Officer Chief Financial Officer and Treasurer
(since March, 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of
the Institute of Chartered Accountants;
formerly, an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice
President for Bankers Trust Company
(1993-1996); Steering Committee Member,
Subcommittee Chairman for American Savings
Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989
- January, 1997) of Bankers Trust Company.
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust
Company (January, 1991 - November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President and
Portfolio Manager for Warburg, Pincus
Counsellors, Inc. (1993-1997), Co-manager
of Warburg, Pincus Emerging Markets Fund
(12/94 - 10/97), Co-manager Warburg,
Pincus Institutional Emerging Markets
Fund - Emerging Markets Portfolio (8/96 -
10/97), Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of Warburg
Pincus International Equity Fund, Warburg
Pincus Institutional Fund - Intermediate
Equity Portfolio, and Warburg Pincus EAFE
Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None.
Christopher Jacobs,
Assistant Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Susan Katz,
Vice President None.
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President An officer and/or portfolio manager for
certain OppenheimerFunds; formerly,
Managing Director and Senior Portfolio
Manager at Prudential Global Advisors
(1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the
senior bond portfolio manager for
Panorama Series Fund Inc., other mutual
funds and pension accounts managed by
G.R. Phelps; also responsible for
managing the public fixed-income
securities department at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Dan Loughran,
Assistant Vice President:
Rochester Division None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September
1995); President and director (since June
1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and
SFSI (September 1995); President (since
September 1995) and a director (since
October 1990) of OAC; President (since
September 1995) and a director (since
November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding
company subsidiary of OFI; a director of
ORAMI (since July 1996) ; President and a
director (since October 1997) of OFIL, an
offshore fund manager subsidiary of OFI
and Oppenheimer Millennium Funds plc
(since October 1997); President and a
director of other Oppenheimer funds; a
director of Hillsdown Holdings plc (a
U.K. food company); formerly, an
Executive Vice President of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis,
Graham, & Stubbs (January 1998-July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C.
(May 1996-June 1998).
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June 1995-
October, 1997) of Merrill Lynch Pierce
Fenner & Smith.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager May, 1996 - June, 1997) and Director
of Product Marketing (August, 1992 - May,
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager
of certain Oppenheimer funds (since April
1998); a Certified Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the management subsidiary of The Guardian
Life Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase Investment
Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Phillips
Assistant Vice President None.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April, 1995 - January, 1998) of
Van Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President and
Business Analyst for Pershing, Jersey
City (August 1997-November 1997); Senior
Business Consultant, American
International Group (January 1996-July
1997)
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Martha Shapiro,
Assistant Vice President None
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Cathleen Stahl,
Vice President Assistant Vice President & Manager of
Women & Investing Program
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds; formerly,
Chairman of the Manager and the
Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of
HarbourView.
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing
Company (January 1997-March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of OAMC, CAMC and
Chairman of the Board of SSI.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Annette Von Brandis,
Assistant Vice President None.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice President
of
HarbourView.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial; Vice President, Finance
and Accounting; Point of Contact: Finance
Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since
May 1985), SFSI (since November 1989), OFIL
(since 1998), Oppenheimer Millennium Funds
plc (since October 1997); an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Europe Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above (except Oppenheimer Multi-Sector Income Trust and Panorama Series
Fund, Inc.) and for MassMutual Institutional Funds.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55403
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
And General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Eric Edstrom(2) Vice President None
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
412 Commons Way
Doylestown, PA 18901
Patrice Falagrady(1) Senior Vice President None
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656
C. Webb Heidinger Vice President None
138 Gales Street
Portsmouth, NH 03801
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Vice President/ None
Director of Sales
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
2714 Orchard Terrace
Linden, NJ 07036
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
LuAnn Mascia(2) Assistant Vice President None
Wesley Mayer(2) Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212
John McDonough Vice President None
3812 Leland Street
Chevey Chase, MD 20815
Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
2408 Eagleridge Dr.
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
7009 Metropolitan Place, #300
Falls Church, VA 22043
Susan Torrisi(2) Assistant Vice President None
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Mark Vandehey(1) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. 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 OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 26th day
of February, 1999.
