<PAGE>
Registration No. 33-17850
File No. 811-5360
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. 14 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 13 / X /
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
- --------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
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(Address of Principal Executive Offices)
1-303-671-3200
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(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On October 1, 1994 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On --------- pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
of Rule 485
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended June 30, 1994 was filed on August 30, 1994.
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
FORM N-1A
Cross Reference Sheet
Prospectus of Oppenheimer Main Street Income & Growth Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; How to Exchange Shares; Special Investor
Services; Service Plan for Class A Shares; Distribution and
Service Plan for Class B Shares; Distribution and Service
Plan for Class C Shares; How to Sell Shares
8 How to Sell Shares
9 *
Prospectus of Oppenheimer Main Street California Tax-Exempt Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; How to Exchange Shares; Special Investor
Services; Distribution and Service Plan for Class B Shares;
How to Sell Shares
8 How to Sell Shares
9 *
__________________
*Not applicable or negative answer.
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
FORM N-1A
Cross Reference Sheet
Statement of Additional Information of Oppenheimer Main Street Income &
Growth Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Directors and Officers of the
Corporation
15 How the Fund is Managed - Major Shareholders;
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
Statement of Additional Information of Oppenheimer Main Street California
Tax-Exempt Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Directors and Officers of the
Corporation
15 How the Fund is Managed - Major Shareholders;
16 How the Fund is Managed; Distribution and Service Plan
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
__________________
*Not applicable or negative answer.
<PAGE>
Oppenheimer
Main Street Income & Growth Fund
Prospectus dated October 1, 1994
Oppenheimer Main Street Income & Growth Fund (the "Fund"), a series of
Oppenheimer Main Street Funds, Inc., is a mutual fund that seeks a high
total return (which includes current income and capital appreciation in
the value of its shares) from equity and debt securities. Please refer
to "Investment Policies and Strategies" for more information about the
types of securities the Fund invests in and the risks of investing in the
Fund.
The Fund offers three classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B and Class C shares, which are sold without a front-end
sales charge, although you may pay a sales charge when you redeem your
shares, depending on how long you hold them. A contingent deferred sales
charge is imposed on most Class B shares redeemed within six years of
purchase. A contingent deferred sales charge is imposed on most Class C
shares redeemed within 12 months of purchase. Class B and Class C shares
are also subject to an annual "asset-based sales charge." Each class of
shares bears different expenses. In deciding which class of shares to
buy, you should consider how much you plan to purchase, how long you plan
to keep your shares, and other factors discussed in "How to Buy Shares"
starting on page ___.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the October 1, 1994, Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
3 Expenses
5 Financial Highlights
6 Investment Objective and Policies
10 How the Fund is Managed
11 Performance of the Fund
A B O U T Y O U R A C C O U N T
13 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
20 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
22 How to Sell Shares
By Mail
By Telephone
23 How to Exchange Shares
24 Shareholder Account Rules and Policies
25 Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are reflected in the Fund's net asset value per share. As
a shareholder, you pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you might expect
to bear indirectly. The calculations are based on the Fund's expenses
during its fiscal year ended June 30, 1994.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages 13 through 23 for an
explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales 5.75% None None
Charge on Purchases
(as a % of offering price)
- -------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- -------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1.0% if
(as a % of the lower of the year, declining shares are
original purchase price or to 1% in the redeemed
redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- -------------------------------------------------------------------------
Exchange Fee $5.00(3) $5.00(3) $5.00(3)
</TABLE>
(1)If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares," below.
(2)See "How to Buy Shares," below, for more information on the contingent
deferred sales charges.
(3)Fee is waived for automated exchanges on PhoneLink, described in "How
to Buy Shares."
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager"), and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for
Class A shares are the Service Plan Fees (which are a maximum of 0.25% of
average annual net assets of that class), and for Class B and Class C
shares are the Distribution and Service Plan Fees (maximum Service Plan
fee of 0.25%) and the asset-based sales charges of 0.75%.
Class B shares were not publicly offered during the fiscal year ended
June 30, 1994. The "Annual Fund Operating Expenses" as to Class B shares
are estimates based on amounts that would have been payable in that period
assuming that Class B shares were outstanding during such fiscal year.
Class C shares were not publicly sold before December 1, 1993. Therefore
the Annual Fund Operating Expenses shown for Class C shares are based on
expenses for the period from December 1, 1993 through June 30, 1994. The
actual expenses for the Fund's Class A, B, and C shares in future years
may be more or less, depending on a number of factors, including the
actual amount of the assets represented by each class of shares.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.58% 0.57% 0.57%
- -------------------------------------------------------------------------
12b-1 Distribution
Plans Fees 0.25%* 1.00%** 1.00%**
- -------------------------------------------------------------------------
Other Expenses 0.45% 0.54% 0.54%
- -------------------------------------------------------------------------
Total Fund
Operating
Expenses 1.28% 2.11% 2.11%
*Service Plan fees only.
**Includes Service Plan fee and asset-based sales charge.
</TABLE>
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years(1)
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $70 $96 $124 $203
Class B Shares $71 $96 $133 $203
Class C Shares $31 $66 $113 $244
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years(1)
- --------------------------------------------------------------
Class A Shares $70 $96 $124 $203
Class B Shares $21 $66 $113 $203
Class C Shares $21 $66 $113 $244
</TABLE>
(1)The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the asset-based
sales charge and the contingent deferred sales charge on Class B and Class
C shares, long-term Class B and Class C shareholders could pay the
economic equivalent of an amount greater than the maximum front-end sales
charge permitted under applicable regulatory requirements. The automatic
conversion of Class B shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
Deloitte & Touche LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended June 30, 1994,
is included in the Statement of Additional Information. Class C shares
were publicly offered only during a portion of that period, commencing
December 1, 1993. Class B shares were not publicly offered during the
fiscal year ended June 30, 1994. Accordingly, no information on Class B
shares is reflected in the table below or in the Fund's other financial
statements.
Class A Class C
- ------ ------
Year Ended Period
Ended
June 30, 1994 1993 1992 1991 1990 1989 1988(2) June
30, 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period $19.88 $15.46 $13.22 $12.38 $11.67
$10.13
$9.60 $20.76
- ------
Income from investment operations:
Net investment income .37 .16 .25 .38 .17
.24 (3)
.05 .13
Net realized and unrealized gain
on investments and options written 2.50 6.65 4.72
.87 .88
1.62 .52 (.42)
- ------ ------ ------ ------ ------ ------
- ------
- ------
Total income from investment
operations 2.87 6.81 4.97 1.25 1.05 1.86
.57
(.29)
- ------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.19)
(.22) (.41)
(.19) (.19) (.04) (.14)
Distributions from net realized gain
on investments and options written -- (2.20) (2.51)
-- (.15)
(.13) -- --
Distributions in excess of gains (1.99) -- -- --
-- --
-- --
- ------ ------ ------ ------ ------ ------
- ------
- ------
Total dividends and distributions
to shareholders (2.35) (2.39) (2.73) (.41)
(.34) (.32)
(.04) (.14)
- ------
Net asset value, end of period $20.40 $19.88 $15.46
$13.22
$12.38 $11.67 $10.13 $20.33
- ------ ------ ------ ------ ------ ------
- ------
- ------
- ------ ------ ------ ------ ------ ------
- ------
- ------
- ------
Total Return, at Net Asset Value(4) 14.34% 46.38%
39.48% 10.60%
9.07% 18.77% 5.94% (.97)%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $739,552 $58,230 $26,926 $15,968
$13,851
$1,256 $345 $170,316
- ------
Average net assets
(in thousands) $270,417 $38,974 $23,018 $14,563
$ 7,520
$ 788 $118 $71,924
- ------
Number of shares outstanding
at end of period (in thousands) 36,251 2,929 1,742
1,208
1,119 108 34 8,377
- ------
Ratios to average net assets:
Net investment income 2.46% 1.02% 1.63% 3.15%
2.33%
2.67% 2.86% 1.86%
Expenses, before reimbursement
from or assumption by the Manager 1.28% 1.46% 1.66%
1.84%
2.21% 2.46% 10.54% 2.11%
Expenses, net of reimbursement
from or assumption by the Manager N/A N/A N/A N/A
N/A
2.12%(3) N/A N/A
- ------
Portfolio turnover rate(5) 199.4% 283.0% 290.1%
208.9%
214.3% 136.8% 18.8% 199.4%
1. For the period from December 1, 1993 (inception of offering)
to June 30,
1994.
2. For the period from February 3, 1988 (commencement of
operations) to June 30,
1988.
3. Net investment income would have been $.20 per share absent
the voluntary
expense reimbursement, resulting in an expense ratio of 2.46%.
4. Assumes a hypothetical initial investment on the business day
before the
first day of the fiscal period, with all dividends and
distributions reinvested
in additional shares on the reinvestment date, and redemption at
the net asset
value calculated on the last business day of the fiscal period.
Sales charges
are not reflected in the total returns.
5. The lesser of purchases or sales of portfolio securities for a
period,
divided by the monthly average of the market value of portfolio
securities owned
during the period. Securities with a maturity or expiration date
at the time of
acquisition of one year or less are excluded from the
calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the year
ended June 30, 1994 were $1,510,599,271 and $494,572,017,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund has the investment objective of seeking high total
return (which includes current income and capital appreciation in the
value of its shares) from equity and debt securities. The Fund is not
intended to be a complete investment program, and there is no assurance
that it will achieve its objective.
Investment Policies and Strategies. The Fund seeks its investment
objective by emphasizing investment in equity and debt securities - common
stocks, preferred stocks, convertible securities, bonds, debentures and
notes. The Fund may also assume a temporary defensive position when
appropriate to do so by investing in cash equivalents, as discussed below.
The composition of the Fund's portfolio among the different types of
permitted investments and maturities of debt instruments will vary from
time to time based upon the evaluation of economic and market trends by
the Fund's investment adviser, Oppenheimer Management Corporation (the
"Manager"), and perceived relative total anticipated return from such
types of securities.
-- Debt Securities. The Fund will purchase securities of issuers
believed by the Manager to be in sound financial condition, including
investment-grade senior securities, that is, bonds rated at least "Baa"
by Moody's Investors Service, Inc. ("Moody's") or at least "BBB" by either
Standard & Poor's Corporation ("Standard & Poor's") or Fitch Investors
Service, Inc. ("Fitch") or if unrated, judged by the Manager to be of
comparable quality to bonds rated within such grades. The Fund will not
invest in debt securities rated less than "Baa" by Moody's or "BBB" by
Standard & Poor's or Fitch, or, if unrated, judged by the Manager to be
of comparable quality to debt securities rated within such grades.
However, the Fund may invest up to 10% of its total assets in convertible
securities rated less than "Baa" or "BBB" or unrated convertible
securities judged by the Manager to be of comparable quality to such
lower-rated convertible securities. The conversion feature into equity
securities causes the Manager to regard convertible securities as "equity
equivalents" so that the assigned rating has less impact on the investment
decision than in the case of non-convertible securities. For further
explanation, see "Special Investment Methods--Convertible Securities" in
the Additional Statement. Securities rated "BBB"/"Baa" or less may be
subject to greater market fluctuations and risks of loss of income and
principal than higher-rated securities, and may be considered to have
speculative characteristics.
The Fund is not obligated to dispose of debt securities whose rating
is reduced below investment-grade and may hold such lower-rated securities
until maturity or until investment considerations indicate that their sale
is appropriate. Risks of lower-rated securities include (i) limited
liquidity and secondary market support, (ii) the possibility that earnings
of the issuer may be insufficient to meet its debt service, and (iii) the
issuer's low creditworthiness and potential for insolvency during periods
of rising interest rates and economic downturn. See Appendix A of the
Additional Statement for a description of investment ratings. Since
market risks are inherent in all securities to varying degrees, assurance
cannot be given that the investment objective of the Fund will be met.
-- Foreign Securities. The Fund may purchase equity and debt
securities issued or guaranteed by foreign companies or foreign
governments or their agencies. The Fund may buy securities of companies
in any country, developed or underdeveloped. There is no limit on the
amount of the Fund's assets that may be invested in foreign securities.
Foreign currency will be held by the Fund only in connection with the
purchase or sale of foreign securities. If the Fund's securities are held
abroad, the countries in which they are held and the sub-custodians
holding them must be approved by the Corporation's Board of Directors.
Foreign securities have special risks. For example, foreign issuers
are not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The value of foreign investments may be
affected by changes in foreign currency rates, exchange control
regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors. More information about the risks and
potential rewards of investing in foreign securities is contained in the
Statement of Additional Information.
-- Special Risk Considerations - Borrowing. From time to time, the
Fund may increase its ownership of securities by borrowing from banks on
an unsecured basis and investing the borrowed funds (on which it will pay
interest), provided that immediately after any such borrowing, its total
assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings. Interest on borrowed money is an expense the Fund
would not otherwise incur, so that it may have substantially reduced net
investment income during periods of substantial borrowings.
-- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund may engage frequently in
short-term trading to try to achieve its objective. As a result, the
Fund's portfolio turnover may be higher than other mutual funds. The
"Financial Highlights," above, show the Fund's portfolio turnover rate
during past fiscal years. High turnover and short-term trading may cause
the Fund to have relatively larger commission expenses and transaction
costs than funds that do not engage in short-term trading. Additionally,
high portfolio turnover may affect the ability of the Fund to qualify for
tax deductions for payments made to shareholders as a "regulated
investment company" under the Internal Revenue Code. The Fund qualified
in its last fiscal year and intends to do so in the coming year, although
it reserves the right not to qualify.
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's
investment objective is a fundamental policy. The Corporation's Board of
Directors may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
-- Temporary Defensive Investments. In times of unstable market or
economic conditions, when the Manager determines it appropriate to do so
to attempt to reduce fluctuations in the value of the Fund's net assets,
the Fund may assume a temporary defensive position and invest an unlimited
amount of assets in: (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government
Securities"); (ii) commercial paper rated in the highest category by an
established rating agency; (iii) certificates of deposit or bankers'
acceptances of domestic banks with assets of $1 billion or more; (iv) any
of the foregoing maturing in one year or less (also generally known as
"cash equivalents"); (v) short-term debt obligations; or (vi) repurchase
agreements (explained below).
-- When-Issued Securities. The Fund may purchase securities on a
"when-issued" basis, and may purchase or sell such securities on a
"delayed delivery" basis. "When-issued" and "delayed delivery" refer to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. The Fund does
not intend to make such purchases for speculative purposes. During the
period between the purchase and settlement, no payment is made for the
security and no interest accrues to the buyer from the investment.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor of the
securities under a repurchase agreement fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement which causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days.
-- Short Sales Against-the-Box. The Fund may not sell securities
short, except in collateralized transactions referred to as "short sales
against-the-box." No more than 15% of the net assets of the Fund will be
held as collateral for such short sales at any one time.
-- Rights and Warrants. The Fund may invest up to 10% of its total
assets in warrants attached to securities; otherwise, it may not purchase
warrants or rights. In connection with the qualification for sale of its
shares in certain states, the Fund has undertaken that it will limit its
investments in warrants to no more than 5% of its net assets, with no more
than 2% of its net assets invested in warrants that are not listed on The
New York Stock Exchange or The American Stock Exchange. Should its shares
no longer be offered in such states, the Fund would not be subject to that
undertaking.
-- Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three years, even after including the
operations of any predecessors. Securities of these companies may have
limited liquidity and may be subject to volatility in their prices. The
Fund currently intends to invest no more than 5% of its net assets in
securities of small, unseasoned issuers.
-- Illiquid and Restricted Securities. Under the policies
established by the Corporation's Board of Directors, the Manager
determines the liquidity of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). Certain restricted securities, eligible for
resale to qualified institutional purchasers, are not subject to that
limit.
-- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Directors. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. 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. The Fund presently does not intend to engage in loans
of securities in the coming year.
-- Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." In general, a "derivative
investment" is a specially designed investment whose performance is linked
to the performance of another investment or security, such as an option,
future, index or currency. In the broadest sense derivative investments
include exchange-traded options and futures contracts (see "Writing
Covered Calls" and "Hedging with Options and Futures Contracts," below).
The risks of investing in derivative investments include not only the
ability of the company issuing the instrument to pay the amount due on the
maturity of the instrument, but also the risk that the underlying
investment or security might not perform the way the Manager expected it
to perform. The performance of derivative investments may also be
influenced by interest rate changes in the U.S. and abroad. All of this
can mean that the Fund will realize less income and/or principal than
expected. Certain derivative investments held by the Fund may trade in
the over-the-counter market and may be illiquid. See "Illiquid and
Restricted Securities," above.
Examples of derivative investments the Fund may invest in include,
among others, "index-linked" notes. These are debt securities of
companies that call for payment on the maturity of the note in different
terms than the typical note where the borrower agrees to pay a fixed sum
on the maturity of the note. The payment on maturity of an index-linked
note depends on the performance of one or more market indices, such as the
S & P 500 Index. Further examples of derivative investments the Fund may
invest in include "debt exchangeable for common stock" of an issuer or
"equity-linked debt securities" of an issuer. At maturity, the principal
amount of the debt security is exchanged for common stock of the issuer
or is payable in an amount based on the issuer's common stock price at the
time of maturity. In either case there is a risk that the amount payable
at maturity will be less than the principal amount of the debt.
Other examples of derivative investments the Fund may invest in are
currency-indexed securities. These are typically short-term or
intermediate-term debt securities whose maturity values or interest rates
are determined by reference to one or more specified foreign currencies.
Certain currency-indexed securities purchased by the Fund may have a
payout factor tied to a multiple of the movement of the U.S. dollar (or
the foreign currency in which the security is denominated) against the
movement in the U.S. dollar, the foreign currency, another currency, or
an index. Such securities may be subject to increased principal risk and
increased volatility than comparable securities without a payout factor
in excess of one, but the Manager believes the increased yield justifies
the increased risk.
-- Writing Covered Calls. The Fund may write (that is, sell) covered
call options (calls) to raise cash for liquidity purposes (for example,
to meet redemption requirements) or for defensive reasons. The Fund may
write calls only if certain conditions are met: (1) after writing any
call, not more than 25% of the Fund's total assets may be subject to
calls; (2) the calls must be listed on a domestic securities exchange or
quoted on the Automated Quotation System of the National Association of
Securities Dealers, Inc. ("NASDAQ"); in addition, calls on debt securities
may be written in the over-the-counter market; and (3) each call must be
"covered" while it is outstanding; that is, the Fund must own the
securities on which the call is written or it must own other securities
that are acceptable for the escrow arrangements required for calls. If
a covered call written by the Fund is exercised on a security that has
increased in value, the Fund will be required to sell the security at the
call price and will not be able to realize any profit on the security
above the call price.
-- Hedging With Options and Futures Contracts. The Fund may purchase
certain kinds of put and call options, Futures, options on Futures and on
broadly-based securities indices, may enter into forward contracts, and
may engage in interest rate swap transactions. These are all referred to
as "Hedging Instruments." The Fund does not use Hedging Instruments for
speculative purposes. Some of these strategies, such as selling futures,
buying puts and writing covered calls, hedge the Fund's portfolio against
price fluctuations. Other hedging strategies, such as buying futures,
writing put options and buying call options, tend to increase the Fund's
exposure to the market. The Hedging Instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
-- Puts and Calls. The Fund may purchase put options ("puts") which
relate to (1) securities that the Fund owns, (2) Interest Rate Futures or
Financial Futures, whether or not the Fund owns the particular Future in
its portfolio, or (3) securities indices. The Fund may write put options
("puts") if: (i) the put relates to a security or securities index, (ii)
the put is covered by segregated liquid assets, and (iii) not more than
50% of the Fund's net assets are segregated to cover puts. The Fund may
purchase calls on securities, broadly-based indices, Interest Rate Futures
or Financial Futures, or to terminate its obligation on a call the Fund
previously wrote. The Fund may also purchase "relative performance call
options." These are call options that have a cash settlement based on the
difference between the returns on two market indices. These options are
subject to the risk that the value of the option may decline because of
adverse movements in the market indices. A call or put may not be
purchased if the value of all of the Fund's put and call options would
exceed 5% of the Fund's total assets.
-- Interest Rate Futures and Financial Futures. The Fund may buy and
sell Futures. An Interest Rate Future obligates the seller to deliver and
the purchaser to take a specific type of debt security at a specific
future date for a fixed price. That obligation may be satisfied by actual
delivery of the debt security or by entering into an offsetting contract.
A securities index assigns relative values to the securities included in
that index and is used as a basis for trading long-term Financial Futures
contracts. Financial Futures reflect the price movements of securities
included in the index. They differ from Interest Rate Futures in that
settlement is made in cash rather than by delivery of the underlying
investment. At present, the Fund does not intend to enter into Futures
contracts and options on Futures, if, after any such purchase, the sum of
margin deposits on Futures and premiums paid on Futures options would
exceed 5% of the Fund's total assets.
-- Risks of Options and Futures Trading. Hedging instruments can be
volatile investments and may involve special risks. If the Manager uses
a Hedging Instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future or
option. Options trading involves the payment of premiums and has special
tax effects on the Fund. There are also special risks in particular
hedging strategies. For example, in writing puts, there is a risk that the
Fund may be required to buy the underlying security at a disadvantageous
price. These risks and the hedging strategies the Fund may use are
described in greater detail in the Statement of Additional
Information.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these fundamental
policies the Fund cannot do any of the following: (1) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets, more than 5% of its total assets would be invested in securities
of that issuer, or it would then own more than 10% of that issuer's voting
securities; (2) lend money except in connection with the acquisition of
debt securities which the Fund's investment policies and restrictions
permit it to purchase; the Fund may also make loans of portfolio
securities, subject to the restrictions stated under "Loans of Portfolio
Securities"; or (3) concentrate investments to the extent of 25% of its
assets in any industry; however, there is no limitation as to investment
in U.S. Government Securities.
The percentage restrictions described above and elsewhere in this
Prospectus and in the Additional Statement apply only at the time the Fund
purchases a security, and the Fund need not dispose of a security merely
because the Fund's assets have changed or the security has increased in
value relative to the size of the Fund. There are other fundamental
policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios,
or "series" of Oppenheimer Main Street Funds, Inc. (the "Corporation"),
an open-end, management investment company organized as a Maryland
corporation in 1987. The Fund commenced operations on February 3, 1988.
The Corporation is governed by a Board of Directors, which is
responsible for protecting the interests of shareholders under Maryland
corporate law. The Directors meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review the
actions of the Manager. "Directors and Officers of the Corporation" in
the Statement of Additional Information names the Directors and provides
more information about them and the officers of the Corporation. Although
the Fund is not required by law to hold annual meetings, it may hold
shareholder meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Director or to
take other action described in the Articles of Incorporation.
The Board of Directors has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. Each class has its own dividends and distributions
and pays certain expenses which may be different for the different
classes. Each class may have a different net asset value. Each share has
one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote together on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
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 Directors, under an Investment Advisory Agreement which states
the Manager's responsibilities and its fees, and describes the expenses
that the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $27 billion as
of June 30, 1994, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
-- Portfolio Manager. John Wallace, a Vice President of the Manager,
serves as the Portfolio Manager of the Fund and a Vice President of the
Corporation and has been primarily responsible for the day to day
management of the Fund's portfolio since January 1991. During the past
five years, Mr. Wallace has also served as an officer and portfolio
manager for other OppenheimerFunds, prior to which he was a securities
analyst and assistant portfolio manager for the Manager.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.65% of the first $200 million of
net assets of the Fund, 0.60% of the next $150 million, 0.55% of the next
$150 million and 0.45% of net assets in excess of $500 million. The
Fund's management fee for its last fiscal year was 0.58% of average annual
net assets for Class A shares and 0.57% for Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Directors' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
-- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "average annual total
return." These terms are used to show the performance of each class of
shares separately, because the performance of each class of shares will
usually be different, as a result of the different kinds of expenses each
class bears. This performance information may be useful to help you see
how well your investment has done and to compare it to other funds or
market indices, as we have done below.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary, depending on
market conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
-- Total Returns. There are different types of total returns used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may also be
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge that applies to the period for
which total return is shown. When total returns are shown for a one-year
period for Class C shares, they reflect the effect of the contingent
deferred sales charge. They may also be shown based on the change in net
asset value, without considering the effect of the contingent deferred
sales charge.
How Has the Fund Performed? Below is a discussion of the Fund's
performance during its last fiscal year ended June 30, 1994, followed by
a graphical comparison of the Fund's performance to appropriate broad-
based market indices.
-- Management's Discussion of Performance. During the Fund's fiscal
year ended June 30, 1994, the performance of the income and equity markets
was impacted by a number of economic factors, including four increases by
the Federal Reserve Bank in short-term interest rates from early February,
1994 through June 30, 1994. These increases adversely affected the
growth stocks held by the Fund for capital gains, as well as the
telecommunications and utilities issues held by the Fund for their yield.
With the rise in interest rates, convertible securities became attractive,
and the Fund added to positions in several shorter-term issues. The Fund
continued to invest in consumer companies the Manager believes are
positioned to increase market share and profit in the U.S., as well as in
industrial companies that the Manager believes should benefit from an
improving global economy. The Manager continuously monitors the income
and equity markets and actively manages the Fund to enable it to benefit
from new developments as they occur.
-- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in Class A and
Class C shares of the Fund held until June 30, 1994; in the case of Class
A shares, from the commencement of operations on February 3, 1988, and in
the case of Class C shares, from the inception of the Class on December
1, 1993, with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 5.75% maximum
initial sales charge on Class A shares and the 1.0% contingent deferred
sales charge on Class C shares. Class B shares were not publicly offered
during the fiscal year ended June 30, 1994. Accordingly, no information
is presented on Class B shares in the graph below.
The Fund's performance is compared to the performance of the S&P 500
Index and the Lipper Growth and Income Fund Index. The S&P 500 Index is
a broad-based index of equity securities widely regarded as a general
measurement of the performance of the U.S. equity securities market. The
Lipper Growth & Income Fund Index is an unmanaged index representing the
average performance of mutual funds having an objective of growth and
income as tracked by Lipper Analytical Services, Inc., and is widely
recognized as a measure of the performance of that category of mutual
funds. The S&P 500 Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data below shows the effect of taxes. Also, the
Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments
are not limited to the securities in the S&P 500 Index, which tend to be
securities of larger, well-capitalized companies. Moreover, the index
data does not reflect any assessment of the risk of the investments
included in the index.
Oppenheimer Main Street Income & Growth Fund
Comparison of Change in Value of
$10,000 Hypothetical Investment in:
Oppenheimer Main Street Income
& Growth Fund, Lipper Growth [Graph]
& Income Fund Index and S&P 500 Index
Past performance is not predictive of future performance.
Avg. Annual Total Returns at 6/30/94
1 Year 5 Year Life*
- ---------------------------------------------
A Shares 7.76% 21.56% 20.70%
- ----------------------------------------------
Cumulative Total Return of the Fund at 6/30/94
Life of Class**
- -----------------------------------------------
C Shares* -1.96%%
- -----------------------------------------------
*The Fund (Class A Shares) began
operations on 2/3/88.
**Class C shares of the Fund first publicly
offered on 12/1/93.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
-- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, and you sell any of those shares within 18
months after your purchase, you will pay a contingent deferred sales
charge, which dollar value will vary depending on the amount you invested.
-- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares.
-- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, deciding which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. Because the Fund's operating costs
that apply to a class of shares and the effect of the different types of
sales charges on your investment will vary your investment results over
time, the most important factors to consider are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which offer all three classes of shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund, based on the
sales charge rates that apply to each class, and considering the effect
of the asset-based sales charges on Class B and Class C expenses (which
will affect your investment return), and, for the sake of comparison, we
have assumed that there is a 10% rate of appreciation in your investment
each year. Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Fund's actual investment returns,
and the operating expenses borne by each class of shares, and which class
of shares you invest in. The factors discussed below are not intended to
be investment advice or recommendations, because each investor's financial
considerations are different.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on How Much You Plan To Invest. For
example, the reduced sales charges available for larger purchases of Class
A shares may, over time, offset the effect of paying an initial sales
charge on your investment (which reduces the amount of your investment
dollars used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B or C for which
no initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge on
Class C shares will have a greater impact on your account over the longer
term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B or C
shares from a single investor. Of course, these examples are based on
approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, using the assumed annual performance
return stated above, and therefore should not be relied on as rigid
guidelines.
Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
-- Are There Differences in Account Features That Matter To You?
Because some features may not be available to Class B or C shareholders,
or other features (such as Automatic Withdrawal Plans) may not be
advisable (because of the effect of the contingent deferred sales charge)
in non-retirement accounts for Class B or Class C shareholders, you should
carefully review how you plan to use your investment account before
deciding which class of shares to buy. Additionally, dividends payable to
Class B and Class C shareholders will be reduced by the additional
expenses borne by those classes that are not borne by Class A, such as the
Class B and Class C asset-based sales charges described below and in the
Statement of Additional Information.
Also, because not all of the OppenheimerFunds currently offer Class
B and Class C shares, and because exchanges are permitted only to the same
class of shares in another of the OppenheimerFunds, you should consider
how important the exchange privilege is likely to be for you.
-- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling or
servicing one class of shares than another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charges is the same as the purpose of the front-
end sales charge on Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for sales of
shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure
to specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day"). If you buy shares
through a dealer, the dealer must receive your order by 4:00 P.M., on a
regular business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which is
normally 5:00 P.M. The Distributor may reject any purchase order for the
Fund's shares, in its sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Front-End Sales Charge Commission
As a Percentage of: as Percentage
Offering Amount of Offering
Amount of Purchase Price Invested Price
- ------------------------------------------------------------------------
<S> <C> <C> <C>
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%
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. However, that
commission will be paid only on the amount of those purchases in excess
of $1 million that were not previously subject to a front-end sales charge
and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those
sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
-- Right of Accumulation. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates act as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) retirement distributions or loans
to participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Articles of Incorporation or adopted by the Board of Directors.
-- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Corporation's Board of Directors authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since
Beginning of
Month in which Contingent Deferred Sales Charge
Purchase Order On Redemptions in That Year
Was Accepted (As % of Amount Subject to Charge)
- ------------------------------------------------------
0-1 5.0%
- ------------------------------------------------------
1-2 4.0%
- ------------------------------------------------------
2-3 3.0%
- ------------------------------------------------------
3-4 3.0%
- ------------------------------------------------------
4-5 2.0%
- ------------------------------------------------------
5-6 1.0%
- ------------------------------------------------------
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
-- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), and (3) returns of excess
contributions to Retirement Plans.
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution 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 "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal service for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Directors may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for certain expenses it
incurred before the Plan was terminated.
Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of
1.0% will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
-- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), and (3) returns of excess
contributions to Retirement Plans.
The contingent deferred sales charge is also waived on Class C shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
Because the Distributor's actual expenses in selling Class C shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class C shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Directors may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for certain expenses it
incurred before the plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
-- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Class A shares that you sell, and
Class B or Class C shares on which you paid a contingent deferred sales
charge when you redeemed them. You must be sure to ask the Distributor for
this privilege when you send your payment. Please consult the Statement
of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
-- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
-- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
-- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment
-- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The check is not payable to all shareholders listed on the account
statement
-- The check is not sent to the address of record on your statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or 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 as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholders Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
-- To redeem shares through a service representative, call 1-800-852-
8457
-- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges between already established
accounts on PhoneLink described below. To exchange shares, you must meet
several conditions:
-- Shares of the fund selected for exchange must be available for
sale in your state of residence
-- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
-- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
-- You must meet the minimum purchase requirements for the fund you
purchase by exchange
-- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchange, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling the
Distributor at 1-800-525-7048. Exchanges of shares involve a redemption
of the shares of the fund you own and a purchase of shares of the other
fund.
There are certain exchange policies you should be aware of:
-- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
-- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Corporation's Board of
Directors has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Directors at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
-- Under unusual circumstances, shares of the Fund may be redeemed
"in kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname and address on
the Fund's records. However, each shareholder may call the Transfer Agent
at 1-800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on a quarterly basis and
normally pays those dividends to shareholders in March, June, September
and December, but the Board of Directors can change that date. Dividends
paid on Class A shares generally are expected to be higher than for Class
B and Class C shares because expenses allocable to Class B and Class C
shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
calendar year. Short-term capital gains are treated as dividends for tax
purposes. There can be no assurances that the Fund will pay any capital
gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
-- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
-- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
-- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
-- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or loss
is the difference between the price you paid for the shares and the price
you received when you sold them.
-- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
Graphic material included in Prospectus of Oppenheimer Main Street
Income & Growth Fund: "Comparison of Total Return of Oppenheimer Main
Street Income & Growth Fund with the S&P 500 Index and the Lipper Growth
& Income Fund Index - Change in Value of a $10,000 Hypothetical
Investment"
A linear graph will be included in the Prospectus of Oppenheimer Main
Street Income & Growth Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund. In the case of the Fund's Class A shares, that graph will
cover the period from February 3, 1988 (commencement of operations)
through June 30, 1994 and in the case of the Fund's Class C shares will
cover the period from the inception of the class (December 1, 1993)
through June 30, 1994. Class B shares were not publicly offered during
the fiscal year ended 6/30/94. Accordingly, no information on Class B
shares is presented in the table below. The graph will compare such
values with hypothetical $10,000 investments over the same time periods
in the S&P 500 Index and the Lipper Growth & Income Fund Index. Set forth
below are the relevant data points that will appear on the linear graph.
Additional information with respect to the foregoing, including a
description of the S&P 500 Index and the Lipper Growth & Income Index, is
set forth in the Prospectus under "Performance of the Fund - Comparing the
Fund's Performance to the Market."
<TABLE>
<CAPTION>
Oppenheimer
Main Street Lipper Growth
Fiscal Year Income & S&P 500 & Income Fund
(Period) Ended Growth Fund A Index Index
<S> <C> <C> <C>
2/3/88 $ 9,425 $10,000 $10,000
6/30/88 $ 9,955 $10,815 $11,082
6/30/89 $11,859 $13,034 $13,039
6/30/90 $12,934 $15,178 $14,226
6/30/91 $14,304 $16,297 $15,071
6/30/92 $19,952 $18,479 $17,212
6/30/93 $29,205 $20,994 $20,080
6/30/94 $33,393 $21,288 $20,906
Oppenheimer
Main Street Lipper Growth
Fiscal Year Income & S&P 500 & Income Fund
(Period) Ended Growth Fund C Index Index
12/1/93 $10,000 $10,000 $10,000
6/30/94 $ 9,804 $ 9,778 $ 9,970
</TABLE>
(1)Class C shares of the Fund were first publicly offered on December 1,
1993.
<PAGE>
Oppenheimer Main Street Income & Growth Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent O P P E N H E I M E R
Oppenheimer Shareholder Services
P.O. Box 5270 Main Street
Denver, Colorado 80217 Income &
1-800-525-7048 Growth Fund
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202 Prospectus
Effective October 1, 1994
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus or the
Additional Statement, and if given or made,
such information and representation must not
be relied upon as having been authorized by
the Corporation, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor,
Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy
any of the securities offered hereby in any
state to any person to whom it is unlawful
to make such offer in such state.
OppenheimerFunds
PR701 (10/94) Printed on recycled paper
<PAGE>
Oppenheimer Main Street Income & Growth Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated October 1, 1994
This Statement of Additional Information of Oppenheimer Main Street
Income & Growth Fund is not a Prospectus. This document contains
additional information about the Fund and supplements information in the
Prospectus dated October 1, 1994. It should be read together with the
Prospectus, which may be obtained upon written request to the Fund's
Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above.
Contents
Page
About the Fund
Investment Objective and Policies
Investment Policies and Strategies
Other Investment Techniques and Strategies
Other Investment Restrictions
How the Fund is Managed
Organization and History
Directors and Officers of the Corporation
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
Appendix A: Description of Ratings
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
-- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Investing in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians holding them must be approved by the
Corporation's Board of Directors under applicable rules of the Securities
and Exchange Commission.
-- Risks of Foreign Investing. Investments in foreign securities
present special additional risks and considerations not typically
associated with investments in domestic securities: reduction of income
by foreign taxes; fluctuation in value of foreign portfolio investments
due to changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement
of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; and unfavorable differences between the U.S. economy and
foreign economies. In the past, U.S. Government policies have
discouraged certain investments abroad by U.S. investors, through
taxation or other restrictions, and it is possible that such restrictions
could be re-imposed.
-- U.S. Government Securities. Obligations of U.S. Government
agencies or instrumentalities (including mortgage-backed securities) may
or may not be guaranteed or supported by the "full faith and credit" of
the United States. Some are backed by the right of the issuer to borrow
from the U.S. Treasury; others, by discretionary authority of the U.S.
Government to purchase the agencies' obligations; while others are
supported only by the credit of the instrumentality. All U.S. Treasury
obligations are backed by the full faith and credit of the United States.
If the securities are not backed by the full faith and credit of the
United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert
a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. The Fund will invest in
U.S. Government Securities of such agencies and instrumentalities only
when the Manager is satisfied that the credit risk with respect to such
instrumentality is minimal.
-- Convertible Securities. While convertible securities are a form
of debt security in many cases, their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as
"equity equivalents" so that the rating assigned to the security has less
impact on the investment decision than in the case of non-convertible
fixed income securities. To determine whether convertible securities
should be regarded as "equity equivalents," the Manager examines the
following factors: (1) whether, at the option of the investor, the
convertible security can be exchanged for a fixed number of shares of
common stock of the issuer, (2) whether the issuer of the convertible
securities has restated its earnings per share of common stock on a fully
diluted basis (considering the effect of conversion of the convertible
securities), and (3) the extent to which the convertible security may be
a defensive "equity substitute," providing the ability to participate in
any appreciation in the price of common stock.
Other Investment Techniques and Strategies
-- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in securities on a "when-issued" or
"delayed delivery" basis. Payment for and delivery of the securities
generally settles within 45 days of the date the offer is accepted. The
purchase price and yield are fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from
the investment. However, the Fund intends to be as fully invested as
possible and will not invest in when-issued securities if its income or
net asset value will be materially adversely affected. At the time the
Fund makes the commitment to purchase a security on a when-issued basis,
it will record the transaction on its books and reflect the value of the
security in determining its net asset value. It will also segregate cash
or other high quality liquid securities equal in value to the commitment
for the when-issued securities. While when-issued securities may be sold
prior to settlement date, the Fund intends to acquire the securities upon
settlement unless a prior sale appears desirable for investment reasons.
There is a risk that the yield available in the market when delivery
occurs may be higher than the yield on the security acquired.
-- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Corporation's
Board of Directors from time to time. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate
effective for the period during which the repurchase agreement is in
effect. The majority of these transactions run from day to day, and
delivery pursuant to the resale typically will occur within one to five
days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act, collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
-- Short Sales Against-the-Box. In this type of short sale, while
the short position is open, the Fund must own an equal amount of the
securities sold short, or by virtue of ownership of other securities have
the right, without payment of further consideration, to obtain an equal
amount of the securities sold short. Short sales against-the-box may be
made to defer, for Federal income tax purposes, recognition of gain or
loss on the sale of securities "in the box" until the short position is
closed out.
-- Rights and Warrants. Warrants basically are options to purchase
equity securities at specific prices valid for a specific period of time.
Their prices do not necessarily move parallel to the prices of the
underlying securities. Rights are similar to warrants, but normally have
a short duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.
-- Investing in Small, Unseasoned Companies. The securities of
small, unseasoned companies may have a limited trading market, which may
adversely affect the Fund's ability to dispose of them and can reduce the
price the Fund might be able to obtain for them. If other investment
companies and investors that invest in this type of securities trade the
same securities when the Fund attempts to dispose of its holdings, the
Fund may receive lower prices than might otherwise be obtained, because
of the thinner market for such securities.
-- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Directors of the Corporation
or by the Manager under Board-approved guidelines. Those guidelines take
into account the trading activity for such securities and the availability
of reliable pricing information, among other factors. If there is a lack
of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call, it receives a
premium and agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period (usually
not more than nine months) at a fixed exercise price (which may differ
from the market price of the underlying security), regardless of market
price changes during the call period. The Fund has retained the risk of
loss should the price of the underlying security decline during the call
period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium previously received
on the call written is more or less than the price of the call
subsequently purchased. A profit may also be realized if the call expires
unexercised, because the Fund retains the underlying security and the
premium received. Any such profits are considered short-term capital
gains for Federal income tax purposes, and when distributed by the Fund
are taxable as ordinary income. If the Fund could not effect a closing
purchase transaction due to lack of a market, it would have to hold the
callable securities until the call expired or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
-- Hedging With Options and Futures Contracts. The Fund may use
Hedging Instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell
Futures, (ii) buy puts on such Futures or securities, or (iii) write
covered calls on securities or Futures. When hedging to permit the Fund
to establish a position in the securities market as a temporary substitute
for purchasing particular debt or equity securities (which the Fund will
normally purchase, and then terminate the hedging position), the Fund may:
(i) buy Futures, or (ii) buy calls on such Futures or on securities.