Bond Fund Series
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By: /s/ Bridget A. Macaskill,
*
Bridget A. Macaskill,
Chairman of the Board and
President
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/ Bridget A Macaskill* Chairman of the Board,
- ------------------------------------- President (Principal
Bridget A. Macaskill Executive Officer) and Trustee February
26, 1999
/s/ George C. Bowen* Treasurer (Principal
- ------------------------------------- Financial and Accounting
George Bowen Officer) February 26, 1999
/s/ Paul Y. Clinton* Trustee February 26, 1999
- -------------------------------------
Paul Y. Clinton
/s/ Thomas W. Courtney* Trustee February 26, 1999
- -------------------------------------
Thomas W. Courtney
/s/ Robert G. Galli Trustee February 26, 1999
- -------------------------------------
Robert G. Galli
/s/ Lacy B. Herrmann* Trustee February 26, 1999
- -------------------------------------
Lacy B. Herrmann
/s/ George Loft* Trustee February 26, 1999
- -------------------------------------
George Loft
*By /s/ Robert G. Zack
- ---------------------------------------------
Robert G. Zack, Attorney-in-fact
<PAGE>
BOND FUND SERIES
OPPENHEIMER CONVERTIBLE SECURITIES FUND
EXHIBIT INDEX
Exhibit No. Description
23(b) Amendment No. 1 to By-Laws
23(g) Custody Agreement
AMENDMENT NO. 1 TO BY-LAWS OF
BOND FUND SERIES
1. The By-Laws of Bond Fund Series, a Massachusetts business trust (the
"Trust"), are hereby amended by revising Section 3.11 of Article 3 entitled
"Resignations and Removals" to read as follows:
3.11 Resignations, Removals and Retirement. Any Trustee or officer may
resign or retire at any time by written instrument signed by him or her
and delivered to the President or the Secretary or to a meeting of the
Trustees. Such resignation or retirement shall be effective upon receipt
unless specified to be effective at some other time. Notwithstanding the
foregoing, any and all Trustees shall be subject to the provisions with
respect to mandatory retirement set forth in the Retirement Plan for
Non-interested Trustees or Directors adopted by the Trust, as the same may
be amended from time to time. The Trustees may remove any officer elected
by them with or without cause. Except to the extent expressly provided in
a written agreement with the Trust, no Trustee or officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on
account of such removal.
2. The By-Laws of the Trust, as amended by this Amendment No. 1, hereby remain
in full force and effect.
IN WITNESS WHEREOF, I hereby set my hand as of this 22nd day of July,
1998.
By: /s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
BOND FUND SERIES,
ON BEHALF OF
OPPENHEIMER BOND FUND FOR GROWTH
CUSTODY AGREEMENT
Agreement made as of this 4th day of April, 1996, between BOND FUND
SERIES, on behalf of OPPENHEIMER BOND FUND FOR GROWTH, a business trust
organized and existing under the laws of the Commonwealth of Massachusetts,
having its principal office and place of business at 2 World Trade Center, New
York, New York 10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK,
a New York corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
<PAGE>
43
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of OSS"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
4. "Call Option" shall mean an exchange traded Option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded Option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian, including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Foreign Subcustodian" shall mean an "Eligible Foreign Custodian" as
defined in Rule 17-5 which is appointed by the Custodian to perform or
coordinate the receipt, custody and delivery of Foreign Property of the Fund
outside the United States in a manner consistent with the provisions of this
Agreement and whose written contract is approved by the Board of Trustees of the
Fund in accordance with Rule 17f-5. References to the Custodian herein shall,
when appropriate, include reference to its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the laws of
a foreign country which operates a system outside the United States in general
use by foreign banks and securities brokers for the central or transnational
handling of securities or equivalent book-entries which is regulated by a
foreign government or agency thereof and which is an "Eligible Foreign
Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term paper as
defined in Rule 17f-5 under the Act, whether issued in registered or bearer
form.
14. "Foreign Property" shall mean Foreign Securities and money of any
currency which is held outside of the United States.
15. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
16. "Futures Contract Option" shall mean an Option with respect to a
Futures Contract.
17. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
18. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
19. "Index Option" shall mean an exchange traded Option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
20. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
21. "Money Market Security" shall mean all instruments and obligations
commonly known as money market instruments, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
22. "Nominee" shall mean, in addition to the name of the registered
nominee of the Custodian, (i) a partnership or other entity of a Foreign
Subcustodian which is used solely for the assets of its customers other than the
Custodian and the Foreign Subcustodian, if any, by which it was appointed; or
(ii) the nominee of a Foreign Depository which is used for the securities and
other assets of its customers, members or participants.
23. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
24. "Officers" shall mean the President, any Vice President, the
Secretary, the Treasurer, the Controller, any Assistant Secretary, any Assistant
Treasurer, and any other person or persons, whether or not any such other person
is an officer or employee of the Fund, but in each case only if duly authorized
by the Board of Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix B or such other Certificate as may be received by the
Custodian from time to time; provided that each person who is designated in any
such Certificate as holding the position of "Officer of OSS" shall be an Officer
only for purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option, Index
Option and/or a Put Option.
26. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
27. "Put Option" shall mean an exchange traded Option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
28. "Repurchase Agreement" shall mean an agreement pursuant to which the
Fund buys Securities and agrees to resell such Securities at a described or
specified date and price.
29. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. '270.17f-5) promulgated by
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended.
31. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter Options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, convertible
fixed-income securities, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or rights to any property or assets.
32. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
33. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
34. "Shares" shall mean the shares of beneficial interest of the Fund
and its Series.
35. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
36. "Transfer Agent" shall mean OppenheimerFunds Services, a division of
OppenheimerFunds, Inc., its successors and assigns.