Normally, the Fund would then purchase the securities and terminate the
hedging portion.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities on the underlying cash market.
In the future, the Fund may employ hedging instruments and strategies that
are not presently contemplated but which may be developed, to the extent
such investment methods are consistent with the Fund's investment
objective, and are legally permissible and disclosed in the Prospectus.
Additional information about the Hedging Instruments the Fund may use is
provided below.
-- Purchasing Calls and Puts. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. When the Fund purchases a
call (other than in a closing purchase transaction), it pays a premium and
has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a
fixed exercise price. The Fund benefits only if the call is sold at a
profit or if, during the call period, the market price of the underlying
investment is above the sum of the call price plus the transaction costs
and the premium paid for the call and the call is exercised. If the call
is not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When the
Fund purchases a call or put (discussed below) on an index or Future, it
pays a premium, but settlement is in cash rather than by delivery of the
underlying investment to the Fund. Gain or loss depends on changes in the
index in question (and thus on price movements in the securities market
generally) rather than on price movements in individual securities or
futures contracts.
When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a
seller of a put on a corresponding investment during the put period at a
fixed exercise price. Buying a put on securities or Futures the Fund owns
enables the Fund to attempt to protect itself during the put period
against a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise price
to a seller of a corresponding put. If the market price of the underlying
investment is equal to or above the exercise price and, as a result, the
put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to sell the underlying investment; the put may, however, be sold prior to
expiration (whether or not a profit).
-- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period. The
Fund will not write puts if, as a result, more than 50% of the Fund's net
assets would be required to be segregated to cover such put options.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains equal to or above the exercise price. However, the Fund has also
assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though
the value of the investment may fall below the exercise price less
transaction costs incurred. If the put expires unexercised, the Fund (as
the writer of the put) realizes a gain in the amount of the premium less
the transaction costs incurred. If the put is exercised, the Fund must
fulfill its obligation to purchase the underlying investment at the
exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the
underlying securities. The Fund therefore foregoes the opportunity of
investing the segregated assets or writing calls against those assets.
As long as the obligation of the Fund as the put writer continues, it may
be assigned an exercise notice by the broker-dealer through whom such
option was sold, requiring the Fund to take delivery of the underlying
security against payment of the exercise price. The Fund has no control
over when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the termination
of its obligation as the writer of the put. This obligation terminates
upon expiration of the put, or such earlier time at which the Fund effects
a closing purchase transaction by purchasing a put of the same series as
that previously sold. Once the Fund has been assigned an exercise notice,
it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As described
above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
-- Interest Rate Futures and Stock Index Futures. Stock Index
Futures require settlement in cash equal in amount to a specified dollar
amount multiplied by the difference between the index value on the last
trading day of the future and the price at which the future was originally
struck. No physical delivery of the stocks in the index is made.
Interest Rate Futures obligate the seller to deliver (and the purchaser
to take) a specific type of debt security or cash at a specified future
date for a fixed price. That obligation may be satisfied by actual
delivery of that security or cash. However, all Futures are generally
terminated by entering into an offsetting contract. No price is paid or
received upon the purchase or sale of an Interest Rate Future or Stock
Index Future. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). The initial margin will be deposited
with the Fund's Custodian in an account registered in the futures broker's
name; however, the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be paid to or by the futures broker on a daily basis. Prior
to expiration of the Future, if the Fund elects to close out its position
by taking an opposite position, a final determination of variation margin
is made, additional cash is required to be paid by or released to the
Fund, and any loss or gain is realized for tax purposes. Although
Interest Rate Futures by their terms call for settlement by delivery or
acquisition of debt securities, in most cases the obligation is fulfilled
by closing out the position. Stock Index Futures are similar except that
settlement is made in cash, and net gain or loss on options on such
Futures depends on price movements of the securities included in the
index. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
-- Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set
at the time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction. The Fund will thereby be able to protect itself
against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between
the date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made or
received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross-hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with respect to position
hedges and cross-hedges. If the value of the securities placed in a
separate account declines, additional cash or securities will be placed
in the account on a daily basis so that the value of the account will
equal the amount of the Fund's commitments with respect to such contracts.
As an alternative to maintaining all or part of the separate account, the
Fund may purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
forward contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not
entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the
Manager must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
-- Additional Information About Hedging Instruments and Their Use.
The Corporation's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the securities on which
the Fund has written options or as to other acceptable escrow securities,
so that no margin will be required for such transactions. OCC will
release the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be closed out
only on a market which provides secondary trading for options of the same
series, and there is no assurance that a liquid secondary market will
exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. This formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security ("in-the-money"). For any OTC
option the Fund writes, it will treat as illiquid (for purposes of the
restriction on illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The SEC is evaluating the
general issue of whether or not OTC options should be considered as liquid
securities, and the procedure described above could be affected by the
outcome of that evaluation.
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on securities or Futures may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to sell
the underlying investment for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, a put or an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher, on a relative
basis, than those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation
to the market value of such investments and consequently, put and call
options offer large amounts of leverage. The leverage offered by trading
in options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investment.
-- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule ("CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC") under the Commodity Exchange Act (the
"CEA"). The CEA excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA), if the Fund complies
with the CFTC Rule. Under these restrictions, the Fund will not, as to
any positions, whether long, short or a combination thereof, enter into
Futures transactions and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use Futures
and options thereon solely for "bona fide hedging purposes" within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, cash or readily-marketable, short-
term (maturing in one year or less) debt instruments in an amount equal
to the market value of the securities underlying such Future, less the
margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months, whether
or not they were purchased on the exercise of a call held by the Fund;
(ii) purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts written or
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held less than three months.
-- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
on the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
discussed in the Prospectus and above, there is a risk in using short
hedging by: (i) selling Futures or (ii) purchasing puts on Futures to
attempt to protect against declines in the value of the Fund's portfolio
securities, that the prices of such Futures or the applicable index will
correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's securities. The ordinary spreads between prices in
the cash and futures markets are subject to distortions, due to
differences in the natures of those markets. First, all participants in
the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions
which could distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures market may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the index
applicable to its Hedging Instruments. To compensate for the imperfect
correlation of movements in the price of the portfolio securities being
hedged and movements in the price of the Hedging Instruments, the Fund may
use Hedging Instruments in a greater dollar amount than the dollar amount
of portfolio securities being hedged if the historical volatility of the
prices of such portfolio securities being hedged is more than the
historical volatility of the applicable index. It is also possible that
where the Fund has used Hedging Instruments in a short hedge, the market
may advance and the value of portfolio securities held in the Fund's
portfolio may decline. If this occurred, the Fund would lose money on the
Hedging Instruments and also experience a decline in value in its
portfolio securities. However, while this could occur for a very brief
period or to a very small degree, over time the value of a diversified
portfolio of securities will tend to move in the same direction as the
indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the
securities markets as a temporary substitute for the purchase of
individual securities (long hedging) by buying Futures and/or calls on
such Futures or securities, it is possible that the market may decline.
If the Fund then concludes not to invest in securities at that time
because of concerns as to possible further market decline or for other
reasons, it will realize a loss on the Hedging Instruments that is not
offset by a reduction in the price of the securities purchased. In the
future, the Fund may employ hedging instruments and strategies that are
not presently contemplated but which may be developed, to the extent such
investment methods are consistent with the Fund's investment objective,
are legally permissible and adequately disclosed.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a majority vote is defined as the vote of the
holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) invest in
interests in oil or gas exploration or development programs or in
commodities; however, the Fund may buy and sell any of the Hedging
Instruments that it may use as permitted by any of its other policies,
whether or not such Hedging Instrument is considered to be a commodity or
commodity contract; (2) invest in real estate or in interests in real
estate; however, the Fund may purchase securities of issuers holding real
estate or interests therein (including securities of real estate
investment trusts); (3) purchase securities on margin; however, the Fund
may make margin deposits in connection with the use of Hedging Instruments
as permitted by any of its other policies; (4) invest in companies for the
purpose of acquiring control or management thereof; (5) underwrite
securities of other companies, except insofar as it might be deemed to be
an underwriter for purposes of the Securities Act in the resale of any
securities held in its own portfolio; (6) invest or hold securities of any
issuer if those officers and directors of the Corporation or its adviser
owning individually more than 1/2 of 1% of the securities of such issuer
together own more than 5% of the securities or such issuer; (7) invest in
other open-end investment companies, or invest more than 5% of its net
assets through open market purchases in closed-end investment companies,
including small business investment companies, nor make any such
investments at commission rates in excess of normal brokerage commissions;
or (8) pledge, mortgage or otherwise encumber, transfer or assign any of
its assets to secure a debt; collateral arrangements for premium and
margin payments in connection with Hedging Instruments are not deemed to
be a pledge of assets.
The Fund has undertaken, in connection with the qualification for
sale of its shares in certain states, (a) with respect to investment
restriction (1) above, not to invest in oil, gas or other mineral leases,
and (b) with respect to investment restriction (2) above, not to invest
in real estate limited partnerships unless such securities are determined
by the Board to be readily marketable and not to invest more than 10% of
its total assets in the securities of one or more real estate investment
trusts. Should its shares no longer be offered in such states, the Fund
would not be subject to the foregoing undertakings.
How the Fund is Managed
Organization and History. It is not contemplated that regular annual
shareholder meetings will be held. The Fund will hold meetings when
required to do so by the Investment Company Act or other applicable law,
or when a shareholder meeting is called by the Directors or upon proper
request of the shareholders. A meeting of shareholders will be called for
a specified purpose (which may include removal of a Director) upon the
written request of the record holders of at least 25% of the outstanding
shares eligible to be voted at that meeting. The Fund has undertaken that
it will then either give the applicants access to the Fund's shareholder
list or mail the applicants' communication to all other shareholders at
the applicants' expense.
Directors and Officers of the Corporation. The Corporation's Directors
and officers and their principal occupations and business affiliations
during the past five years are listed below. All of the Directors are
also trustees, directors or managing general partners of Centennial
America Fund, L.P., Oppenheimer Limited-Term Government Fund, Oppenheimer
Tax-Exempt Bond Fund, Oppenheimer Equity Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Cash Reserves, Oppenheimer High Yield Fund,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Short-Term Income
Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Champion High Yield Fund, Oppenheimer Integrity Funds, The New
York Tax-Exempt Income Fund, Inc., Centennial Government Trust, Centennial
Money Market Trust, Centennial California Tax Exempt Trust, Centennial Tax
Exempt Trust, Centennial New York Tax Exempt Trust and Daily Cash
Accumulation Fund, Inc. (all of the foregoing funds are collectively
referred to as the "Denver-based OppenheimerFunds"). Messrs. Bishop,
Bowen, Donohue, Farrar and Zack hold similar positions as officers of all
such funds. Mr. Fossel is President and Mr. Swain is Chairman of the
Denver-based OppenheimerFunds. As of September 26, 1994, the Directors
and officers in the aggregate owned less than 1% of the Fund's and the
Corporation's respective outstanding shares.
Robert G. Avis, Director*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Director
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Director
1447 Vista del Cerro, Las Cruces, New Mexico 88005
Vice President of McDonnell Douglas Space Systems Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Director*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a Director of the Manager;
President and director of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; President and a Director of
HarbourView Asset Management Corp. ("HarbourView"), a subsidiary of
the Manager; a Director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager; formerly President of the Manager.
Raymond J. Kalinowski, Director
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies Ltd.; formerly Vice Chairman and a
director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Director
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Director
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Director
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a Director of the Van Gilder Insurance Corp. (insurance
brokers).
James C. Swain, Chairman and Director*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and a Director of Centennial
Asset Management Corporation, an investment adviser subsidiary of the
Manager ("Centennial"); formerly Chairman of the Board of SSI.
John L. Wallace, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly a Securities Analyst and Assistant Portfolio Manager for the
Manager.
Andrew J. Donohue, Vice President
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer
of other OppenheimerFunds; formerly Senior Vice President and
Associate General Counsel of the Manager and the Distributor, Partner
in, Kraft & McManimon (a law firm), an officer of First Investors
Corporation (a broker-dealer) and First Investors Management Company,
Inc. (broker-dealer and investment adviser), and director and an
officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a Director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers, Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
[FN]
- -----------------
*A Director who is an "interested person" as defined in the Investment
Company Act.
-- Remuneration of Directors. The officers of the Corporation are
affiliated with the Manager. They and the Directors of the Corporation
who are affiliated with the Manager (Messrs. Fossel and Swain, both of
whom are an officer and Director) and receive no salary or fee from the
Corporation. During the fiscal year ended June 30, 1994, the remuneration
(including expense reimbursements) attributable to the Fund paid to all
Directors of the Corporation (excluding Messrs. Fossel and Swain) for
services as Directors and as members of one or more committees totaled
$2,648. The Corporation has an Audit Committee, comprised of William A.
Baker (Chairman), Charles Conrad, Jr. and Robert M. Kirchner. This
Committee meets regularly to review audits, audit procedures, financial
statements and other financial and operational matters of the Fund.
-- Major Shareholders. As of September 26, 1994, the only person who
owned of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding Class A or Class C shares was Merrill Lynch
Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive E FL3, Jacksonville,
Florida 32246 which was the record owner of 2,788,827.460 Class A shares
(approximately 5.64% of the Class A shares then outstanding) and
2,969,881.812 Class C shares (approximately 24.29% of the Class C shares
then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corporation ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom may also
serve as officers of the Corporation and two of whom (Messrs. Fossel and
Swain) serve as directors of the Corporation.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Corporation on behalf of the Fund
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration of the Fund, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Corporation. Expenses with respect to the Corporation's
two series, including the Fund, are allocated in proportion to the net
assets of the respective funds except where allocations of direct expenses
could be made. Certain expenses are further allocated to certain classes
of shares of a series as explained in the Prospectus and under "How to Buy
Shares" below. The advisory agreement lists examples of expenses paid by
the Corporation, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Directors, legal and audit
expenses, transfer agent and custodian expenses, share issuance costs,
certain printing and registration expenses and non-recurring expenses,
including litigation costs. During the Fund's fiscal years ended June 30,
1992, 1993 and 1994, the management fees paid by the Corporation on behalf
of the Fund to the Manager were $149,622, $253,182 and $1,817,623,
respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has voluntarily undertaken that the total expenses of the Fund in any
fiscal year (including the management fee but excluding taxes, interest,
brokerage fees and extraordinary expenses such as litigation costs), shall
not exceed the most stringent applicable state regulatory limitation.
Pursuant to the undertaking, the Manager's fee will be reduced at the end
of a month so that there will not be any accrued but unpaid liability
under this undertaking. Currently, the most stringent limitation is
imposed by California, and limits expenses (with specified exclusions) to
2.5% of the first $30 million of average annual net assets, 2.0% of the
next $70 million, and 1.5% of the average annual net assets in excess of
$100 million. Any assumption of the Fund's expenses under this limitation
lowers the Fund's overall expense ratio and increases its total return
during the time such expenses are assumed. The Manager reserves the right
to vary the amount of expenses assumed or eliminate the assumption of
expenses altogether.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties under the advisory agreement, the Manager is not
liable for any loss resulting from a good faith error or omission on its
part with respect to any of its duties thereunder. The advisory agreement
permits the Manager to act as investment adviser for any other person,
firm or corporation, and to use the name "Main Street" 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 right of the Corporation to use the name "Main
Street" as part of its name and the name of the Fund may be withdrawn.
-- The Distributor. Under its General Distributor's Agreement with
the Corporation, the Distributor acts as the Corporation's principal
underwriter in the continuous public offering of shares of the Fund's
Class A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales (other
than those paid under the Rule 12b-1 plans), including advertising and the
cost of printing and mailing prospectuses, other than those furnished to
existing shareholders, are borne by the Distributor. During the Fund's
fiscal years ended June 30, 1992, 1993 and 1994, the aggregate amount of
sales charges on sales of the Fund's Class A shares was $310,560, $784,013
and $23,502,310, respectively, of which the Distributor retained in the
aggregate $6,147 and $87,916 for the fiscal years ended June 30, 1992 and
1993 and of which the Distributor and an affiliated broker-dealer retained
$6,373,770 during the fiscal year ended June 30, 1994. Contingent
deferred sales charges collected by the Distributor on the redemption of
Class C shares during the period December 1, 1993 (the commencement of the
offering of those shares) through June 30, 1994 totaled $_______. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, refer to "Distribution and
Service Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions of the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers (as that term is defined in the Investment Company
Act), as may, in the Manager's best judgment based on all relevant
factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need not
seek competitive commission bidding or base its selection on "posted"
rates, but 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 the Board of
Directors. Purchases of securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and purchases from
dealers include a spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers 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 have charged,
if a good faith determination is made by the Manager that the commission
is reasonable in relation to the services provided. Subject to the
foregoing considerations, the Manager may also consider sales of shares
of the Fund and the other funds managed by the Manager and its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the Agreement, when brokers are used for the Fund's
portfolio transactions, allocations of brokerage are made by portfolio
managers under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
connection with transactions on foreign exchanges, the Fund may be
required to pay fixed brokerage commissions and thereby forego the benefit
of negotiated commissions available in U.S. markets. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transactions in the securities to which the
option relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager or
it affiliates are combined. Transactions effected pursuant to such
combined orders are averaged as to price and allocated in accordance with
the purchase or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolios or being considered for purchase. The Board,
including the independent Directors, annually reviews information
furnished by the Manager relative to the commissions paid to brokers
furnishing such services in an effort to ascertain that the amount of such
commissions was reasonably related to the value or the benefit of such
services. The Board of Directors has permitted the manager to use
concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
During the Fund's fiscal years ended June 30, 1992, 1993 and 1994,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $141,035,
$292,787 and $6,479,920, respectively. During the fiscal year ended June
30, 1994, $616,284 was paid by the Fund to brokers for research services;
the aggregate dollar amounts of these transactions was $292,454,269. The
transactions giving rise to those commissions were allocated in accordance
with the internal allocation procedures described above.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return", "total return" and "total return
at net asset value" of an investment in each class of the Fund may be
advertised. An explanation of how average annual total return and total
return are calculated for each class and the components of those
calculations is set forth below. No total return calculations are
presented below for Class B shares because no shares of that class were
publicly issued during the fiscal year ended June 30, 1994.
-- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return. It is the
rate of return based on factors which include a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a number of years
("n") with an Ending Redeemable Value ("ERV") of that investment,
according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class A shares
of the Fund (using the method described above) for the one and five year
periods ended June 30, 1994 and for the period from February 3, 1988
(commencement of operations) to June 30, 1994 were _____%, _____% and
20.70%, respectively.
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses the same
factors as average annual total return, but it does not average the rate
of return on an annual basis. Cumulative total return is determined as
follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class C shares, the 1.0% contingent
deferred sales charge is applied to the investment result for the one-year
period (or less). The formulas also assume that all dividends and capital
gains distributions during the period are reinvested at net asset value
per share, and that the investment is redeemed at the end of the period.
The "total return" on Class A shares for the period from February 3,
1988 (commencement of operations) to June 30, 1994 was 233.93%. The
cumulative total return on Class C shares for the period from December 1,
1993 (the commencement of the offering of the shares) through June 30,
1994 was (1.96%).
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The "total return at net asset
value" on the Fund's Class A shares for the one year period ended June 30,
1994 was 14.34%. The total return at net asset value for the Fund's Class
C shares for the period from December 1, 1993 through June 30, 1994 was
0.77%.
Other Performance Comparisons. From time to time, the Fund may publish
the ranking of the performance of its Class A, Class B or Class C shares
by Morningstar, Inc. ("Morningstar"), an independent mutual fund
monitoring service that ranks various mutual funds, including the Fund,
monthly in broad investment categories (equity, taxable bond, municipal
bond and hybrid) based upon the funds' three, five and ten-year average
annual total returns (when available) and a risk factor that reflects fund
performances relative to three-month U.S. Treasury bill monthly returns.