37. "Transfer Agent Account" shall mean any account in the name of the
Fund, or the Transfer Agent, as agent for the Fund, maintained with United
Missouri Bank or such other Bank designated by the Fund in a Certificate.
38. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned or held by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except for monies received and maintained in the Transfer Agent
Account, or as otherwise provided in paragraph 7 of this Article or in Article
VIII or XV, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. Except for assets
held at DTC, the Custodian shall physically segregate, keep and maintain the
Securities of the Series separate and apart from each other Series and from
other assets held by the Custodian. Except as otherwise expressly provided in
this Agreement, the Custodian will not be responsible for any Securities and
moneys not actually received by it, unless the Custodian has been negligent or
has engaged in willful misconduct with respect thereto. The Custodian will be
entitled to reverse any credit of money made on the Fund's behalf where such
credits have been previously made and moneys are not finally collected, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto; provided that if such reversal is thirty (30) days or more
after the credit was issued, the Custodian will give five (5) days' prior notice
of such reversal. The Fund shall deliver to the Custodian a certified resolution
of the Board of Trustees of the Fund, substantially in the form of Exhibit A
hereto, approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in any Depository, the
Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a Certificate
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All Securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be subject only
to drafts, orders, or charges of the Custodian pursuant to this Agreement and
shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates or Resolutions of the Fund's
Board of Trustees certified by an Officer and by the Secretary or Assistant
Secretary of the Fund setting forth the name and address of the person to whom
the payment is to be made, the Series account from which payment is to be made,
the purpose for which payment is to be made, and declaring such purpose to be a
proper corporate purpose; provided, however, that amounts representing
dividends, distributions, or redemptions proceeds with respect to Shares shall
be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series and
authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest, taxes,
management fees or operating expenses (including, without limitation thereto,
Board of Trustees' fees and expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address of the person to
whom payment is to be made, state the purpose of such payment and designate the
Series for whose account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or subcustodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income, dividends and
distributions due or payable;
(b) Promptly give notice to the Fund and promptly present for
payment and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's
account the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in
exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held
hereunder for the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount
payable upon Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940 in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in Certificates in
connection with any such purchase, sale, writing, settlement or closing out upon
its receipt from a broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as the
case may be, confirming that such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or otherwise in the name the
Custodian (or any nominee of the Custodian) as custodian for the Fund; provided,
however, that notwithstanding the foregoing, payments to or deliveries from the
Margin Account and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS, REPURCHASE
AGREEMENTS, REVERSE REPURCHASE AGREEMENTS AND SHORT SALES
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, a Futures Contract
Option, a Repurchase Agreement, a Reverse Repurchase Agreement or a Short Sale,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, oral
Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker or other party to whom
payment is to be made. Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in the Certificate out
of the moneys held for the account of such Series the total amount payable upon
such purchase, provided that the same conforms to the total amount payable as
set forth in such Certificate, oral Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option,
Repurchase Agreement, Reverse Repurchase Agreement or Short Sale, the Fund shall
deliver such to the Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
sale of Money Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale and settlement; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, oral Instructions or Written Instructions.
<PAGE>
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's written statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly appointed and
registered nominee of the Custodian) as Custodian for the Fund, out of moneys
held for the account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the Clearing Member
through whom the purchase was made, provided that the same conforms to the
amount payable as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph of this Article with respect
to such Option upon receipt by the Custodian of the total amount payable to the
Fund, provided that the same conforms to the total amount payable as set forth
in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct a Depository to deliver the Securities specifically allocated
to such Series, provided the same conforms to the amount payable to the Fund as
set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call) (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, upon receipt of the premium specified in the Certificate with
respect to such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct a Depository to impose, upon the underlying
Securities specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with a Depository underlying a
Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate upon payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate upon
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, upon delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of Options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract (s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the Series to which the
same relates; (b) with respect to an Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from whom
payment or delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such Option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4 Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5 Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6 Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7 Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8 Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and (b) make such withdrawals from and/or in the case of
an exercise such deposits into the Senior Security Account as may be specified
in a Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
9 Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1 Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer-and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
2 Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
1 Promptly after the Fund enters a Repurchase Agreement or a Reverse
Repurchase Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate, or in the
event such Repurchase Agreement or Reverse Repurchase Agreement is a Money
Market Security, a Certificate, Oral Instructions, or Written Instructions
specifying: (a) the Series for which the Repurchase Agreement or Reverse
Repurchase Agreement is entered; (b) the total amount payable to or by the Fund
in connection with such Repurchase Agreement or Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker, dealer, or financial
institution with whom the Repurchase Agreement or Reverse Repurchase Agreement
is entered; (d) the amount and kind of Securities to be delivered or received by
the Fund to or from such broker, dealer, or financial institution; (e) the date
of such Repurchase Agreement or Reverse Repurchase Agreement; and (f) the amount
of cash and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to or by the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make or accept the
delivery to or from the broker, dealer, or financial institution and the
deposits, if any, to the Senior Security Account, specified in such Certificate,
Oral Instructions, or Written Instructions.
2 Upon the termination of a Repurchase Agreement or a Reverse Repurchase
Agreement described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Repurchase Agreement or
Reverse Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions to the Custodian specifying: (a) the
Repurchase Agreement or Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable to or by the
Fund in connection with such termination; (c) the amount and kind of Securities
to be received or delivered by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e) the
name of the broker, dealer, or financial institution with whom the Repurchase
Agreement or Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Securities Account for such Series. The Custodian shall, upon
receipt or delivery of the amount and kind of Securities or cash to be received
or delivered by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make or receive the payment to or from the broker, dealer,
or financial institution and make the withdrawals, if any, from the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
3 The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular
Repurchase Agreement or Reverse Repurchase Agreement be combined and delivered
to the Custodian at the time of entering into such Repurchase Agreement or
Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1 Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds.
2 In connection with each termination of a loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
<PAGE>
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS,
AND COLLATERAL ACCOUNTS
1 The Custodian shall establish a Senior Security Account and from time to
time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2 The Custodian shall make deliveries or payments from a Margin Account to
the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3 Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4 The Custodian shall to the extent permitted by the Fund's Declaration of
Trust, investment restrictions and the Investment Company Act of 1940 have a
continuing lien and security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any such
property whenever the Custodian has made payment or delivery pursuant to any Put
Option guarantee letter or similar document or any receipt issued hereunder by
the Custodian; provided, however, that the Custodian shall not be required to
issue any Put Option guarantee letter unless it shall have received an opinion
of counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien and
security interest is valid, enforceable and not limited by the Declaration of
Trust, any investment restrictions or the Investment Company Act of 1940. In the
event the Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee letter or
similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5 On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6 The Custodian shall establish a Collateral Account and from time to time
shall make such deposits thereto as may be specified in a Certificate. Promptly
after the close of business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the Custodian shall
furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1 The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account and any sub-dividend agent or co-dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account on the payment date.
2 Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Transfer Agent Account
and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1 Whenever the Fund shall sell any Shares, it shall deliver or cause to be
delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date,
and price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2 Upon receipt of such money from the Fund's General Distributor, the
Custodian shall credit such money to the separate account in the name of the
Series for which such money was received.
3 Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4 Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish, or cause to be furnished, to
the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5 Upon receipt of an advice from an Authorized Person setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1 If the Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate, Oral Instructions, or Written
Instructions or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, unless the
Fund has given a Certificate that the Custodian shall not impose a lien and
security interest to secure such overdrafts (in which event it shall not do so),
the Custodian shall have a continuing lien and security interest in the
aggregate amount of such overdrafts and indebtedness as may from time to time
exist in and to any property specifically allocated to such Series at any time
held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any money
balance in an account standing in the name of such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on each Business
Day on which either it intends to enter a Reverse Repurchase Agreement and/or
otherwise borrow from a third party, or which next succeeds a Business Day on
which at the close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City time,
advise the Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any indebtedness,
including pursuant to any Reverse Repurchase Agreement, not so specified other
than from the Custodian.
2 The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's prospectus
and Statement of Additional Information. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
ARTICLE XV
CUSTODY OF ASSETS OUTSIDE THE U.S.
1 The Custodian is authorized and instructed to employ, as its agent, as
subcustodians for the securities and other assets of the Fund maintained outside
of the United States the Foreign Subcustodians and Foreign Depositories
designated on Schedule A hereto. Except as provided in Schedule A, the Custodian
shall employ no other Foreign Custodian or Foreign Depository. The Custodian and
the Fund may amend Schedule A hereto from time to time to agree to designate any
additional Foreign Subcustodian or Foreign Depository with which the Custodian
has an agreement for such entity to act as the Custodian's agent, as
subcustodian, and which the Custodian in its absolute discretion proposes to
utilize to hold any of the Fund's Foreign Property. Upon receipt of a
Certificate or Written Instructions from the Fund, the Custodian shall cease the
employment of any one or more of such subcustodians for maintaining custody of
the Fund's assets and such custodian shall be deemed deleted from Schedule A.
2 The Custodian shall limit the securities and other assets maintained in
the custody of the Foreign Subcustodians to: (a) "foreign securities," as
defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the Fund may
determine to be reasonably necessary to effect the foreign securities
transactions of the Fund.
3 The Custodian shall identify on its books as belonging to the Fund, the
Foreign Securities held by each Foreign Subcustodian.