Such returns are adjusted for fees and sales loads. There are five
ranking categories with a corresponding number of stars: highest (5),
above average (4), neutral (3), below average (2) and lowest (1). The top
ten percent of the funds, series or classes in an investment category
receive five stars; 22.5% receive four stars; 35% receive three stars;
22.5% receive two stars; and the bottom 10% receive one star. Morningstar
ranks the Fund in relation to other equity funds.
From time to time the Fund may publish the ranking of its performance
of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent service. Lipper monitors
the performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund is ranked against
(i) all other open-end mutual funds and (ii) the other open-end mutual
funds in the same category as the Fund, that is, growth and income funds.
The Lipper performance analysis includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration.
From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper and
Morningstar.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However,
certain factors should be considered before using such information as a
basis for comparison with other investments. No adjustment is made for
taxes payable on distributions. Investors should be aware that an
investment in the Fund is not insured. Its total return is not guaranteed
and will fluctuate over time. Total return for any given past period is
not an indication or representation by the Fund of future rates of return
on its shares. An investment in the Fund is not insured by any
governmental agency. Investors should understand that certain other
investment alternatives such as money market instruments, certificates of
deposit, U.S. Government securities or bank accounts may provide yields
that are fixed or that may vary above a stated minimum, and also that bank
accounts may be insured. The total return of the Class A, Class B and
Class C shares of the Fund is affected by investment policy, portfolio
maturity, type of securities held and operating expenses.
Distribution and Service Plans
The Corporation has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of the Fund
under Rule 12b-1 of the Investment Company Act pursuant to which the
Corporation will reimburse the Distributor for all or a portion of its
costs incurred in connection with the distribution and/or servicing of the
shares of that class, as described in the Prospectus. Each Plan has been
approved by a vote of (i) the Board of Directors of the Corporation,
including a majority of the Independent Directors, cast in person at a
meeting called for the purpose of voting on that Plan, and (ii) the
holders of a "majority" (as defined in the Investment Company Act) of the
shares of each class, such vote having been cast by the Manager as the
sole initial holder of Class B and Class C shares of the Fund as to the
Class B Plan and Class C Plan, respectively.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Corporation's Board of Directors and its
"Independent Directors" by a vote cast in person at a meeting called for
the purpose of voting on such continuance. Any Plan may be terminated at
any time by the vote of a majority of the Independent Directors or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the respective class, who vote
exclusively on approval or amendment of the Plan for that class. In
addition, because Class B shares of the Fund automatically convert into
Class A shares after six years, the Fund is required by an exemptive order
issued by the Securities and Exchange Commission to obtain the approval
of Class B as well as Class A shareholders for a proposed material
amendment to the Class A Plan. Such approval must be by a "majority" of
the Class A and Class B shares (as defined in the Investment Company Act),
voting separately by class. All material amendments must be approved by
the Board of Directors and the Independent Directors.
While the Plans are in effect, the Treasurer of the Corporation shall
provide separate written reports to the Corporation's Board of Directors
at least quarterly on the amount of all payments made pursuant to each
Plan, the purpose for which the payment was made and the identity of each
Recipient that received any such payment. The report for the Class B Plan
and Class C Plan shall also include the distribution costs for that
quarter, and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. Those reports,
including the allocations on which they are based, will be subject to the
review and approval of the Independent Directors in the exercise of their
fiduciary duty. Each Plan further provides that while it is in effect,
the selection and nomination of those Directors of the Corporation who are
not "interested persons" of the Corporation is committed to the discretion
of the Independent Directors. This does not prevent the involvement of
others in such selection and nomination if the final decision on any such
selection or nomination is approved by a majority of the Independent
Directors.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Corporation's Independent Directors. Initially, the Board of Directors
has set the fee at the maximum rate and set no minimum amount.
For the fiscal year ended June 30, 1994, payments under the Class A
Plan totaled $643,787, all of which was paid by the Distributor to
Recipients, including $20,221 paid to an affiliated broker-dealer as
reimbursement for Class A personal service and maintenance expenses. For
the period December 1, 1993 through June 30, 1994, payments under the
Class C Plan totalled $413,111, of which the Distributor retained $386,830
as reimbursement for Class C sales commissions and service fee advances,
as well as financing costs, and paid the balance to Recipients.
The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year Class
B and Class C shares are outstanding, and thereafter on a quarterly basis,
as described in the Prospectus. The advance payment is based on the net
assets of the Class B and Class C shares sold. An exchange of shares does
not entitle the Recipient to an advance service fee payment. In the event
Class B or Class C shares are redeemed during the first year such shares
are outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Class B and the Class C Plan permit the Distributor to
retain both the asset-based sales charge and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan and the Class C Plan by the
Board. Initially, the Board has set no minimum holding period. All
payments under the Class B and the Class C Plan are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
Any unreimbursed expenses incurred with respect to Class A shares for
any fiscal quarter by the Distributor may not be recovered under the Class
A Plan in subsequent fiscal quarters. Payments received by the
Distributor under the Class A Plan will not be used to pay any interest
expense, carrying charges, or other financial costs, or allocation of
overhead by the Distributor. The Class B Plan and the Class C Plan allow
for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods, as described in
the Prospectus. The asset-based sales charges paid to the Distributor by
the Fund under the Class B Plan and the Class C Plan are intended to allow
the Distributor to recoup the cost of sales commissions paid to authorized
brokers and dealers at the time of sale, plus financing costs, as
described in the Prospectus. Such payments may also be used to pay for
the following expenses in connection with the distribution of Class B and
Class C shares: (i) financing the advance of the service fee payment to
Recipients under the Class B and the Class C Plan, (ii) compensation and
expenses of personnel employed by the Distributor to support distribution
of Class B and Class C shares, and (iii) costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders).
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
any order for $1 million or more of Class B or Class C shares on behalf
of a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that investor
to purchase Class A shares of the Fund instead.
The conversion of Class B shares to Class A shares, as described in
the Prospectus, 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 holder under Federal income tax
law. If such a revenue ruling or opinion is no longer available, the
automatic conversion feature may be suspended, in which event no further
conversions of Class B shares would occur while such suspension remained
in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class
B shares might continue to be subject to the asset-based sales charge for
longer than six years.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
respectively, including the asset-based sales charges to which Class B and
Class C shares are subject.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to either class are allocated pro rata to the shares of each class, based
on the percentage of the net assets of such class to the Fund's total
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Directors, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
each day The New York Stock Exchange (the "NYSE") is open, as of 4:00
P.M., New York time, that day, by dividing the value of the Fund's net
assets attributable to that class by the number of shares of that class
outstanding. The NYSE's most recent annual announcement (which is subject
to change) states that it will close New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Trading may occur in
debt securities and in foreign securities at times when the NYSE is
closed. Because the net asset values of the Fund will not be calculated
at such times, if securities held in the Fund's portfolio are traded at
such times, the net asset values per share of Class A, Class B and Class
C shares of the Fund may be significantly affected at times when
shareholders do not have the ability to purchase or redeem shares.
The Corporation's Board of Directors has established procedures for
the valuation of the Fund's securities generally as follows: (i) equity
securities traded on a securities exchange or on the NASDAQ for which last
sale information is regularly reported are valued at the last sales prices
on their primary exchange or the NASDAQ that day (or, in the absence of
sales that day, at values based on the last sale prices of the preceding
trading day or closing bid and asked prices); (ii) NASDAQ and other
unlisted equity securities for which last sale prices are not regularly
reported but for which over-the-counter market quotations are readily
available are valued at the highest closing bid price at the time of
valuation, or, if no closing bid price is reported, on the basis of a
closing bid price obtained from a dealer who maintains an active market
in that security; (iii) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under
the Board's procedures; (iv) long-term debt securities, and short-term
debt securities having a remaining maturity in excess of 60 days, are
valued at the mean between the asked and bid prices determined by a
portfolio pricing service appointed by the Corporation's Board of
Directors or obtained from active market makers in the security; (v)
short-term debt securities having a remaining maturity of 60 days or less
are valued at cost, adjusted for amortization of premiums and accretion
of discounts; and (vi) securities traded on foreign exchanges or in
foreign over-the-counter markets are valued as determined by a portfolio
pricing service, approved by the Board, based upon last sales prices
reported on a principal exchange or the mean between closing bid and asked
prices and reflect prevailing rates of exchange taken from the closing
price on the London foreign exchange market that day.
Trading in securities on European and Far Eastern exchanges and over-
the-counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities that occur between the
time their prices are determined and the close of the NYSE will not be
reflected in the Fund's calculation of net asset value unless the Manager,
under procedures established by the Board, determines that the particular
event would materially affect net asset value, in which case an adjustment
would be made. Foreign currency will be valued as close to the time fixed
for the valuation date as is reasonably practicable. The value of
securities denominated in foreign currency will be converted to U.S.
dollars at the prevailing rates of exchange taken from the closing price
on the London foreign exchange market that day. Forward currency
contracts are valued at the closing price on the London foreign exchange
market. In the case of U.S. Government Securities, mortgage-backed
securities, and corporate bonds, where last sale information is not
generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable debt instruments on the basis of
quality, yield, maturity and other special factors involved. The
Directors will monitor the accuracy of pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls and Futures are valued at the last sale prices on the
principal exchanges or the NASDAQ National Market System on which they are
traded or, if there are no sales that day, in accordance with (i) above.
When the Fund writes an option, an amount equal to the premium received
by the Fund is included in its Statement of Assets and Liabilities as an
asset, and an equivalent deferred credit is included in the liability
section. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights 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
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, parents, grandparents, parents-in-
law, sons- and daughters-in-law, siblings, a sibling's spouse and a
spouse's siblings.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Directors of the Corporation may determine that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash. In that case the
Fund may pay the redemption proceeds in whole or in part by a distribution
"in kind" of securities from the portfolio of the Fund, in lieu of cash,
in conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
-- Involuntary Redemptions. The Board of Directors has the right to
cause the involuntary redemption of the shares held in any Fund account
if the aggregate net asset value of those shares is less than $500 or such
lesser amount as the Board may fix. The Board of Directors will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of the shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or the Board may set requirements for granting
permission to the Shareholder to increase the investment, and set other
terms and conditions so that the shares would not be involuntarily
redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A
shares,(ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed or (iii) Class C shares that were
subject to the Class C contingent deferred sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other OppenheimerFunds into which shares of the
Fund are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of transfer to
the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required redemption documents, with signature(s) guaranteed
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred
sales charges on such withdrawals (except where the Class B and Class C
contingent deferred sales charges are waived as described in the
Prospectus under "Class B Contingent Deferred Sales Charge" and "Class C
Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares (except for Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
(referred to as "Advisors Portfolio" funds) offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Target Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange)
Oppenheimer Strategic Diversified Income Fund
The following other OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are available only by
exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase
of the exchanged Class C shares. The Class B contingent deferred sales
charge is imposed on Class B shares redeemed within six years of the
initial purchase of the exchanged Class B 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 and Class C contingent deferred sales charges
will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Board of Directors and the Manager might determine
in a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
and Class C shareholders should be aware that as of the date of this
Statement of Additional Information, not all of the OppenheimerFunds offer
Class B and Class C shares. The names of the funds that do as of the date
of this document can be obtained by referring to "How To Exchange Shares,"
above or by calling the Distributor at 1-800-525-7048. To elect this
option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from certain of the OppenheimerFunds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and 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.
Independent Auditors' Report
- ------
The Board of Trustees and Shareholders of Oppenheimer Main Street
Income and
Growth Fund:
We have audited the accompanying statement of assets and
liabilities, including
the statement of investments, of Oppenheimer Main Street Income
and Growth Fund
as of June 30, 1994, the related statement of operations for the
year then
ended, the statements of changes in net assets for the years
ended June 30, 1994
and 1993, and the financial highlights for the period February 3,
1988
(commencement of operations) to June 30, 1994. These financial
statements and
financial highlights are the responsibility of the Fund's
management. Our
responsibility is to express an opinion on these financial
statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to obtain
reasonable assurance about whether the financial statements and
financial
highlights are free of material misstatement. An audit also
includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the
financial statements. Our procedures included confirmation of
securities owned
at June 30, 1994 by correspondence with the custodian and
brokers; where replies
were not received from brokers, we performed other auditing
procedures. An audit
also includes assessing the accounting principles used and
significant estimates
made by management, as well as evaluating the overall financial
statement
presentation. We believe that our audits provide a reasonable
basis for our
opinion.
In our opinion, such financial statements and financial
highlights present
fairly, in all material respects, the financial position of
Oppenheimer Main
Street Income and Growth Fund at June 30, 1994, the results of
its operations,
the changes in its net assets, and the financial highlights for
the respective
stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
Denver, Colorado
July 22, 1994
Statement of Investments June 30, 1994
Face Market Value
Amount See Note 1
- ------
Repurchase Agreements--17.8%
- ------
Repurchase agreement with First Chicago Capital Markets, 4.22%,
dated 6/30/94,
to be repurchased at $162,119,001 on 7/1/94, collateralized by
U.S. Treasury
Nts., 3.875%--9.25%, 12/31/94--11/30/98, with a value of
$117,837,239 and U.S.
Treasury Bills, 0%, 6/29/95, with a value of $47,565,732 (Cost
$162,100,000)
$162,100,000 $162,100,000
- ------
Long-Term U.S. Government Obligations--2.2%
- ------
U.S. Treasury Nts., 7.25%, 5/15/04 10,000,000 9,943,750
- ------
U.S. Treasury STRIPS, 0%, Series S, 5/15/14 46,878,000
9,862,284
- ------
Total Long-Term U.S. Government Obligations (Cost $20,067,204)
19,806,034
- ------
Corporate Bonds and Notes--7.6%
- ------
Agnico Eagle, 3.50% Cv. Sr. Nts., 1/27/04 2,000,000
1,650,000
- ------
Arch Communications Group, 6.75% Cv. Sub. Debs., 12/1/03(2)
1,450,000 1,493,500
- ------
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(2) 6,000,000
4,080,000
- ------
Cypress Semiconductor Corp., 3.15% Cv. Sub. Nts., 3/15/01(2)
8,000,000 6,060,000
- ------
Delta Airlines, Inc., 3.23% Cv. Sub. Nts., 6/15/03 5,000,000
3,443,750
- ------
Eagle Hardware & Garden, Inc., 6.25% Cv. Sub. Debs., 3/15/01
4,500,000 3,420,000
- ------
Empresas Ica Sociedad, 5% Cv. Sub. Debs., 3/15/04 4,500,000
4,140,000
- ------
Genesis Health Ventures, Inc., 6% Cv. Sr. Sub. Debs., 11/30/03
750,000 915,000
- ------
Interpool, Inc., 5.25% Cv. Sub. Exch. Nts., 12/15/18
1,000,000 805,000
- ------
IVAX Corp., 6.50% Cv. Sub. Nts., 11/15/01(2) 2,000,000
1,637,500
- ------
L.A. Gear, Inc., 7.75% Cv. Sub. Debs., 11/30/02 3,000,000
2,400,000
- ------
McKesson Corp., 4.50% Cv. Sub. Debs., 3/1/04 4,000,000
3,950,000
- ------
Noble Affiliates, Inc., 4.25% Cv. Sub. Nts., 11/1/03
4,500,000 4,381,875
- ------
Novacare, Inc., 5.50% Cv. Sub. Debs., 1/15/00 3,000,000
2,801,250
- ------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs.,
8/15/00(2)
1,000,000 1,003,750
- ------
Rohr, Inc., 7.75% Cv. Sub. Nts., 5/15/04 2,800,000
3,290,000
- ------
Seagate Technology, 5% Cv. Sub. Debs., 11/1/03(2) 1,000,000
920,000
- ------
Seagate Technology, 6.75% Cv. Sub. Debs., 5/1/12 4,000,000
3,370,000
- ------
Shangri-La Asia Ltd., 2.875% Cv.Sub.Debs., 6/16/00(2)
1,500,000 1,237,500
- ------
Sierra On-Line, Inc., 6.50% Cv. Sub. Nts., 4/1/01(2)
3,500,000 2,887,500
- ------
Softe SA, 4.25% Cv. Debs., 7/30/98(2) 2,350,000,000(4)
1,657,045
- ------
Synoptics Communications, Inc., 5.25% Cv. Sub. Debs., 5/15/03(2)
3,000,000
2,118,750
- ------
Time Warner, Inc., 8.75% Cv. Sr. Nts., 1/10/15 11,000,000
11,041,250
- ------
Total Corporate Bonds and Notes (Cost $71,587,174) 68,703,670
4 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Market Value
Date/Price Units See Note 1
- ------
Indexed Instruments--0.2% Nikkei Index (Cost $2,895,000)
Nov./$21,378
5,000 $1,740,000
- ------
Rights, Warrants and Certificates--0.1%
- ------
American Satellite Networks Wts., Exp. 6/99 18,750 0
- ------
Banco Santander Rts., Exp 7/1/94 100,000 547,109
- ------
Total Rights, Warrants and Certificates (Cost $0) 547,109
Shares
- ------
Preferred Stocks--4.3%
- ------
AMR Corp., $3.00 Cum. Cv. Depositary Shares, Series A(2)
225,000 9,956,250
- ------
Citicorp, $1.217 Cv. Depositary Shares, Series 15 200,000
3,925,000
- ------
Freeport-McMoRan Copper & Gold, Inc., $1.875 Cv. Exch. Depositary
Shares
175,000 3,959,375
- ------
James River Corp., 9% Cv. Exch. Depositary Shares, Series P
400,000 7,050,000
- ------
Nacional Financiera (TMX), 11.25% Cv., Exch., Series, 5/15/98,
Preferred
Redeemable Increased Dividend Equity Security 50,000
3,062,500
- ------
Noble Drilling Corp., $2.25 Cv. Exch., Series A 20,000
850,000
- ------
Salomon, Inc., 6.125% Cv., Exch. Series, Pfd. Equity Linked
Security
100,000 3,475,000
- ------
Santa Fe Energy Resources, Inc., $.732 Cv. Exch. Series A
325,000 3,128,125
- ------
Standish Care Co., $4.50 Cv., Series A(3) 60,000 547,500
- ------
Unisys Corp., $3.75 Cv., Series A 100,000 3,437,500
- ------
Total Preferred Stocks (Cost $42,093,807) 39,391,250
- ------
Common Stocks--69.0%
- ------
Basic Materials--3.5%
- ------
Chemicals--2.6% Bush Boake Allen, Inc.(1) 390,000
6,825,000
- ------
Great Lakes Chemical Corp. 90,000 4,871,250
- ------
Imperial Chemical Industries PLC, ADS 150,000 7,125,000
- ------
Methanex Corp.(1) 400,000 4,700,000
- ------
23,521,250
5 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Investments (Continued)
Market Value
Shares See Note 1
- ------
Gold--0.1% MK Gold Co.(1) 150,000 $806,250
- ------
Metal: Miscellaneous--0.4% Birmingham Steel Corp. 125,000
3,375,000
- ------
Steel--0.4% AK Steel Holding Corp.(1) 150,000
3,825,000
- ------
Consumer Cyclicals--14.6%
- ------
Airlines--2.8% Atlantic Southeast Airlines, Inc. 360,000
8,730,000
- ------
Comair Holdings, Inc. 200,000 4,050,000
- ------
Continental Airlines, Inc., Cl. B(1) 300,000 3,862,500
- ------
SkyWest, Inc. 25,000 637,500
- ------
UAL Corp.(1) 65,000 8,206,250
- ------
25,486,250
- ------
Automobiles--1.9% Fiat SpA Di Risp. 815,900 1,948,201
- ------
Fiat SpA, Preference(1) 2,584,100 6,423,312
- ------
Volkswagon AG 18,000 5,361,155
- ------
Volvo AB, Series B Free 35,500 3,095,198
- ------
16,827,866
- ------
Broadcast Media--0.9% IDB Communications Group, Inc.(1)
450,000 4,162,500
- ------
International Cablecasting Technologies, Inc.(1) 240,000
840,000
- ------
Lin Broadcasting Corp.(1) 30,000 3,592,500
- ------
8,595,000
- ------
Entertainment--0.4% Imax Corp.(1) 200,000 1,825,000
- ------
Iwerks Entertainment, Inc.(1) 250,000 1,656,250
- ------
3,481,250
- ------
Household Furnishings and
Appliances--0.7%
Rival Manufacturing Co. 110,000 2,255,000
- ------
Shaw Industries, Inc. 250,000 4,125,000
- ------
6,380,000
- ------
Leisure Time--1.0% Bally Gaming International, Inc.(1)
125,000 1,531,250
- ------
Brunswick Corp. 150,000 3,300,000
- ------
Innovative Gaming Corp. of America(1) 175,000 1,268,750
- ------
Outboard Marine Corp. 150,000 3,000,000
- ------
9,100,000
6 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Market Value
Shares See Note 1
- ------
Manufactured Housing--0.1% Shelter Components Corp.