4 Each agreement pursuant to which the Custodian employs a Foreign
Subcustodian shall be substantially in the form reviewed and approved by the
Fund and will not be amended in a way that materially affects the Fund without
the Fund's prior written consent and shall:
(a) require that such institution establish custody account(s) for
the Custodian on behalf of the Fund and physically segregate in each such
account securities and other assets of the fund, and, in the event that such
institution deposits the securities of the Fund in a Foreign Depository, that it
shall identify on its books as belonging to the Fund or the Custodian, as agent
for the Fund, the securities so deposited;
(b) provide that:
(1) the assets of the Fund will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the Foreign
Subcustodian or its creditors, except a claim of payment for their safe custody
or administration;
(2) beneficial ownership for the assets of the Fund will be
freely transferable without the payment of money or value other than for custody
or administration;
(3) adequate records will be maintained identifying the
assets as belonging to the Fund;
(4) the independent public accountants for the Fund will be
given access to the books and records of the Foreign Subcustodian relating to
its actions under its agreement with the Custodian or confirmation of the
contents of those records;
(5) the Fund will receive periodic reports with respect to the
safekeeping of the Fund's assets, including, but not necessarily limited to,
notification of any transfer to or from the custody account(s); and
(6) assets of the Fund held by the Foreign Subcustodian will
be subject only to the instructions of the Custodian or its agents.
(c) Require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising out
of or in connection with the institution's performance of such obligations, with
the exception of any such losses, damages, costs, expenses, liabilities or
claims arising as a result of an act of God. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with respect
to any claims against a Foreign Subcustodian as a consequence of any such loss,
damage, cost, expense, liability or claim of or to the Fund, if and to the
extent that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
5 Upon receipt of a Certificate or Written Instructions, which may be
continuing instructions when deemed appropriate by the parties, the Custodian
shall on behalf of the Fund make or cause its Foreign Subcustodian to transfer,
exchange or deliver securities owned by the Fund, except to the extent
explicitly prohibited therein. Upon receipt of a Certificate or Written
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall on behalf of the fund pay out or cause its
Foreign Subcustodians to pay out monies of the Fund. The Custodian shall use all
means reasonably available to it, including, if specifically authorized by the
Fund in a Certificate, any necessary litigation at the cost and expense of the
Fund (except as to matters for which the Custodian is responsible hereunder) to
require or compel each Foreign Subcustodian or Foreign Depository to perform the
services required of it by the agreement between it and the Custodian authorized
pursuant to this Agreement.
6 The Custodian shall maintain all books and records as shall be necessary
to enable the Custodian readily to perform the services required of it hereunder
with respect to the Fund's Foreign Properties. The Custodians shall supply to
the Fund from time to time, as mutually agreed upon, statements in respect of
the Foreign Securities and other Foreign Properties of the Fund held by Foreign
Subcustodians, directly or through Foreign Depositories, including but not
limited to an identification of entities having possession of the Fund's Foreign
Securities and other assets, an advice or other notification of any transfers of
securities to or from each custodial account maintained for the Fund or the
Custodian on behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of such securities.
The Custodian shall promptly and faithfully transmit all reports and information
received pertaining to the Foreign Property of the Fund, including, without
limitation, notices or reports of corporate action, proxies and proxy soliciting
materials.
7 Upon request of the Fund, the Custodian shall use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Subcustodian, or confirmation of the contents
thereof, insofar as such books and records relate to the Foreign Property of the
Fund or the performance of such Foreign Subcustodian under its agreement with
the Custodian; provided that any litigation to afford such access shall be at
the sole cost and expense of the Fund.
8 The Custodian recognizes that employment of a Foreign Subcustodian or
Foreign Depository for the Fund's Foreign Securities and Foreign Property is
permitted by Section 17(f) of the Investment Company Act of 1940 only upon
compliance with Section (a) of Rule 17f-5 promulgated thereunder. With respect
to the Foreign Subcustodians and Foreign Depositories identified on Schedule A,
the Custodian represents that it has furnished the Fund with certain materials
prepared by the Custodian and with such other information in the possession of
the Custodian as the Fund advised the Custodian was reasonably necessary to
assist the Board of Trustees of the Fund in making the determinations required
of the Board of Trustees by Rule 17f-5, including, without limitation,
consideration of the matters set forth in the Notes to Rule 17f-5. If the
Custodian recommends any additional Foreign Subcustodian or Foreign Depository,
the Custodian shall supply information similar in kind and scope to that
furnished pursuant to the preceding sentence. Further, the Custodian shall
furnish annually to the Fund, at such time as the Fund and Custodian shall
mutually agree, information concerning each Foreign Subcustodian and Foreign
Depository then identified on Schedule A similar in kind and scope to that
furnished pursuant to the preceding two sentences.
9 The Custodian's employment of any Foreign Subcustodian or Foreign
Depository shall constitute a representation that the Custodian believes in good
faith that such Foreign Subcustodian or Foreign Depository provides a level of
safeguards for maintaining the Fund's assets not materially different from that
provided by the Custodian in maintaining the Fund's securities in the United
States. In addition, the Custodian shall monitor the financial condition and
general operational performance of the Foreign Subcustodians and Foreign
Depositories and shall promptly inform the Fund in the event that the Custodian
has actual knowledge of a material adverse change in the financial condition
thereof or that there appears to be a substantial likelihood that the
shareholders' equity of any Foreign Subcustodian will decline below $200 million
(U.S. dollars or the equivalent thereof) or that its shareholders' equity has
declined below $200 million , or that the Foreign Subcustodian or Foreign
Depository has breached the agreement between it and the Custodian in a way that
the Custodian believes adversely affects the Fund. Further, the Custodian shall
advise the Fund if it believes that there is a material adverse change in the
operating environment of any Foreign Subcustodian or Foreign Depository.
ARTICLE XVI
CONCERNING THE CUSTODIAN
1 The Custodian shall use reasonable care in the performance of its duties
hereunder, and, except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of the
subcustodians or co-custodians appointed by the Custodian or of the officers,
employees, or agents of any of them. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund, at the expense of
the Fund, or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence, bad faith or willful
misconduct on the part of the Custodian or any of its employees or agents.
2 Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by
the Fund, as specified in a resolution, Certificate, Oral Instructions, or
Written Instructions;
(d) The legality of any borrowing by the Fund using Securities
as collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
subparagraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3 The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives such money directly or by the final crediting of
the account representing the Fund's interest at the Book-Entry System or the
Depository.
4 With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or proceeding
in respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required, or
alternatively, the Fund shall be subrogated to the rights of the Custodian with
respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5 The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6 The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7 The Custodian may, with the prior approval of the Board of Trustees of
the Fund, appoint one or more banking institutions as subcustodian or
subcustodians, or as co-Custodian or co-Custodians, of Securities and moneys at
any time owned by the Fund, upon such terms and conditions as may be approved in
a Certificate or contained in an agreement executed by the Custodian, the Fund
and the appointed institution; provided, however, that appointment of any
foreign banking institution or depository shall be subject to the provisions of
Article XV hereof.
8 The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any subcustodian of the Securities and moneys
owned by the Fund.
9 The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it, for the account
of the Fund and specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its then current
prospectus, or (b) to ascertain whether any transactions by the Fund, whether or
not involving the Custodian, are such transactions as may properly be engaged in
by the Fund.
10 The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon in writing from time to time between the Custodian and the
Fund. The Custodian may charge such compensation, and any such expenses with
respect to a Series incurred by the Custodian in the performance of its duties
under this Agreement against any money specifically allocated to such Series.
The Custodian shall also be entitled to charge against any money held by it for
the account of a Series the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to, the
expenses of subcustodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase and sale
of Securities of the Fund. Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any overdraft or
indebtedness or interest thereon, submit an invoice therefor to the Fund.
11 The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing, Oral Instructions, or Written Instructions received
by the Custodian and reasonably believed by the Custodian to be genuine. The
Fund agrees to forward to the Custodian a Certificate or facsimile thereof
confirming Oral Instructions or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions or Written Instructions are
given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions or Written Instructions
given to the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
12 The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13 The books and records pertaining to the Fund, as described in Appendix
E hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable Securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14 The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry system,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15 The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16 The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of the negligence, bad faith,
or willful misconduct of the Custodian, any co-Custodian or subcustodian
appointed by the Custodian, or that of the officers, employees, or agents of any
of them.
17 Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18 The Custodian will comply with the procedures, guidelines or
restrictions ("Procedures") adopted by the Fund from time to time for particular
types of investments or transactions, e.g., Repurchase Agreements and Reverse
Repurchase Agreements, provided that the Custodian has received from the Fund a
copy of such Procedures. If within ten days after receipt of any such
Procedures, the Custodian determines in good faith that it is unreasonable for
it to comply with any new procedures, guidelines or restrictions set forth
therein, it may within such ten day period send notice to the Fund that it does
not intend to comply with those new procedures, guidelines or restrictions which
it identifies with particularity in such notice, in which event the Custodian
shall not be required to comply with such identified procedures, guidelines or
restrictions; provided, however, that, anything to the contrary set forth herein
or in any other agreement with the Fund, if the Custodian identifies procedures,
guidelines or restrictions with which it does not intend to comply, the Fund
shall be entitled to terminate this Agreement without cost or penalty to the
Fund upon thirty days' written notice.
19 Whenever the Custodian has the authority to deduct monies from the
account for a Series without a Certificate, it shall notify the Fund within one
business day of such deduction and the reason for it. Whenever the Custodian has
the authority to sell Securities or any other property of the Fund on behalf of
any Series without a Certificate, the Custodian will notify the Fund of its
intention to do so and afford the Fund the reasonable opportunity to select
which Securities or other property it wishes to sell on behalf of such Series.
If the Fund does not promptly sell sufficient Securities or Deposited Property
on behalf of the Series, then, after notice, the Custodian may proceed with the
intended sale.