97,500 $1,255,313
- ------
Publishing--0.2% Meredith Corp. 50,000 2,125,000
- ------
Restaurants--0.5% Applebee's International, Inc. 400,000
4,900,000
- ------
Retail Stores: Ames Department Stores, Inc.(1) 300,000
975,000
Department Stores--0.1%
- ------
Retail: Specialty--3.7% Bed Bath & Beyond, Inc.(1)
100,000 2,862,500
- ------
Blockbuster Entertainment Corp. 200,000 5,175,000
- ------
Brookstone, Inc.(1) 200,000 3,050,000
- ------
CML Group, Inc. 250,000 2,937,500
- ------
Lowe's Cos., Inc. 260,000 8,905,000
- ------
Rite Aid Corp. 470,000 9,517,500
- ------
Spiegel, Inc., Cl. A 75,000 1,425,000
- ------
33,872,500
- ------
Retail: Specialty Apparel--0.5% Cato Corp. Cl. A 325,000
4,103,125
- ------
Shoes--1.2% Nike Incorporated Cl. B 175,000
10,456,250
- ------
Textiles: Apparel
Manufacturers--0.6%
Donnkenny, Inc.(1) 122,500 2,955,313
- ------
Norton McNaughton, Inc.(1) 100,000 2,025,000
- ------
4,980,313
- ------
Consumer Non-Cyclicals--8.6%
- ------
Drugs--0.5% Lilly (Eli) & Co. 50,000 2,843,750
- ------
Neurogen Corp.(1) 160,000 1,040,000
- ------
3,883,750
- ------
Food Processing--1.7% IBP, Inc. 175,000 4,659,375
- ------
McCormick & Co., Inc., Non-Vtg. 300,000 6,075,000
- ------
Pet, Inc. 225,000 4,190,625
- ------
Ralston-Continental Baking Group(1) 125,000 609,375
- ------
15,534,375
- ------
Food Wholesalers--0.3% Food Lion, Inc., Cl. A 450,000
2,700,000
- ------
Healthcare: Diversified--1.2% Bristol-Myers Squibb Co.
125,000 6,703,125
- ------
Theratx, Inc.(1) 370,000 4,162,500
- ------
10,865,625
7 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Investments (Continued)
Market Value
Shares See Note 1
- ------
Healthcare: Alpha Beta Technology, Inc.(1) 95,000
$1,021,250
Miscellaneous--2.5%
- ------
Athena Neurosciences, Inc.(1) 120,000 810,000
- ------
COR Therapeutics, Inc.(1) 200,000 2,350,000
- ------
Cyto Therapeutics, Inc.(1) 100,000 562,500
- ------
Dentsply International, Inc.(1) 150,000 5,250,000
- ------
Matrix Pharmaceutical, Inc.(1) 200,000 2,050,000
- ------
Noven Pharmaceuticals, Inc.(1) 175,000 2,362,500
- ------
Pioneer Hi-Bred International, Inc. 69,400 2,272,850
- ------
ProCyte Corporation(1) 150,000 1,687,500
- ------
United Healthcare Corp. 100,000 4,587,500
- ------
22,954,100
- ------
Hospital Management--0.1% Pediatric Services of America,
Inc.(1)
150,000 1,087,500
- ------
Medical Products--1.0% St. Jude Medical, Inc. 67,500
2,193,750
- ------
Sybron Corp. of Delaware(1) 85,000 2,550,000
- ------
Ventritex, Inc.(1) 250,000 4,656,250
- ------
9,400,000
- ------
Tobacco--1.3% Philip Morris Cos., Inc. 225,000
11,587,500
- ------
Energy--3.7%
- ------
Oil: Exploration and Apache Corp. 200,000 5,525,000
Production--0.6%
- ------
Oil: Integrated Domestic--1.1% Atlantic Richfield Co.
100,000 10,212,500
- ------
Oil: Integrated
International--0.6%
Elf Aquitaine, Sponsored ADR(1) 150,000 4,987,500
- ------
Oil and Gas Drilling--0.3% Basin Exploration, Inc.(1)
100,000 850,000
- ------
Energy Service Company, Inc.(1) 125,000 2,156,250
- ------
3,006,250
- ------
Oil Well Services and
Equipment--1.1%
McDermott International, Inc. 100,000 2,500,000
- ------
Oceaneering International, Inc.(1) 200,000 2,800,000
- ------
Pride Petroleum Services(1) 200,000 1,087,500
- ------
Weatherford International, Inc.(1) 290,000 3,915,000
- ------
10,302,500
- ------
Financial--8.9%
- ------
Financial Services:
Miscellaneous--1.9%
First Financial Caribbean Corp. 27,000 297,000
- ------
H & R Block Incorporated 200,000 7,850,000
- ------
Japan OTC Equity Fund, Inc.(1) 200,000 2,475,000
- ------
Korea Equity Fund, Inc.(1) 110,000 1,141,250
- ------
Resource Bancshares Mortgage Group, Inc.(1) 84,000
798,000
- ------
Taiwan Fund, Inc. 75,000 2,015,625
- ------
Vallicorp Holdings, Inc. 171,000 2,565,000
- ------
17,141,875
8 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Market Value
Shares See Note 1
- ------
Insurance: Life--0.2% Southwestern Life Corp.(1) 365,800
$1,920,450
- ------
Insurance: Multi-line--0.3% CCP Insurance, Inc. 150,000
3,056,250
- ------
Insurance: Property and St. Paul Cos., Inc. (The)
200,000 8,025,000
Casualty--0.9%
- ------
Major Banks: Other--1.2% Banco de Santander SA 100,000
3,598,003
- ------
BankAmerica Corp. 125,000 5,718,750
- ------
Svenska Handelsbanken, Inc. 108,100 1,448,933
- ------
10,765,686
- ------
Major Banks: Regional--2.5% CoreStates Financial Corp.
175,000 4,506,250
- ------
First Interstate Bancorp 75,000 5,775,000
- ------
Midlantic Corp. 100,000 2,925,000
- ------
Norwest Corp. 200,000 5,225,000
- ------
West One Bancorp 150,000 4,312,500
- ------
22,743,750
- ------
Money Center Banks--0.6% First Chicago Corp. 120,000
5,775,000
- ------
Savings and Loans/Holding Cos.--1.3%
Charter One Financial, Inc. 190,000 3,847,500
- ------
Commercial Federal Corp.(1) 200,000 4,700,000
- ------
GP Financial Corp. 150,000 3,337,500
- ------
11,885,000
- ------
Industrial--5.2%
- ------
Building Materials Group--1.2% Centex Construction Products,
Inc.(1)
250,000 2,968,750
- ------
Martin Marietta Materials, Inc. 150,000 3,300,000
- ------
National Gypsum Co.(1) 100,000 3,075,000
- ------
TJ International, Inc. 100,000 1,950,000
- ------
11,293,750
- ------
Commercial Services--1.2% Manpower, Inc. 200,000
4,200,000
- ------
Safety-Kleen Corp. 200,000 3,400,000
- ------
Wallace Computer Services, Inc. 100,000 3,200,000
- ------
10,800,000
- ------
Electrical Equipment--0.3% Methode Electronics, Inc., Cl. A
150,000 2,550,000
- ------
Machine Tools--0.4% Acme-Cleveland Corp. 93,100
965,913
- ------
Greenfield Industries-GTD 125,000 2,437,500
- ------
3,403,413
9 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Investments (Continued)
Market Value
Shares See Note 1
- ------
Manufacturing: Diversified
Industrials--0.3%
Watts Industries, Inc., Cl. A 125,000 $2,906,250
- ------
Railroads--0.3% Santa Fe Pacific Corp.(1) 150,000
3,131,250
- ------
Transportation:
Miscellaneous--0.8%
Airborne Freight Corp. 150,000 5,212,500
- ------
Kirby Corp.(1) 125,000 2,046,875
- ------
7,259,375
- ------
Truckers--0.6% Roadway Services, Inc. 90,000
5,670,000
- ------
Pollution Control--0.1% Newpark Resources, Inc.(1) 75,000
1,200,000
- ------
Technology--14.1%
- ------
Aerospace/Defense--0.5% Martin Marietta Corp. 100,000
4,412,500
- ------
Communication:
Equipment/Manufacturers--0.2%
CMG Information SVS Inc.(1)(3) 234,000 2,106,000
- ------
Computer Software and
Services--6.7%
Adobe Systems, Inc. 100,000 2,725,000
- ------
Alias Research, Inc.(1) 215,000 2,821,875
- ------
BMC Software, Inc.(1) 70,000 3,062,500
- ------
Banyan Systems, Inc.(1) 31,000 399,125
- ------
Cadence Design Systems(1) 150,000 2,512,500
- ------
Ciber, Inc.(1) 135,000 1,181,250
- ------
Computer Associates International, Inc. 100,000 4,000,000
- ------
Cornerstone Imaging, Inc.(1) 95,000 1,377,500
- ------
Exabyte Corp.(1) 100,000 1,425,000
- ------
Intersolv, Inc.(1) 205,000 2,203,750
- ------
Legent Corp.(1) 125,000 3,375,000
- ------
Micrografx, Inc.(1) 255,000 1,657,500
- ------
Microsoft Corp.(1)(5) 100,000 5,150,000
- ------
NetManage, Inc.(1) 200,000 2,800,000
- ------
Oracle Systems Corp.(1)(5) 75,000 2,812,500
- ------
Platinum Technology, Inc.(1) 125,000 1,625,000
- ------
QuickResponse Services, Inc.(1) 100,000 1,000,000
- ------
Reynolds & Reynolds Co., Cl. A 275,000 6,359,375
- ------
SHL Systemhouse, Inc.(1) 350,000 2,231,250
- ------
Sap AG, Preference 2,750 5,520,916
- ------
Shared Medical Systems Corp. 100,000 2,400,000
- ------
Softkey International, Inc.(1) 200,000 2,500,000
- ------
Virtuality Group PLC(1) 300,000 842,751
- ------
Wavefront Technologies, Inc.(1) 150,000 975,000
- ------
60,957,792
10 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Market Value
Shares See Note 1
- ------
Computer Systems--0.7% Auspex Systems, Inc.(1) 100,000
500,000
- ------
International Business Machines Corp. 60,000 3,525,000
- ------
Komag Incorporated(1) 100,000 1,850,000
- ------
Radius, Inc.(1) 170,000 828,750
- ------
6,703,750
- ------
Electronics--0.4% California Micro Devices Corp.(1)
150,000 $3,225,000
- ------
Electronics:
Instrumentation--0.3%
Recoton Corp.(1) 90,000 2,857,500
- ------
Electronics:
Semiconductors--1.0%
Intel Corp. 75,000 4,387,500
- ------
Micron Technology, Inc. 125,000 4,312,500
- ------
8,700,000
- ------
Office Equipment and
Supplies--0.5%
Moore Corp. Ltd. 250,000 4,218,750
- ------
Supermac Technology, Inc.(1) 50,000 293,750
- ------
4,512,500
- ------
Telecommunications--3.8% A+ Communications, Inc.(1)
230,000 2,472,500
- ------
Airtouch Communications, Inc.(1) 150,000 3,543,750
- ------
American Mobile Systems, Inc.(1) 102,000 1,326,000
- ------
Atlantic Tele-Network, Inc. 240,000 1,980,000
- ------
Ericsson Telefonaktiebolaget 111,900 5,591,736
- ------
Executive Telecard, Ltd.(1) 135,000 1,029,375
- ------
MCI Communications Corp. 200,000 4,425,000
- ------
MFS Communications Co., Inc.(1) 150,000 3,712,500
- ------
McCaw Cellular Communications, Inc.(1) 125,000 6,468,750
- ------
Millicom International Cellular SA(1) 210,200 4,361,650
- ------
34,911,261
- ------
Utilities--10.4%
- ------
Electric Cos.--6.6% Empresa Nacional De Electricidad--ADR
200,000 8,975,000
- ------
FPL Group, Inc. 250,000 7,468,750
- ------
Houston Industries, Inc. 275,000 8,971,875
- ------
Ohio Edison Co. 125,000 2,234,375
- ------
Pacific Gas & Electric Co. 250,000 5,937,500
- ------
Peco Energy Co. 225,000 5,934,375
- ------
Public Service Co. of Colorado 100,000 2,612,500
- ------
Public Service Enterprise Group, Inc. 300,000 7,800,000
- ------
Texas Utilities Co. 225,000 7,059,375
- ------
Union Electric Co. 100,000 3,175,000
- ------
60,168,750
11 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Investments (Continued)
Market Value
Shares See Note 1
- ------
Natural Gas--1.2% Williams Cos., Inc. (The) 375,000
$10,734,375
- ------
Telephone--2.6% Bell Atlantic Corp. 200,000
11,200,000
- ------
GTE Corp. 250,000 7,875,000
- ------
Telefonica de Espana, ADS 350,000 4,707,418
- ------
23,782,418
- ------
Total Common Stocks (Cost $651,024,233) 628,710,862
- ------
Total Investments, at Value (Cost $949,767,418) 101.2%
920,998,925
- ------
Liabilities in Excess of Other Assets (1.2) (11,130,573)
- ------ ------
Net Assets 100.0% $909,868,352
- ------ ------
- ------ ------
1. Non-income producing security.
2. Restricted security--See Note 5 of Notes to Financial
Statements.
3. Affiliated company. Represents ownership of at least 5% of the
voting
securities of the issuer and is or was an affiliate, as defined
in the
Investment Company Act of 1940, at or during the year ended June
30, 1994. The
aggregate fair value of all securities of affiliated companies as
of June 30,
1994 amounted to $2,653,500. Transactions during the period in
which the issuer
was an affiliate are as follows:
Balance
Balance
June 30, 1993 Gross Additions Gross Reductions
June 30, 1994
- ------ ------ ------
- ------
Shares Cost Shares Cost Shares Cost
Shares Cost
- ------
Standish Care Co., $4.50 Cv., Series A -- $-- 60,000
$ 649,995
-- $-- 60,000 $ 649,995
- ------
CMG Information SVS Inc. -- -- 234,000 1,967,000
-- --
234,000 1,967,000
- ------ ------
$2,616,995 $2,616,995
- ------ ------
- ------ ------
4. Face amount reported in foreign currency.
5. Securities with an aggregate market value of $5,387,500 are
held in escrow to
cover outstanding call options, as follows:
Market
Shares Expiration Exercise Premium
Value
Subject to Call Date Price Received
See Note 1
- ------
Microsoft Corp. 50,000 7/94 $52.50 $ 92,247
$ 43,750
Oracle Systems 75,000 7/94 35.00 147,745
215,625
- ------ ------ ------
125,000 239,992 259,375
See accompanying Notes to Financial Statements.
12 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Assets and Liabilities June 30, 1994
- ------
Assets Investments, at value (cost $949,767,418)--see
accompanying
statements $920,998,925
- ------
Cash 914,813
- ------
Receivables:
Shares of capital stock sold 20,385,032
Investments sold 17,852,790
Dividends and interest 2,838,873
- ------
Other 106,676
- ------
Total assets 963,097,109
- ------
Liabilities Options written, at value (premiums received
$239,992)--see
accompanying statement--Note 6 259,375
Payables and other liabilities:
Investments purchased 47,827,181
Shares of capital stock redeemed 4,054,615
Distribution and service plan fees--Note 4 443,112
Other 644,474
- ------
Total liabilities 53,228,757
- ------
Net Assets $909,868,352
- ------
- ------
- ------
Composition of Net Assets
Par value of shares of capital stock 446,277
- ------
Additional paid-in capital 953,159,883
- ------
Undistributed net investment income 706,011
- ------
Accumulated net realized loss from investment and written option
transactions
(15,645,364)
- ------
Net unrealized depreciation on investments and translation of
assets and
liabilities denominated in foreign currencies (28,798,455)
- ------
Net assets $909,868,352
- ------
- ------
- ------
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of
$739,552,177 and 36,250,537 shares of capital stock outstanding)
$20.40
Maximum offering price per share (net asset value plus sales
charge of 5.75% of
offering price) $21.64
- ------
Class C Shares:
Net asset value, redemption price and offering price per share
(based on net
assets of $170,316,175 and 8,377,158 shares of capital stock
outstanding)
$20.33
See accompanying Notes to Financial Statements.
13 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statement of Operations For the Year Ended June 30, 1994
- ------
Investment Income Dividends $8,519,789
- ------
Interest 3,264,314
- ------
Total income 11,784,103
- ------
Expenses Management fees--Note 4 1,817,623
- ------
Transfer and shareholder servicing agent fees--Note 4 850,630
- ------
Distribution and service plan fees:
Class A--Note 4 643,787
Class C--Note 4 413,111
- ------
Registration and filing fees:
Class A 304,239
Class C 62,520
- ------
Shareholder reports 160,322
- ------
Custodian fees and expenses 29,902
- ------
Legal and auditing fees 21,002
- ------
Directors' fees and expenses 2,648
- ------
Other 42,633
- ------
Total expenses 4,348,417
- ------
Net Investment Income 7,435,686
- ------
Realized and Unrealized
Loss on Investments
Net realized loss on investments (12,425,245)
- ------
Net change in unrealized depreciation on investments
(36,662,021)
- ------
Net realized and unrealized loss on investments (49,087,266)
- ------
Net Decrease in Net Assets Resulting From Operations
$(41,651,580)
- ------
- ------
See accompanying Notes to Financial Statements.
14 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Statements of Changes in Net Assets
Year Ended Year Ended
June 30, 1994 June 30, 1993
- ------
Operations Net investment income $7,435,686 $398,115
- ------
Net realized gain (loss) on investments and options written
(12,425,245) 6,992,957
- ------
Net change in unrealized depreciation or appreciation on
investments
(36,662,021) 6,820,214
- ------ ------
Net increase (decrease) in net assets resulting from operations
(41,651,580) 14,211,286
- ------
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A ($.356 and $.192 per share, respectively) (5,859,657)
(434,312)
Class C ($.136 per share) (815,401) --
- ------
Distributions from net realized gain on investments and options
written:
Class A ($2.202 per share) -- (4,252,038)
- ------
Distributions in excess of gains:
Class A ($1.989 per share) (9,339,980) --
- ------
Capital Stock
Transactions
Net increase in net assets resulting from Class A
capital stock transactions--Note 2 727,055,604 21,779,236
- ------
Net increase in net assets resulting from Class C
capital stock transactions--Note 2 182,249,457 --
- ------
Net Assets Total increase 851,638,443 31,304,172
- ------
Beginning of year 58,229,909 26,925,737
- ------ ------
End of year (including undistributed net investment income of
$706,011
and $31,753, respectively) $909,868,352 $58,229,909
- ------ ------
- ------ ------
See accompanying Notes to Financial Statements.