20 The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth or
referred to in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
ARTICLE XVII
TERMINATION
1 Except as provided in paragraph 3 of this Article, this Agreement shall
continue until terminated by either the Custodian giving to the Fund, or the
Fund giving to the Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after the date of the
giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the Securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company eligible to serve as a custodian for Securities
of a management investment company under the Investment Company Act of 1940 and
which is acceptable to the Fund. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2 If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement arising thereafter,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
3 Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors rights, or if a petition is presented for the winding up
or liquidation of the party or a resolution is passed for its winding up or
liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance of, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
ARTICLE XVIII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized only for the purpose of the Fund
providing Certificates to the Custodian and the Custodian providing notices to
the Fund and only after the Fund shall have established access codes and
internal safekeeping procedures to safeguard and protect the confidentiality and
availability of such access codes. Each use of the Terminal Link by the Fund
shall constitute a representation and warranty that at least two officers have
each utilized an access code that such internal safekeeping procedures have been
established by the Fund, and that such use does not contravene the Investment
Company Act of 1940 and the rules and regulations thereunder.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Custodian's prior
written consent. The Fund acknowledges that any software provided by the
Custodian as part of the Terminal Link is the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the same, whether by the
Fund or the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will cause its officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the other to act in accordance with and
rely on Certificates and notices received by it through the Terminal Link. Each
party acknowledges that it is its responsibility to assure that only its
authorized persons use the Terminal Link on its behalf, and that a party shall
not be responsible nor liable for use of the Terminal Link on behalf of the
other party by unauthorized persons of such other party.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willful misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000; provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, in no event shall
either party or any manufacturer or supplier of its computer equipment, software
or services relating to the Terminal Link be responsible for any special,
indirect, incidental or consequential damages which the other party may incur or
experience by reason of its use of the Terminal Link even if such party,
manufacturer or supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall either party or any such
manufacturer or supplier be liable for acts of God, or with respect to the
following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, and (ii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or a notice transmitted by the Terminal Link, verify to the other
party by use of the Terminal Link its receipt of such Certificate or notice, and
in the absence of such verification the party to which the Certificate or notice
is sent shall not be liable for any failure to act in accordance with such
Certificate or notice and the sending party may not claim that such Certificate
or notice was received by the other party.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
officer ceases to be an officer of the Fund, or in the event that other or
additional officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or rehired by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement constitutes the entire agreement between the parties,
replaces all prior agreements and may not be amended or modified in any manner
except by a written agreement executed by both parties with the same formality
as this Agreement and approved by a resolution of the Board of Trustees of the
Fund, except that Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of the instrument are not
binding upon any of the Trustees or shareholders individually but are binding
upon the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a particular series
of the Fund shall under no circumstances be charges with liabilities
attributable to any other series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular series
of the Fund shall look only to the assets of that particular series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
BOND FUND SERIES, on behalf of
OPPENHEIMER BOND FUND FOR GROWTH
By: /s/ Andrew J. Donohue,
Andrew J. Donohue, Secretary
[SEAL]
Attest:
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
[SEAL] By: /s/ Jorge Ramos
Jorge Ramos, Vice President
Attest:
<PAGE>
APPENDIX A
I, Andrew J. Donohue, Secretary, and I, Robert G. Zack, Assistant Secretary,
of Bond Fund Series, on behalf of Oppenheimer Bond Fund for Growth, a
Massachusetts business trust (the "Fund"), do hereby certify that the following
individuals have been duly authorized by the Board of Trustees of the Fund in
conformity with the Fund's Declaration of Trust and By-Laws to give Oral
Instructions and Written Instructions on behalf of the Fund and further that the
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
Adele Campbell Assistant Treasurer /s/ Adele
Campbell
Adele Campbell
Christine Casey Officer of Rochester /s/ Christine
Casey
Division of OFI Christine Casey
Melissa Delforte Officer of Rochester /s/ Melissa
Delforte
Division of OFI Melissa Delforte
George Bowen Treasurer /s/ George Bowen
George Bowen
Andrew J. Donohue Secretary; EVP and General
Counsel of OFI /s/ Andrew J.
Donohue
Andrew J. Donohue
Robert G. Zack Assistant Secretary /s/ Robert G.
Zack
Robert G. Zack
Mitchell J. Lindauer VP of OFI /s/ Mitchell J.
Lindauer
Mitchell J.
Lindauer
Katherine P. Feld VP of OFI /s/ Katherine P.
Feld
Katherine P. Feld
Mark Binning Securities Coordinator /s/ Mark Binning
Mark Binning
IN WITNESS WHEREOF, we have hereunto set our hands as of this 4th day
of April, 1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX B
I, Andrew J. Donohue, Secretary, and I, Robert G. Zack, Assistant Secretary,
of Bond Fund Series, on behalf of Oppenheimer Bond Fund for Growth, a
Massachusetts business trust (the "Fund"), do hereby certify that:
(a) the following individuals serve in the following positions with the
Fund, each has been duly elected or appointed by the Board of Trustees of the
Fund to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws and further that the signatures of each
individual below set forth opposite their respective names are their true and
correct signatures:
Name Position Signature
Adele Campbell Assistant Treasurer /s/ Adele
Campbell
George Bowen Treasurer /s/ George Bowen
George Bowen
Andrew J. Donohue Secretary; EVP and General
Counsel of OFI /s/ Andrew J.