15 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Financial Highlights
Class A Class C
- ------ ------
Year Ended Period
Ended
June 30, 1994 1993 1992 1991 1990 1989 1988(2) June
30, 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period $19.88 $15.46 $13.22 $12.38 $11.67
$10.13
$9.60 $20.76
- ------
Income from investment operations:
Net investment income .37 .16 .25 .38 .17
.24 (3)
.05 .13
Net realized and unrealized gain
on investments and options written 2.50 6.65 4.72
.87 .88
1.62 .52 (.42)
- ------ ------ ------ ------ ------ ------
- ------
- ------
Total income from investment
operations 2.87 6.81 4.97 1.25 1.05 1.86
.57
(.29)
- ------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.19)
(.22) (.41)
(.19) (.19) (.04) (.14)
Distributions from net realized gain
on investments and options written -- (2.20) (2.51)
-- (.15)
(.13) -- --
Distributions in excess of gains (1.99) -- -- --
-- --
-- --
- ------ ------ ------ ------ ------ ------
- ------
- ------
Total dividends and distributions
to shareholders (2.35) (2.39) (2.73) (.41)
(.34) (.32)
(.04) (.14)
- ------
Net asset value, end of period $20.40 $19.88 $15.46
$13.22
$12.38 $11.67 $10.13 $20.33
- ------ ------ ------ ------ ------ ------
- ------
- ------
- ------ ------ ------ ------ ------ ------
- ------
- ------
- ------
Total Return, at Net Asset Value(4) 14.34% 46.38%
39.48% 10.60%
9.07% 18.77% 5.94% (.97)%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $739,552 $58,230 $26,926 $15,968
$13,851
$1,256 $345 $170,316
- ------
Average net assets
(in thousands) $270,417 $38,974 $23,018 $14,563
$ 7,520
$ 788 $118 $71,924
- ------
Number of shares outstanding
at end of period (in thousands) 36,251 2,929 1,742
1,208
1,119 108 34 8,377
- ------
Ratios to average net assets:
Net investment income 2.46% 1.02% 1.63% 3.15%
2.33%
2.67% 2.86% 1.86%
Expenses, before reimbursement
from or assumption by the Manager 1.28% 1.46% 1.66%
1.84%
2.21% 2.46% 10.54% 2.11%
Expenses, net of reimbursement
from or assumption by the Manager N/A N/A N/A N/A
N/A
2.12%(3) N/A N/A
- ------
Portfolio turnover rate(5) 199.4% 283.0% 290.1%
208.9%
214.3% 136.8% 18.8% 199.4%
1. For the period from December 1, 1993 (inception of offering)
to June 30,
1994.
2. For the period from February 3, 1988 (commencement of
operations) to June 30,
1988.
3. Net investment income would have been $.20 per share absent
the voluntary
expense reimbursement, resulting in an expense ratio of 2.46%.
4. Assumes a hypothetical initial investment on the business day
before the
first day of the fiscal period, with all dividends and
distributions reinvested
in additional shares on the reinvestment date, and redemption at
the net asset
value calculated on the last business day of the fiscal period.
Sales charges
are not reflected in the total returns.
5. The lesser of purchases or sales of portfolio securities for a
period,
divided by the monthly average of the market value of portfolio
securities owned
during the period. Securities with a maturity or expiration date
at the time of
acquisition of one year or less are excluded from the
calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the year
ended June 30, 1994 were $1,510,599,271 and $494,572,017,
respectively.
See accompanying Notes to Financial Statements.
16 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Notes to Financial Statements
- ------
1. Significant Accounting Policies
Oppenheimer Main Street Income & Growth Fund (the Fund), formerly
named Main
Street Funds, Inc.-Income & Growth Fund, is a separate series of
Oppenheimer
Main Street Funds, Inc., an open-end management investment
company registered
under the Investment Company Act of 1940, as amended. The Fund's
investment
advisor is Oppenheimer Management Corporation (the Manager). The
Fund offers
both Class A and Class C shares. Class A shares are sold with a
front-end sales
charge. Class C shares may be subject to a contingent deferred
sales charge.
Both classes of shares have identical rights to earnings, assets
and voting
privileges, except that each class has its own distribution plan,
expenses
directly attributable to a particular class and exclusive voting
rights with
respect to matters affecting a single class. The following is a
summary of
significant accounting policies consistently followed by the
Fund.
- ------
Investment Valuation. Portfolio securities are valued at 4:00
p.m. (New York
time) on each trading day. Listed and unlisted securities for
which such
information is regularly reported are valued at the last sale
price of the day
or, in the absence of sales, at values based on the closing bid
or asked price
or the last sale price on the prior trading day. Long-term debt
securities are
valued by a portfolio pricing service approved by the Board of
Directors.
Long-term debt securities which cannot be valued by the approved
portfolio
pricing service are valued by averaging the mean between the bid
and asked
prices obtained from two active market makers in such securities.
Short-term
debt securities having a remaining maturity of 60 days or less
are valued at
cost (or last determined market value) adjusted for amortization
to maturity of
any premium or discount. Securities for which market quotes are
not readily
available are valued under procedures established by the Board of
Directors to
determine fair value in good faith. A call option is valued based
upon the last
sales price on the principal exchange on which the option is
traded or, in the
absence of any transactions that day, the value is based upon the
last sale on
the prior trading date if it is within the spread between the
closing bid and
asked prices. If the last sale price is outside the spread, the
closing bid or
asked price closest to the last reported sale price is used.
- ------
Repurchase Agreement. The Fund requires the custodian to take
possession, to
have legally segregated in the Federal Reserve Book Entry System
or to have
segregated within the custodian's vault, all securities held as
collateral for
repurchase agreements. If the seller of the agreement defaults
and the value of
the collateral declines, or if the seller enters an insolvency
proceeding,
realization of the value of the collateral by the Fund may be
delayed or
limited.
- ------
Allocation of Income, Expenses and Gains and Losses. Income,
expenses (other
than those attributable to a specific class) and gains and losses
are allocated
daily to each class of shares based upon the relative proportion
of net assets
represented by such class. Operating expenses directly
attributable to a
specific class are charged against the operations of that class.
- ------
Federal Income Taxes. The Fund intends to continue to comply with
provisions of
the Internal Revenue Code applicable to regulated investment
companies and to
distribute all of its taxable income, including any net realized
gain on
investments not offset by loss carryovers, to shareholders.
Therefore, no
federal income tax provision is required.
- ------
Distributions to Shareholders. Dividends and distributions to
shareholders are
recorded on the ex-dividend date.
- ------
Change in Accounting for Distributions to Shareholders. Effective
July 1, 1993,
the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and
Return of Capital
Distributions by Investment Companies. As a result, the Fund
changed the
classification of distributions to shareholders to better
disclose the
differences between financial statement amounts and distributions
determined in
accordance with income tax regulations. Accordingly, subsequent
to June 30,
1993, amounts have been reclassified to reflect an increase in
paid-in capital
of $23,375, an increase in undistributed net investment income of
$15,399, and a
decrease in undistributed capital gain on investments of $38,774.
During the
year ended June 30, 1994, in accordance with Statement of
Position 93-2,
undistributed capital gain on investments was increased by
$103,573,
undistributed net investment income was decreased by $101,769,
and paid-in
capital was decreased by $1,804.
- ------
Other. Investment transactions are accounted for on the date the
investments are
purchased or sold (trade date) and dividend income is recorded on
the
ex-dividend date. Discount on securities purchased is amortized
over the life of
the respective securities, in accordance with federal income tax
requirements.
Realized gains and losses on investments and unrealized
appreciation and
depreciation are determined on an identified cost basis, which is
the same basis
used for federal income tax purposes.
17 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
Notes to Financial Statements (Continued)
- ------
2. Capital Stock The Fund has authorized 102,500,000 shares
of $.01 par
value capital stock (76,250,000 for Class A and 26,250,000 for
Class C).
Transactions in shares of capital stock were as follows:
Year Ended June 30, 1994(1) Year Ended June 30, 1993
- ------ ------
Shares Amount Shares Amount
- ------
Class A:
Sold 34,877,614 $761,137,297 1,080,758
$20,104,977
Dividends and distributions reinvested 704,717 14,641,214
264,954
4,627,593
Issued in connection with the acquisition of Main Street Asset
Allocation Fund--Note 7 72,926 1,179,937
Redeemed (2,260,838) (48,722,907) (231,352)
(4,133,271)
- ------ ------ ------ ------
Net increase 33,321,493 $727,055,604 1,187,286
$21,779,236
- ------ ------ ------ ------
- ------ ------ ------ ------
- ------
Class C:
Sold 8,563,107 $186,240,396 -- $--
Dividends and distributions reinvested 35,985 747,590
- -- --
Redeemed (221,934) (4,738,529) --
- ------ ------ ------ ------
Net increase 8,377,158 $182,249,457 -- $--
- ------ ------ ------ ------
- ------ ------ ------ ------
1. For the year ended June 30, 1994 for Class A shares and for
the period from
December 1, 1993 (inception of offering) to June 30, 1994 for
Class C shares.
- ------
3. Unrealized Gains and Losses on Investments
At June 30, 1994, net unrealized depreciation on investments of
$28,787,847 was
composed of gross appreciation of $23,383,823, and gross
depreciation of
$52,171,670.
- ------
4. Management Fees And Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the
investment
advisory agreement with the Fund which provides for an annual fee
of .65% on the
first $200 million of net assets with a reduction of .05% on each
$150 million
thereafter to $500 million and .45% on net assets in excess of
$500 million. The
Manager has agreed to reimburse the Fund if aggregate expenses
(with specified
exceptions) exceed the most stringent applicable regulatory limit
on Fund
expenses.
For the year ended June 30, 1994, commissions (sales charges
paid by
investors) on sales of Class A shares totaled $23,502,310, of
which $6,373,770
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the
Manager as general distributor, and by an affiliated
broker/dealer.
Oppenheimer Shareholder Services (OSS), a division of the
Manager, is the
transfer and shareholder servicing agent for the Fund, and for
other registered
investment companies. OSS's total costs of providing such
services are allocated
ratably to these companies.
Under separate approved plans, each class may expend up to
.25% of its net
assets annually to reimburse OFDI for costs incurred in
connection with the
personal service and maintenance of accounts that hold shares of
the Fund,
including amounts paid to brokers, dealers, banks and other
institutions. In
addition, Class C shares are subject to an asset-based sales
charge of .75% of
net assets annually, to reimburse OFDI for sales commissions paid
from its own
resources at the time of sale and associated financing costs. In
the event of
termination or discontinuance of the Class C plan, the Board of
Trustees may
allow the Fund to continue payment of the asset-based sales
charge to OFDI for
distribution expenses incurred on Class C shares sold prior to
termination or
discontinuance of the plan. During the year ended June 30, 1994,
OFDI paid
$20,221 to an affiliated broker/dealer as reimbursement for Class
A personal
service and maintenance expenses and retained $386,830 as
reimbursement for
Class C sales commissions and service fee advances, as well as
financing costs.
18 Oppenheimer Main Street Income & Growth Fund
<PAGE>
- ------
- ------
5. Restricted Securities
The Fund owns securities purchased in private placement
transactions, without
registration under the Securities Act of 1993 (the Act). The
securities are
valued under methods approved by the Board of Directors as
reflecting fair
value. The Fund intends to invest no more than 10% of its net
assets (determined
at the time of purchase) in restricted and illiquid securities,
excluding
securities eligible for resale pursuant to Rule 144A of the Act
that are
determined to be liquid by the Board of Directors or by the
Manager under
Board-approved guidelines.
Valuation Per
Unit
Security Acquisition Date Cost Per Unit as of June 30,
1994
- ------
AMR Corp. $3.00 Cum. Cv.
Depositary Shares, Series A(1) 3/18/94 $44.84 $44.25
- ------
Arch Communications Group, 6.75%
Cv. Sub. Debs., 12/1/03(1) 6/21/94 $102.50 $103.00
- ------
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(1) 1/21/94
$76.67 $68.00
- ------
Cypress Semiconductor Corp.,
3.15% Cv. Sub. Nts., 3/15/01(1) 3/25/94 $80.30 $75.75
- ------
IVAX Corp., 6.50% Cv. Sub. Nts., 11/15/01(1) 9/22/92
$85.25 $81.87
- ------
Physicians Clinical Laboratory, Inc.,
7.50% Cv. Sub. Debs., 8/15/00(1) 1/13/94 $104.00
$100.37
- ------
Seagate Technology, 5% Cv. Sub. Debs., 11/1/03(1) 6/30/94
$92.00
$92.00
- ------
Shangri-La Asia Ltd., 2.875% Cv. Sub. Debs., 6/16/00(1)
12/13/93 $87.30
$82.50
- ------
Sierra On-Line, Inc., 6.50% Cv. Sub. Nts., 4/1/01(1) 4/13/94
$98.71
$82.50
- ------
Softe SA, 4.25% Cv. Debs., 7/30/98(1) 6/2/94 $117.75
$111.62
- ------
Synoptics Communications, Inc.,
5.25% Cv. Sub. Debs., 5/15/03(1) 5/5/94--5/20/94 $78.14
$70.62
1. Transferable under Rule 144A of the Act.
- ------
6. Call Option Activity Call option activity for the year
ended June 30,
1994 was as follows:
Number of Amount of
Call Option Activity Options Premiums
- ------
Options outstanding at June 30, 1993 -- $--
- ------
Options written 1,250 239,992
- ------
Options expired prior to exercise -- --
- ------
Options exercised -- --
- ------ ------
Options outstanding at June 30, 1994 1,250 $239,992
- ------ ------
- ------ ------
- ------
7. Acquisition On October 16, 1992, the Fund acquired all of
the net assets
of Main Street Asset Allocation Fund (AAF), pursuant to an
Agreement and Plan of
Reorganization approved by the AAF shareholders on October 9,
1992. The Fund
issued 72,926 shares of beneficial interest, valued at
$1,179,937, in exchange
for the net assets, resulting in combined net assets of
$30,151,286 on October
16, 1992. The net assets acquired included net unrealized
appreciation of
$145,867 and capital loss carryovers for federal income tax
purposes of $25,921.
The exchange was tax-free.
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Ratings of Investments
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal
is secure. While the various protective elements are likely to change,
the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative
in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor
prospects of ever retaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change
in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal
is in arrears.
Description of Fitch Investors Service, Inc. Ratings
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic
activity through the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery of these
bonds, and "D" represents the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the "DDD," "DD," or "D"
categories.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
Oppenheimer
Main Street California
Tax-Exempt Fund
Prospectus dated October 1, 1994
Oppenheimer Main Street California Tax-Exempt Fund (the "Fund"), a
series of Oppenheimer Main Street Funds, Inc., is a mutual fund that seeks
as high a level of current income which is exempt from Federal and
California personal income taxes as is available from investing in
Municipal Securities while attempting to preserve capital. Please refer
to "Investment Policies and Strategies" for more information about the
types of securities the Fund invests in and the risks of investing in the
Fund.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. A contingent deferred sales charge is imposed
on most Class B shares redeemed within six years of purchase. Class B
shares are also subject to an annual "asset-based sales charge." Each
class of shares bears different expenses. In deciding which class of
shares to buy, you should consider how much you plan to purchase, how long
you plan to keep your shares, and other factors discussed in "How to Buy
Shares" starting on page 13.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the October 1, 1994, Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
2 Expenses
4 Financial Highlights
5 Investment Objective and Policies
10 How the Fund is Managed
11 Performance of the Fund
A B O U T Y O U R A C C O U N T
13 How to Buy Shares
Class A Shares
Class B Shares
19 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
20 How to Sell Shares
By Mail
By Telephone
Checkwriting
21 How to Exchange Shares
22 Shareholder Account Rules and Policies
24 Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are reflected in the Fund's net asset value per share of
each class. As a shareholder, you pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges. The
following tables are provided to help you understand your direct expenses
of investing in the Fund and your share of the Fund's operating expenses
that you might expect to bear indirectly. The calculations are based on
the Fund's expenses during its fiscal year ended June 30, 1994.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages 14 through 22 for an
explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
- ----------------------------------------------------------
<S> <C> <C>
Maximum Sales 4.75% None
Charge on Purchases
(as a % of offering price)
- ----------------------------------------------------------
Sales Charge on
Reinvested Dividends None None
- -------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first year,
(as a % of the lower of the declining to 1% in
original purchase price or the six year and
redemption proceeds eliminated thereafter
- --------------------------------------------------------------------
Exchange Fee $5.00(2) $5.00(2)
</TABLE>
(1)If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares," below.
(2)Fee is waived for automated exchanges on PhoneLink, described in "How
to Buy Shares."
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager"), and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees"
for Class B shares are the Distribution and Service Plan Fee (maximum
Service Plan fee of 0.25%) and the asset-based sales charge of 0.75%. The
actual expenses for each class of shares in future years may be more or
less, depending on a number of factors, including the actual amount of the
assets represented by each class of shares. Class B shares were not
publicly sold before October 29, 1993. Therefore, the Annual Fund
Operating Expenses shown for Class B shares are based on expenses for the
period from October 29, 1993 through June 30, 1994.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
- ----------------------------------------------------------
<S> <C> <C>
Management Fees 0.39% 0 .39%
- ----------------------------------------------------------
12b-1 Distribution Plan Fees None 1.00%*
- ----------------------------------------------------------
Other Expenses 0.14% 0.23%
- ----------------------------------------------------------
Total Fund Operating Expenses 0.53% 1.62%
</TABLE>
*Includes Service Plan Fee and asset-based sales charge.
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years(1)
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $52 $63 $75 $109
- -------------------------------------------------------------------------
Class B Shares $66 $81 $108 $135
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $52 $63 $75 $109
- -------------------------------------------------------------------------
Class B Shares $16 $51 $88 $135
</TABLE>
(1)The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the asset-based
sales charge and contingent deferred sales charge, long-term Class B
shareholders could pay the economic equivalent of an amount greater than
the maximum front-end sales charge permitted under applicable regulatory
requirements. The automatic conversion is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy Shares -
Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
Deloitte & Touche LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended June 30, 1994,
is included in the Statement of Additional Information. Class B shares
were publicly offered only during a portion of that period, commencing
October 29, 1993.
- ------
Financial Highlights
Class A Class B
- ------ ------
Year Ended Period Ended
June 30, June 30,
1994 1993 1992 1991 1990(2) 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period $12.66 $12.05 $11.61 $11.56 $11.43
$12.90
Income (loss) from
investment operations:
Net investment income .75 .80 .82 .83(3) .06(3)
.38
Net realized and unrealized
gain (loss) on investments (.80) .64 .45 .05 .13
(1.07)
- ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (.05) 1.44 1.27 .88 .19
(.69)
- ------
Dividends and distributions to shareholders:
Dividends from net
investment income (.73) (.81) (.82) (.83) (.06)
(.37)
Dividends in excess of net
investment income (.03) -- -- -- -- (.01)
Distributions from net realized
gain on investments -- (.02) (.01) -- -- --
Distributions in excess of net
realized gain on investments (.03) -- -- -- --
(.03)
- ------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.79) (.83) (.83) (.83)
(.06) (.41)
- ------
Net asset value, end of period $11.82 $12.66 $12.05 $11.61
$11.56 $11.80
- ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------
- ------
Total Return, at Net Asset Value(4) (.60)% 12.53% 11.21%
7.94% 1.95% (5.42)%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $79,555 $72,387 $40,055 $13,924 $2,027
$1,203
- ------
Average net assets
(in thousands) $81,741 $54,840 $26,304 $6,661 $1,685
$649
- ------
Number of shares outstanding
at end of period (in thousands) 6,732 5,719 3,324 1,199
175
102
- ------
Ratios to average net assets:
Net investment income 6.09% 6.46% 6.74% 6.94%
5.48%(5)
4.91%(5)
Expenses .53% .39% .32% .33%(3) .20%(3)(5)
1.62%(5)
- ------
Portfolio turnover rate(6) 20.2% 5.8% 25.7% 14.6% 0.0%
20.2%
1. For the period from October 29, 1993 (inception of offering) to June
30, 1994.
2. For the period from May 18, 1990 (commencement of operations) to June
30, 1990.
3. Net investment income would have been $.82 and $.04 per share in 1991
and 1990 absent the voluntary expense assumption, resulting in an expense
ratio of .42% and 1.93%, respectively.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended June 30, 1994 were $29,672,105
and $15,979,622, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund invests its assets to seek as high a level of current
income which is exempt from Federal and California personal income taxes
as is available from investing in Municipal Securities (defined below),
while attempting to preserve capital. The Fund is not intended to be a
complete investment program, and there is no assurance that it will
achieve its objective.
Investment Policies and Strategies. The Fund seeks its objective by
following the fundamental policy of investing, under normal market
conditions, at least 80% of its total assets in California Municipal
Securities.
Dividends paid by the Fund derived from interest attributable to
California Municipal Securities will be exempt from Federal individual
income taxes. Such dividends will also be exempt from California personal
income taxes provided that at the close of each quarter, at least 50% of
the value of the Fund's assets are invested in obligations the interest
of which is exempt from taxation under California law when held by an
individual. Dividends derived from interest on Municipal Securities of
other governmental issuers will be exempt from Federal individual income
tax, but will be subject to California personal income taxes. Any net
interest income on taxable investments and repurchase agreements will be
taxable as ordinary income when distributed to shareholders.
-- Municipal Securities. Municipal Securities are municipal bonds,
municipal notes (including tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes and other
loans), tax-exempt commercial paper, certificates of participation and
other debt obligations issued by or on behalf of the State of California,
other states and the District of Columbia, their political subdivisions,
or any commonwealth, territory or possession of the United States, or
their respective agencies, instrumentalities or authorities, the interest
from which, in the opinion of bond counsel for the respective issuer, is
not includable in gross income for purposes of Federal individual income
tax. California Municipal Securities are obligations of the state of
California and its political subdivisions, and their respective agencies,
authorities or instrumentalities, the interest from which, in the opinion
of bond counsel for the respective issuer, is not includable in gross
income for purposes of the California personal income tax. From time to
time the Fund may purchase private activity municipal securities, although
no independent investigation has been made by Oppenheimer Management
Corporation (the "Manager") as to the users of proceeds of bond offerings
or the application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities
that have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest) and "revenue obligations" (payable only
from the revenues derived from a particular facility or class of
facilities, or specific excise tax or other revenue source). The Fund may
invest in Municipal Securities of both classifications.
-- Special Considerations - California Municipal Securities. Because
the Fund concentrates its investments in California Municipal Securities,
the market value and marketability of such Municipal Securities and the
interest income to the Fund from them could be adversely affected by a
default or a financial crisis relating to any of such issuers. Investors
should consider these matters as well as economic trends in California,
summarized in the Additional Statement under "Special Investment
Considerations - California Municipal Securities."
-- Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20%
of its assets in taxable investments, including (i) repurchase agreements;
(ii) Municipal Securities issued to benefit a private user ("Private
Activity Municipal Securities"), the interest from which may be subject
to Federal alternative minimum tax; (iii) debt obligations rated "A-3" or
better by Standard & Poor's Corporation ("Standard & Poor's"), "Prime-3"
or better by Moody's Investors Service, Inc. ("Moody's"), or "F-2" or
better by Fitch Investors Service, Inc. ("Fitch"), which mature in one
year or less ("short-term debt obligations"); (iv) bankers' acceptances,
certificates of deposit, time deposits and U.S. Treasury bills ("cash
equivalents"); and (v) Hedging Instruments.
In times of unstable market or economic conditions, when the Manager
determines it appropriate to do so to attempt to reduce fluctuations in
the value of the Fund's net assets, the Fund may assume a temporary
defensive position and invest an unlimited amount of assets in: (i)
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities; (ii) cash equivalents; (iii) commercial paper rated
in the highest category by an established rating agency; (iv) short-term
debt obligations; (v) certificates of deposit of domestic banks with
assets of $1 billion or more; or (vi) repurchase agreements. To the
extent the Fund assumes a temporary defensive position, a portion of the
Fund's distributions may be subject to Federal and state income taxes and
the Fund may not achieve its objective.
-- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet interest and principal payments. Generally, higher-yielding
lower-rated Municipal Securities are subject to greater credit risk than
higher-rated bonds. Such values will also change in response to changes
in interest rates. Should prevailing interest rates rise, the values of
outstanding Municipal Securities will probably decline and (if purchased
at principal amount) would sell at a discount. If interest rates fall,
the values of outstanding Municipal Securities will probably increase and
(if purchased at principal amount) would sell at a premium. The magnitude
of these fluctuations will be greater when the average maturity of these
securities is longer. It is anticipated that under normal market
conditions, the Fund's portfolio will have an average weighted maturity
of approximately 7 to 30 years. During periods when the Fund is
defensively invested in municipal notes and municipal commercial paper,
the average weighted maturity of the Fund's portfolio may decline to 3 to
4 years. Changes in the value of Municipal Securities held in the Fund's
portfolio arising from these or other factors will not affect interest
income derived from these securities but will affect the Fund's net asset
value per share.
-- Municipal Lease Obligations. The Fund may invest in certificates
of participation, which are tax-exempt obligations that evidence the
holder's right to share in lease, installment loan or other financing
payments by a public entity. Projects financed with certificates of
participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed and do not constitute an obligation of the
State of California or any of its political subdivisions. While some
municipal lease securities may be deemed to be "illiquid" securities (the
purchase of which would be limited as described below in "Illiquid and
Restricted Securities"), from time to time the Fund may invest more than
5% of its net assets in municipal lease obligations that the Manager has
determined to be liquid under guidelines set by the Corporation's Board
of Directors.
-- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjusted at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
-- Inverse Floaters and Other Derivative Investments. The Fund may
invest in variable rate bonds known as "inverse floaters." These bonds
pay interest at a rate that varies as the yields generally available on
short-term tax-exempt bonds change. However, the yields on inverse
floaters move in the opposite direction of yields on short-term bonds in
response to market changes. As interest rates rise, inverse floaters
produce less current income. Inverse floaters are a type of "derivative
security," which is a specially designed investment whose performance is
linked to the performance of another security or investment. Some inverse
floaters have a "cap" whereby if interest rates rise above the "cap," the
security pays additional interest income. If rates do not rise above the
"cap," the Fund will have paid an additional amount for a feature that
proves worthless. The Fund may also invest in municipal derivative
securities that pay interest that depends on an external pricing
mechanism. Examples are interest rate swaps or caps and municipal bond
or swap indices. The Fund anticipates that it would invest no more than
10% of its total assets in inverse floaters.
In the broadest sense, derivative investments also include
exchange-traded options and futures contracts (see "Writing Covered Calls"
and "Hedging with Options and Futures Contracts," below). The risks of
investing in derivative investments include not only the ability of the
issuer of the derivative investment to pay the amount due on the maturity
of the investment, but also the risk that the underlying security or
investment might not perform the way the Manager expected it to perform.
That can mean that the Fund will realize less principal and/or income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but that have similar credit quality, redemption provisions
and maturities. Certain derivative investment held by the Fund may trade
in the over-the-counter market and may be illiquid - See "Illiquid and
Restricted Securities," below.
-- Ratings of Municipal Securities. Municipal Securities purchased by
the Fund must be rated at the time of purchase within the four highest
rating categories assigned by Moody's, Standard & Poor's or Fitch or, if
unrated, judged by the Manager to be of comparable quality to Municipal
Securities rated within such grades. See Appendix A of the Additional
Statement for a description of these ratings. Investment in unrated
Municipal Securities will not exceed 20% of the Fund's total assets. Not
more than 25% of the Fund's total assets will be invested in Municipal
Securities that are (a) municipal bonds rated either "Baa" by Moody's or
"BBB" by either Standard & Poor's or Fitch, (b) municipal notes rated "SP-
2" by Standard & Poor's, "MIG2" by Moody's or "F-2" by Fitch, or (c) if
unrated Municipal Securities, judged by the Manager to be of comparable
quality to Municipal Securities rated within the grades described in (a)
or (b) above, because such Municipal Securities, although investment
grade, may be subject to greater market fluctuations and risks of loss of
income and principal than higher-rated Municipal Securities, and may be
considered to have some speculative characteristics. A reduction in the
rating of a security after its purchase by the Fund will not require the
Fund to dispose of such security. Securities that have fallen below
investment grade entail a greater risk that the ability of the issuers of
such securities to meet their debt obligations will be impaired.
-- Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund generally will not engage in the
trading of securities to realize short-term gains, but the Fund may sell
securities as the Manager deems advisable to take advantage of
differentials in yield. The "Financial Highlights," above, show the
Fund's portfolio turnover rate during past fiscal years. While short-term
trading increases portfolio turnover, the Fund incurs little or no
brokerage costs because most of the Fund's portfolio transactions are
principal trades without brokerage commissions.
-- Non-diversification. The Fund is a "non-diversified" investment
company under the Investment Company Act. As a result, it may invest its
assets in a single issuer or limited number of issuers without limitation
by the Investment Company Act. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), pursuant to which: (1) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a
single issuer, and (2) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total assets may
be invested in the securities of a single issuer and the Fund must not own
more than 10% of the outstanding voting securities of a single issuer.
An investment in the Fund therefore will entail greater risk than an
investment in a diversified investment company because a higher percentage
of investments among fewer issuers may result in greater fluctuation in
the total market value of the Fund's portfolio, and economic, political
or regulatory developments may have a greater impact on the value of the
Fund's portfolio than would be the case if the portfolio were diversified
among more issuers.
-- Special Risk Considerations - Borrowing. The Fund may not borrow
in excess of 10% of the value of its total assets and it cannot make any
investment when borrowings exceed 5% of its total assets, and it may
borrow only as a temporary measure for extraordinary or emergency
purposes. Interest on borrowed money is an expense the Fund would not
otherwise incur, so that it may have substantially reduced net investment
income during periods of substantial borrowings.
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's
investment objective is a fundamental policy. The Corporation's Board of
Directors may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. "When-issued" and
"delayed delivery" refer to securities whose terms and indenture are
available and for which a market exists, but which are not available for
immediate delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, no payment is made for the security and no interest accrues
to the buyer from the investment.
-- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements to generate income and for liquidity purposes to
meet anticipated redemptions, or pending the investment of proceeds from
sales of Fund shares or settlement of purchases of portfolio investments.
The Fund's repurchase agreements will be fully collateralized. However,
if the seller of the securities fails to pay the agreed-upon repurchase
price on the delivery date, the Fund's risks may include any costs of
disposing of the collateral for the agreement, and losses that might
result from any delays in foreclosing on the collateral. Income earned
on repurchase transactions is not tax-exempt and, accordingly, under
normal market conditions, the Fund will limit its investments in
repurchase transactions to 20% of its total assets. When the Fund assumes
a temporary defensive position, there is no limit on the amount of its
assets that may be subject to repurchase agreements maturing in seven days
or less. See "Repurchase Agreements" in the Additional Statement for more
details.
-- Illiquid and Restricted Securities. Under the policies and
procedures established by the Corporation's Board of Directors, the
Manager determines the liquidity of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. The Fund will not invest more than 10%
of its net assets in illiquid or restricted securities (that limit may
increase to 15%). Certain restricted securities, eligible for resale to
qualified institutional purchasers, are not subject to that limit.
-- Puts and Stand-By Commitments. For liquidity purposes, the Fund may
purchase Municipal Securities with puts from banks, brokers, dealers or
other institutions. The put gives the Fund the right to sell the
underlying security within a specified time at a stated price. Under a
stand-by commitment, a dealer agrees to purchase, at the Fund's option,
specified Municipal Securities at a stated price on same-day settlement.
The aggregate price of a security subject to a put or a stand-by
commitment may be higher than the price which otherwise would be paid for
the security without such put or stand-by commitment, thus increasing the
cost of such security and reducing its yield.
-- Loans of Portfolio Securities. To raise cash for liquidity purposes,
the Fund may lend its portfolio securities to certain types of eligible
borrowers approved by the Board of Directors. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. 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. The Fund presently does not intend to engage in loans
of securities in the coming year.
-- Writing Covered Calls. The Fund may write (that is, sell) covered
call options (calls) to raise cash for liquidity purposes (for example,
to meet redemption requirements) or for defensive reasons. The Fund may
write calls only if certain conditions are met: (1) after writing any
call, not more than 25% of the Fund's total assets may be subject to
calls; (2) the calls must be listed on a domestic securities exchange or
quoted on the Automated Quotation System of the National Association of
Securities Dealers, Inc.; in addition, calls on debt securities may be
written in the over-the-counter market; and (3) each call must be
"covered" while it is outstanding; that is, the Fund must own the
securities on which the call is written or it must own other securities
that are acceptable for the escrow arrangements required for calls. If
a covered call written by the Fund is exercised on a security that has
increased in value, the Fund will be required to sell the security at the
call price and will not be able to realize any profit on the security
above the call price.
-- Hedging With Options and Futures Contracts. The Fund may purchase
certain kinds of put and call options, Interest Rate Futures and Municipal
Bond Index Futures, options on Interest Rate Futures and Municipal Bond
Index Futures, and may engage in interest rate swap transactions. These
are all referred to as "Hedging Instruments." The Fund does not use
hedging instruments for speculative purposes. Some of these strategies,
such as selling futures, buying puts and writing covered calls, hedge the
Fund's portfolio against price fluctuations. Other hedging strategies,
such as buying futures, writing put options and buying call options, tend
to increase the Fund's exposure to the market. The hedging instruments the
Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may purchase put options ("puts") which relate to (1)
securities that the Fund owns, (2) Interest Rate Futures and Municipal
Bond Index Futures, whether or not the Fund owns the particular Future in
its portfolio, or (3) municipal bond indices. The Fund may purchase calls
only on debt securities, Interest Rate Futures and Municipal Bond Index
Futures, or to terminate its obligation on a call the Fund previously
wrote. A call or put may not be purchased if the value of all of the
Fund's put and call options would exceed 5% of the Fund's total assets.
Writing puts requires the segregation of liquid assets to cover the put.
The Fund will not write a put if it will require more than 50% of the
Fund's net assets to be segregated to cover the put obligation. At
present, the Fund does not intend to enter into Futures contracts and
option on Futures if, after any such practice, the sum of margin deposits
on Futures and premiums paid on Futures would exceed 5% of the Fund's
total assets.
Hedging instruments can be volatile investments and may involve special
risks. If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these fundamental
policies, the Fund cannot do any of the following: (1) lend money except
in connection with the acquisition of debt securities which the Fund's
investment policies and restrictions permit it to purchase; the Fund may
also make loans of portfolio securities, subject to the restrictions
stated under "Loans of Portfolio Securities"; or (2) concentrate
investments to the extent of 25% of its assets in any industry; however,
there is no limitation as to investment in U.S. Government Securities,
Municipal Securities or as to investment in obligations issued by the
State of California or its subdivisions, agencies, authorities or
instrumentalities; the Fund cannot invest in securities or any other
investment other than Municipal Securities, temporary investments and
Hedging Instruments.
The percentage restrictions described above and elsewhere in this
Prospectus and in the Additional Statement apply only at the time the Fund
purchases a security, and the Fund need not dispose of a security merely
because the Fund's assets have changed or the security has increased in
value relative to the size of the Fund. There are other fundamental
policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios
or "series" of Oppenheimer Main Street Funds, Inc. (the "Corporation"),
an open-end, management investment company organized as a Maryland
corporation in 1987. The Fund commenced operations on May 18, 1990.
The Corporation is governed by a Board of Directors, which is
responsible for protecting the interests of shareholders under Maryland
corporate law. The Directors meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review the
actions of the Manager. "Directors and Officers of the Corporation" in
the Statement of Additional Information names the Directors and provides
more information about them and the officers of the Corporation. Although
the Fund is not required by law to hold annual meetings, it may hold
shareholder meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a Director or to
take other action described in the Articles of Incorporation.
The Board of Directors has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote together on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
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 Directors, under an Investment Advisory Agreement which states
the Manager's responsibilities and its fees, and describes the expenses
that the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $27 billion as
of June 30, 1994, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
-- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Corporation) is Robert E. Patterson, a Senior Vice
President of the Manager. He has been responsible for the day-to-day
management of the Fund's portfolio since May 18, 1990, the date the Fund
commenced operations. During the past five years, Mr. Patterson has also
served as an officer and portfolio manager for other OppenheimerFunds.
-- Fees and Expenses. Under the Investment Advisory Agreement between
the Manager and the Corporation on behalf of the Fund, the Fund pays a
management fee to the Manager monthly, computed on the aggregate net asset
value of the Fund as of the close of business each day, at the annual rate
of 0.55% of net assets. Pursuant to the Agreement, the Manager has agreed
to waive a portion of the fee when the Fund's net assets are less than
$100 million. The fee rate, reflecting this waiver, is 0.40% when net
assets are $75 million or more but less than $100 million, 0.25% when net
assets are $50 million or more but less than $75 million, 0.15% when net
assets are $25 million or more but less than $50 million, and 0% when net
assets are less than $25 million. When asset level breakpoints are
reached, the fee applies to total net assets of the Fund, not only to
assets in excess of such breakpoint. The Fund's management fee for its
last fiscal year was 0.39% of average annual net assets for Class A shares
and 0.39% for Class B shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Directors' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses affect the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it therefore
incurs relatively little expense for brokerage. From time to time it may
use brokers when buying portfolio securities. When deciding which brokers
to use, the Manager is permitted by the investment advisory agreement to
consider whether brokers have sold shares of the Fund or any other funds
for which the Manager serves as investment adviser.
-- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries to the
Transfer Agent at the address and toll-free numbers shown below in this
Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "yield." These terms are
used to show the performance of each class of shares separately, because
the performance of each class of shares will usually be different, as a
result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or market indices,
as we have done below.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Fund's performance. The Fund's investment performance will vary,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
-- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may also be
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge. They may also be shown based on
the change in net asset value, without considering the effect of the
contingent deferred sales charge.
-- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of income taxes. It is calculated by dividing that portion of the
yield that is tax-exempt by a factor equal to one minus the applicable tax
rate. The yield of each Class will differ because of the different
expenses of each Class of shares. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment
return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated
by dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended June 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
-- Management's Discussion of Performance. During the twelve months
ended June 30, 1994, the performance of the California municipal bond
market was affected by the broad decline in bond prices that followed four
increases in short-term interest rates by the Federal Reserve Board from
early February, 1994 through mid-May, 1994. The Fund continued to
maintain a strong position in higher quality bonds that the Manager
considered to be related to essential services and projects that benefit
the entire community, such as transportation, housing and education.
Recent additions to the portfolio followed this basic strategy, while also
focusing on bond maturity. The Fund also sought to lock-in attractive
rates with call protection, which prevents the issuer of the bond from
calling or redeeming it before maturity. In the opinion of the Manager,
the Fund is diversified both by geographic location and by market sector
within California.
-- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund from the inception of the Class held through June
30, 1994, with all dividends and capital gains distributions reinvested
in additional shares. The graph reflects the deduction of the 4.75%
maximum initial sales charge on Class A shares and the 5% maximum
contingent deferred sales charge on Class B shares.
The Fund's performance is compared to the performance of the Lehman
Brothers Municipal Bond Index, an unmanaged index of a broad range of
investment grade municipal bonds widely regarded as a measure of the
performance of the general municipal bond market. Index performance
reflects the reinvestment of dividends but does not consider the effect
of capital gains or transaction costs, and none of the data below shows
the effect of taxes. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in any one index. Moreover,
the index data does not reflect any assessment of the risk of the
investments included in the index.
Comparison of Change
in Value of $10,000
Hypothetical Investments in:
Main Street California Tax-Exempt Fund
And Lehman Brothers Municipal Bond Index
[Graph]
Past performance is not predictive of future performance.
Avg. Annual Total Return of the Fund at 6/30/94
A Shares 1 Year Life*
- ------------------------------------------------
-5.32%% 6.65%
- ------------------------------------------------
Cumulative Total Return of the Fund at 6/30/94
B Shares Life**
- ------------------------------------------------
-10.15%
- ------------------------------------------------
*The Fund (Class A shares) began
operations on 5/18/90.
**Class B shares of the Fund first publicly
offered on 10/29/93.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
-- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, and you sell any of those shares within 18
months after your purchase, you will pay a contingent deferred sales
charge, which dollar value will vary depending on the amount you invested.
-- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 6
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, deciding which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. Because the Fund's operating costs
that apply to a class of shares and the effect of the different types of
sales charges on your investment will vary your investment results over
time, the most important factors to consider are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which offer Class A and/or Class B shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund, based on the
sales charge rates that apply to each class, and considering the effect
of the asset-based sales charge on Class B expenses (which will affect
your investment return), and, for the sake of comparison, we have assumed
that there is a 10% rate of appreciation in your investment each year. Of
course, the actual performance of your investment cannot be predicted and
will vary, based on the Fund's actual investment returns, and the
operating expenses borne by each class of shares, and which class of
shares you invest in. The factors discussed below are not intended to be
investment advice or recommendations, because each investor's financial
considerations are different.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on How Much You Plan To Invest. For
example, the reduced sales charges available for larger purchases of Class
A shares may, over time, offset the effect of paying an initial sales
charge on your investment (which reduces the amount of your investment
dollars used to buy shares for your account), compared to the effect over
time of higher class-based expenses on shares of Class B for which no
initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A shares rather than
Class B shares, because of the effect of the Class B contingent deferred
sales charge if you redeem in less than 7 years, as well as the effect of
the Class B asset-based sales charge on the investment return for that
class in the short-term.