Donohue
Andrew J. Donohue
Robert G. Zack Assistant Secretary /s/ Robert G.
Zack
Robert G. Zack
(b) With respect to the following individuals, each such individual has been
designated by a resolution of the Board of Trustees of the Fund to be an Officer
for purposes of the Fund's Custody Agreement with The Bank of New York and
further that the signatures of each individual below set forth opposite their
respective names are their true and correct signatures:
Christine Casey Officer of Rochester /s/ Christine
Casey
Division of OFI Christine Casey
Melissa Delforte Officer of Rochester /s/ Melissa
Delforte
Division of OFI Melissa Delforte
Mitchell J. Lindauer VP of OFI /s/ Mitchell J.
Lindauer
Mitchell J.
Lindauer
Katherine P. Feld VP of OFI /s/ Katherine P.
Feld
Katherine P. Feld
Mark Binning Securities Coordinator /s/ Mark Binning
Mark Binning
IN WITNESS WHEREOF, we have hereunto set our hands as of this 4th day
of April, 1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX C
The undersigned, Andrew Donohue, hereby certifies that he is the duly
elected and acting Secretary of Bond Fund Series, on behalf of Oppenheimer Bond
Fund for Growth, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolutions were adopted by the Board of Trustees
of the Fund at a meeting duly held on January 31, 1996, at which a quorum was at
all times was present and that such resolutions have not been modified or
rescinded and are in full force an effect as of the date hereof:
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of April 4, 1996 (the "Custody Agreement"), is authorized and
instructed on a continuous and ongoing basis to act in accordance
with, and to rely on instructions by the Fund to the Custodian
communicated by a Terminal Link as defined in the Custody Agreement;
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to Officers of the Fund as defined in the
Custody Agreement, and shall establish internal safekeeping procedures
to safeguard and protect the confidentiality and availability of such
access codes;
RESOLVED, that Officers of the Fund as defined in the Custody
Agreement shall, following the establishment of such access codes and
such internal safekeeping procedures, advise the Custodian that the
same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand as of this 4th day of April,
1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
<PAGE>
APPENDIX D
I, Jorge Ramos, a Vice President with THE BANK OF NEW YORK, do hereby
designate the following publications:
The Bond Buyer Depository Trust Company Notices Financial Daily Card Service JJ
Kenney Municipal Bond Service London Financial Times New York Times Standard &
Poor's Called Bond Record Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Andrew Donohue, hereby certifies that he is the duly
elected and acting Secretary of Bond Fund Series, on behalf of Oppenheimer Bond
Fund for Growth, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on January 31, 1996, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof:
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of April 4, 1996 (the "Custody Agreement"), is authorized and
instructed on a continuous and ongoing basis to deposit in the
Book-Entry System, as defined in the Custody Agreement, all Securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Book-Entry System
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries
and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 4th day of April,
1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, Andrew Donohue, hereby certifies that he is the duly
elected and acting Secretary of Bond Fund Series, on behalf of Oppenheimer Bond
Fund for Growth Fund, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on January 31, 1996, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof:
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of April 4, 1996 (the "Custody Agreement"), is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to deposit in The Depository Trust Company ("DTC") as a
"Depository" as defined in the Custody Agreement, all Securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize DTC to the extent
possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 4th day of April,
1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Andrew Donohue, hereby certifies that he is the duly
elected and acting Secretary of Bond Fund Series, on behalf of Oppenheimer Bond
Fund for Growth, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on January 31, 1996, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof:
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of April 4, 1996 (the "Custody Agreement"), is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as a Depository,
as defined in the Custody Agreement, all Securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Participants Trust Company
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries
and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 4th day of April,
1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Andrew Donohue, hereby certifies that he is the duly
elected and acting Secretary of Bond Fund Series, on behalf of Oppenheimer Bond
Fund for Growth, a Massachusetts business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on January 31, 1996, at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof:
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as
of April 4, 1996 (the "Custody Agreement"), is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transactions in Options, regardless of
the Series to which the same are specifically allocated, as such terms
are defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 4th day of April,
1996.
/s/ Andrew J. Donohue
Andrew J. Donohue,Secretary
<PAGE>
EXHIBIT D
[FORM OF FOREIGN SUBCUSTODIAN AGREEMENT]
<PAGE>
Appendix A
Article XIX.1
Appendix B
Article XIX.2
XXExhibit A
Article III.1
Exhibit B
Article III.1
Exhibit C
Article III.1
Exhibit D
Article XV.4
Schedule A
Article XV.1