However, Class A might be more advantageous than Class B for
investments of more than $100,000 expected to be held for 5 or 6 years (or
more). For investments over $250,000 expected to be held 4 to 6 years (or
more), Class A shares may become more advantageous than Class B. If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B shares
from a single investor. Of course, these examples are based on
approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, using the assumed annual performance
return stated above, and therefore should not be relied on as rigid
guidelines.
Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares, as discussed above, because of
the effect of the expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in Class
A shares under the Fund's Right of Accumulation.
-- Are There Differences in Account Features That Matter To You?
Because some features (such as Checkwriting) may not be available to Class
B shareholders, or other features (such as Automatic Withdrawal Plans) may
not be advisable (because of the effect of the contingent deferred sales
charge) for Class B shareholders, you should carefully review how you plan
to use your investment account before deciding which class of shares to
buy. Additionally, dividends payable to Class B shareholders will be
reduced by the additional expenses borne by that class that are not borne
by Class A, such as the Class B asset-based sales charge described below
and in the Statement of Additional Information.
Also, because not all of the OppenheimerFunds currently offer Class
B shares, and because exchanges are permitted only to the same class of
shares in another of the OppenheimerFunds, you should consider how
important the exchange privilege is likely to be for you.
-- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling or
servicing one class of shares than another class. It is important that
investors understand that the purpose of the Class B contingent deferred
sales charge is the same as the purpose of the front-end sales charge on
Class A shares: to compensate the Distributor for commissions it pays to
dealers and financial institutions for sales of shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure
to specify Class A or Class B shares. If you do not choose, your
investment will be made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day"). If you buy shares
through a dealer, the dealer must receive your order by 4:00 P.M., on a
regular business day and transmit it to the Distributor so that it is
received before the Distributor's close of business that day, which is
normally 5:00 P.M. The Distributor may reject any purchase order for the
Fund's shares, in its sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End
Front-End Sales Charge
Sales Charge as Commission
as Approximate as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- -------------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- -------------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. However, that
commission will be paid only on the amount of those purchases in excess
of $1 million that were not previously subject to a front-end sales charge
and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
-- Right of Accumulation. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
-- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates act as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) Automatic Withdrawal Plan
payments that are limited to no more than 12% of the original account
value annually, and (2) involuntary redemptions of shares by operation of
law or under the procedures set forth in the Fund's Articles of
Incorporation or adopted by the Board of Directors.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Years Since Beginning Contingent Deferred Sales Charge
of Month in which On Redemptions in That Year
Purchase Order Was Made (As % of Amount Subject to Charge)
- ------------------------------------------------------------------
<S> <C>
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
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
-- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for a
redemption following the death or disability of the shareholder (you must
provide evidence of a determination of disability by the Social Security
Administration).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution 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 "Alternative Sales Arrangements - Class A and Class
B Shares" in the Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal service for accounts that hold Class B shares.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
The asset-based sales charge and service fees increase Class B expenses
by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Directors may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for certain expenses it
incurred before the Plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
-- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Class A shares that you sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The check is not payable to all shareholders listed on the account
statement
-- The check is not sent to the address of record on your statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or 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 as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholders Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held under a share
certificate by telephone.
-- To redeem shares through a service representative, call 1-800-852-
8457
-- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
-- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
-- Checkwriting privileges are not available for accounts holding
Class B shares, or Class A shares that are subject to a contingent
deferred sales charge.
-- Checks must be written for at least $100.
-- Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write a
check close to the total account value.
-- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
-- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, or (4) the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges between already established
accounts on PhoneLink described below. To exchange shares, you must meet
several conditions:
-- Shares of the fund selected for exchange must be available for
sale in your state of residence
-- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
-- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
-- You must meet the minimum purchase requirements for the fund you
purchase by exchange
-- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling the
Distributor at 1-800-525-7048. Exchanges of shares involve a redemption
of the shares of the fund you own and a purchase of shares of the other
fund.
There are certain exchange policies you should be aware of:
-- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
-- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Corporation's Board of
Directors has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Directors at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
-- Under unusual circumstances, shares of the Fund may be redeemed
"in kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname and address on
the Fund's records. However, each shareholder may call the Transfer Agent
at 1-800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income on each regular business day and pays
those dividends to shareholders monthly. Daily dividends will not be
declared or paid on newly purchased shares until 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, dividends
are paid on or about the tenth business day of every month, but the Board
of Directors can change that date. However, the amount of dividends and
distributions may vary from time to time, depending upon market
conditions, the composition of the Fund's portfolio, and expenses borne
by that class. It is expected that distributions paid with respect to
Class A shares will generally be higher than for Class B shares because
expenses allocable to Class B shares will generally be higher. During the
Fund's fiscal year ended June 30, 1994, the Fund maintained the practice,
to the extent consistent with the amount of the Fund's net investment
income and other distributable income, of attempting to pay dividends on
Class A shares at a constant level, although the amount of such dividends
was subject to change from time to time depending on market conditions,
the composition of the Fund's portfolio and expenses borne by the Fund.
Capital Gains. Although the Fund does not seek capital gains, the Fund
may realize capital gains on the sale of portfolio securities. If it
does, it may make distributions annually in December out of any net short-
term or long-term capital gains. The Fund may also make supplemental
distributions of dividends and capital gains following the end of its
fiscal year. If net capital losses are realized in any year, they are
charged against principal and not against net investment income, which is
distributed regardless of capital gains or losses. Long-term capital
gains will be separately identified in the tax information the Fund sends
you after the end of the calendar year. Short-term capital gains are
treated as taxable dividends for tax purposes.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have four
options:
-- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
-- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term capital
gains are taxable as ordinary income. Dividends paid from net investment
income earned by the Fund on Municipal Securities will be excludable from
your gross income for federal income tax purposes. A portion of the
dividends paid by the Fund may be an item of tax preference if you are
subject to alternative minimum tax. Distributions are subject to federal
income tax and may be subject to state or local taxes. 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 as well as the amount of your tax-exempt income.
-- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a dividend or a taxable
capital gain.
-- Taxes on Transactions: Even though the Fund seeks tax-exempt
income for distribution to shareholders, 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.
-- Returns of Capital: In certain cases, distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer Main Street
California Tax-Exempt Fund: "Comparison of Total Return of Oppenheimer
Main Street California Tax-Exempt Fund and the Lehman Brothers Municipal
Bond Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Main
Street California Tax-Exempt Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical $10,000
investment in the Fund. In the case of the Fund's class A shares, that
graph will cover the period from the commencement of the Fund's operations
(5/18/90) through 6/30/94 and in the case of the Fund's Class B shares
will cover the period from the inception of the class (October 29, 1993)
through June 30, 1994. The graph will compare such values with
hypothetical $10,000 investments over the same time periods in the Lehman
Brothers Municipal Bond Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Lehman Brothers
Municipal Bond Index, is set forth in the Prospectus under "Fund
Information - Management's Discussion of Performance."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Main Street Lehman Brothers
(Period) Ended California Tax-Exempt Fund A Municipal Bond Index
<S> <C> <C>
5/18/90 $ 9,525 $10,000
6/30/90 $ 9,683 $10,088
6/30/91 $10,446 $10,997
6/30/92 $11,615 $12,291
6/30/93 $13,080 $13,761
6/30/94 $13,037 $13,785
Fiscal Oppenheimer Main Street Lehman Brothers
Period Ended California Tax-Exempt Fund B Municipal Bond Index
10/29/93 $10,000 $10,000
6/30/94 $ 8,985 $ 9,673
</TABLE>
<PAGE>
Oppenheimer Main Street California Tax-Exempt Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048 O P P E N H E I M E R
Transfer and Shareholder Servicing Agent Main Street
Oppenheimer Shareholder Services California
P.O. Box 5270 Tax-Exempt
Denver, Colorado 80217 Fund
1-800-525-7048
Prospectus
Custodian of Portfolio Securities Effective October 1, 1994
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has
been authorized to give any information or to make
any representations other than those contained in
this Prospectus or the Additional Statement, and
if given or made, such information and
representation must not be relied upon as having
been authorized by the Corporation, Oppenheimer
Management Corporation, Oppenheimer Funds
Distributor, Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the
securities offered hereby in any state to any
person to whom it is unlawful to make such offer
in such state.
OppenheimerFunds
California Federal Savings is the exclusive dealer for Oppenheimer Main
Street California Tax-Exempt Fund
PR725 (10/94) Printed on recycled paper
<PAGE>
Oppenheimer Main Street California Tax-Exempt Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated October 1, 1994
This Statement of Additional Information of Oppenheimer Main Street
California Tax-Exempt Fund is not a Prospectus. This document contains
additional information about the Fund and supplements information in the
Prospectus dated October 1, 1994. It should be read together with the
Prospectus which may be obtained by writing to the Fund's Transfer Agent,
Oppenheimer Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217
or by calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies
Investment Policies and Strategies
Other Investment Techniques and Strategies
Other Investment Restrictions
How the Fund is Managed
Organization and History
Directors and Officers of the Corporation
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plan
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
Appendix A: Description of Ratings A
Appendix B: Tax Equivalent Yield Table B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
Municipal Securities. There are variations in the security of Municipal
Securities, both within a particular classification and between
classifications, depending on numerous factors. The yields of Municipal
Securities depend on, among other things, general conditions of the
Municipal Securities market, size of a particular offering, the maturity
of the obligation and rating of the issue. The market value of Municipal
Securities will vary as a result of changing evaluations of the ability
of their issuers to meet interest and principal payments, as well as
changes in the interest rates payable on new issues of Municipal
Securities.
-- Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds. In California, municipal bonds may also be funded by
property taxes in specially created districts (Mello-Roos or Special
Assessment Bonds), tax allocations based on increased property tax
assessments over a specified period (frequently for redevelopment
projects) or specified redevelopment area sales allocations.
-- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
-- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
-- Industrial Development Bonds. Industrial development bonds, which
are considered municipal bonds if the interest paid is exempt from federal
income tax, are issued by or on behalf of public authorities to raise
money to finance various privately operated facilities for business and
manufacturing, housing, sports, and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
-- Advance Refunding. The refinancing of outstanding bonds by the
issuance of a new issue of bonds prior to the date on which the
outstanding bonds become due or are callable is known as advance
refunding. Accordingly, for a period of time, both the issue being
refunded and the refunding issue are outstanding. Bonds are "escrowed to
maturity" when the proceeds of the refunding bonds are deposited in escrow
for investment in federal securities in an amount sufficient to pay, when
due, the principal of and interest on the issue being refunded. Bonds are
considered "pre-refunded" when the refunding bond proceeds are escrowed
only until the call date of the refunded issue.
-- Mello-Roos Bonds. Bonds issued pursuant to the California Mello-
Roos Community Facilities Act ("Mello-Roos bonds") are used to finance
infrastructure projects (such as roads or sewage treatment plants) and are
primarily secured by real estate taxes levied on property located in the
same community as that project. Mello-Roos bond financing arose in
response to limitations contained in California's statutory limitations
on real property taxes (see "Special Investment Considerations --
California Municipal Securities" below), and do not constitute obligations
of a municipality. Timely payment of such bonds depends on the developer
or other property owners' ability to pay their real estate taxes, which
could be adversely affected by a declining economy and/or real estate
market.
-- Municipal Notes. Municipal Securities having a maturity when
issued of less than one year are generally known as municipal notes.
Municipal notes generally are used to provide for short-term working
capital needs and include:
-- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use or business taxes, and are payable from these specific future
taxes.
-- Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other types of revenue, such as federal
revenues available under the Federal revenue sharing programs.
-- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
-- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
-- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
-- Floating Rate/Variable Rate Obligations. Floating rate and
variable rate demand notes are tax-exempt obligations which may have a
stated maturity in excess of one year, but may include features that
permit the holder to recover the principal amount of the underlying
security at specified intervals. The issuer of such notes normally has
a corresponding right, after a given period, to prepay in its discretion
the outstanding principal amount of the note plus accrued interest upon
a specified number of days notice to the holder. The interest rate on a
floating rate demand note is based on a stated prevailing market rate,
such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, or some
other standard, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand note is also based
on a stated prevailing market rate but is adjusted automatically at
specified intervals of no less than one year. Generally, the changes in
the interest rate on such securities reduce the fluctuation in their
market value. As interest rates decrease or increase, the potential for
capital appreciation or depreciation is less than that for fixed-rate
obligations of the same maturity. The Fund's investment manager,
Oppenheimer Management Corporation (the "Manager"), may determine that an
unrated floating rate or variable rate demand obligation meets the Fund's
quality standards by reason of being backed by a letter of credit or
guarantee issued by a bank that meets the Fund's quality standards. There
is no limit on the amount of the Fund's assets that may be invested in
floating rate and variable rate obligations.
-- Inverse Floaters and Other Derivative Investments. Some inverse
floaters have a feature known as an interest rate "cap" as part of the
terms of the investment. Investing in inverse floaters that have interest
rate caps might be part of a portfolio strategy to try to maintain a high
current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuation.
Embedded caps hedge a portion of the Fund's exposure to rising interest
rates. When interest rates exceed the pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates
on the inverse floater, and the hedge is successful. However, the Fund
bears the risk that if interest rates do not rise above the pre-determined
rate, the cap (which is purchased for additional cost) will not provide
additional cash flows and will expire worthless.
-- Municipal Lease Obligations. From time to time the Fund may
invest more than 5% of its net assets in municipal lease obligations,
generally through the acquisition of certificates of participation, that
the Manager has determined to be liquid under guidelines set by the Board
of Directors. Those guidelines require the Manager to evaluate: (1) the
frequency of trades and price quotations for such securities; (2) the
number of dealers or other potential buyers willing to purchase or sell
such securities; (3) the availability of market-makers; and (4) the nature
of the trades for such securities. The Manager will also evaluate the
likelihood of a continuing market for such securities throughout the time
they are held by the Fund and the credit quality of the instrument.
Municipal leases may take the form of a lease or an installment purchase
contract issued by a state or local government authority to obtain funds
to acquire a wide variety of equipment and facilities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. Projects financed with certificates
of participation generally are not subject to state constitutional debt
limitations or other statutory requirements that may be applicable to
Municipal Securities. Payments by the public entity on the obligation
underlying the certificates are derived from available revenue sources;
such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the
certificates are not guaranteed and do not constitute an obligation of the
State of California or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease
securities do not yet have a highly developed market to provide the degree
of liquidity of conventional municipal bonds. Municipal leases, like
other municipal debt obligations, are subject to the risk of non-payment.
The ability of issuers of municipal leases to make timely lease payments
may be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Fund.
-- Puts and Stand-by Commitments. When the Fund buys Municipal
Securities, it may obtain a stand-by commitment to repurchase the
securities that entitles it to achieve same-day settlement from the
purchaser and to receive an exercise price equal to the amortized cost of
the underlying security plus accrued interest, if any, at the time of
exercise. A put purchased in conjunction with a Municipal Security
enables the Fund to sell the underlying security within a specified period
of time at a fixed exercise price. The Fund may pay for a stand-by
commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the stand-by commitment or put.
The Fund will enter into these transactions only with banks and dealers
which, in the Manager's opinion, present minimal credit risks. The Fund's
ability to exercise a put or stand-by commitment will depend on the
ability of the bank or dealer to pay for the securities if the put or
stand-by commitment is exercised. If the bank or dealer should default
on its obligation, the Fund might not be able to recover all or a portion
of any loss sustained from having to sell the security elsewhere. Puts
and stand-by commitments are not transferable by the Fund, and therefore
terminate if the Fund sells the underlying security to a third party. The
Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a
security at a pre-arranged price which may be higher than the prevailing
market price at the time the put or stand-by commitment is exercised.
However, the Fund might refrain from exercising a put or stand-by
commitment if the exercise price is significantly higher than the
prevailing market price, to avoid imposing a loss on the seller which
could jeopardize the Fund's business relationships with the seller. Any
consideration paid by the Fund for the put or stand-by commitment (which
increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as
unrealized depreciation while the put or stand-by commitment is held, and
a realized gain or loss when the put or commitment is exercised or
expires. Interest income received by the Fund from Municipal Securities
subject to puts or stand-by commitments may not qualify as tax-exempt in
its hands if the terms of the put or stand-by commitment cause the Fund
to not be treated as the tax owner of the underlying Municipal Securities.
-- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued to
finance governmental operations. Thus, interest on obligations issued by
or on behalf of state or local governments, the proceeds of which are used
to finance the operations of such governments (e.g., general obligation
bonds) continues to be tax-exempt. However, the Tax Reform Act further
limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7,
1986, which continues to be tax-exempt will be treated as a tax preference
item subject to the alternative minimum tax (discussed below) to which
certain taxpayers are subject. Furthermore, a private activity bond which
would otherwise be a qualified tax-exempt private activity bond will not,
under Internal Revenue Code Section 147(a), be a qualified bond for any
period during which it is held by a person who is a "substantial user" of
the facilities or by a "related person" of such a substantial user. This
"substantial user" provision is applicable primarily to exempt facility
bonds, including industrial development bonds. The Fund may not be an
appropriate investment for entities which are "substantial users" (or
persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, limitations as to the amount of private
activity bonds which each state may issue were revised downward, which
will reduce the supply of such bonds. The value of the Fund's portfolio
could be affected if there is a reduction in the availability of such
bonds. That value may also be affected by a 1988 U.S. Supreme Court
decision upholding the constitutionality of the imposition of a Federal
tax on the interest earned on Municipal Securities issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or
(b) a private loan restriction. Under the trade or business use and
security interest test, an obligation is a private activity bond if: (i)
more than 10% of bond proceeds are used for private business purposes and
(ii) 10% or more of the payment of principal or interest on the issue is
directly or indirectly derived from such private use or is secured by the
privately used property or the payments related to the use of the
property. For certain types of uses, a 5% threshold is substituted for
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state or municipal governmental unit.) Under the private
loan restriction, the amount of bond proceeds which may be used to make
private loans is limited to the lesser of 5% or $5.0 million of the
proceeds. Thus, certain issues of Municipal Securities could lose their
tax-exempt status retroactively if the issuer fails to meet certain
requirements as to the expenditure of the proceeds of that issue or use
of the bond-financed facility. The Fund makes no independent
investigation of the issuers of such bonds or their use of proceeds.
Should the Fund hold a bond that loses its tax-exempt status
retroactively, there might be an adjustment to the tax-exempt income
previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act, which makes tax-exempt interest from certain private activity bonds
a tax preference item for purposes of the alternative minimum tax,
specifically states that any exempt-interest dividend paid by a regulated
investment company will be treated as interest on a specific private
activity bond to the extent of its proportionate share of the interest on
such bonds received by the regulated investment company. The Treasury is
authorized to issue regulations implementing this provision. The Fund may
hold Municipal Securities the interest on which (and thus a proportionate
share of the exempt-interest dividends paid by the Fund) will be subject
to the Federal alternative minimum tax. In addition, corporate taxpayers
subject to the alternative minimum tax may, under some circumstances, have
to include exempt-interest dividends in calculating their alternative
minimum taxable income in situations where the "adjusted current earnings"
of the corporation exceeds its alternative minimum taxable income.
-- Changes in Ratings. Subsequent to its purchase by the Fund, a
Municipal Security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Fund. Neither event
requires the Fund to sell the security, but the Manager will consider such
events in determining whether the Fund should continue to hold the
security. To the extent that ratings given by Moody's, Standard & Poor's
or Fitch change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the Fund's investment
policies.
Special Investment Considerations - California Municipal Securities. As
stated in the Prospectus, the values of the Fund's California Municipal
Securities are highly sensitive to the fiscal stability of California and
its subdivisions, agencies, instrumentalities or authorities, which issue
the Municipal Securities in which the Trust concentrates its investments.
Certain amendments to the California State constitution, legislative
measures, executive orders, civil actions and voter initiatives in recent
years that could adversely affect the ability of California issuers to pay
interest and principal on Municipal Securities are described below. The
following constitutes only a brief summary, and is based on information
drawn from the relevant statutes and certain other publicly available
information. The Fund has not independently verified such information.
Changes in California constitutional and other laws during the last
several years have caused concerns about the ability of California state
and municipal issuers to obtain sufficient revenue to pay their bond
obligations. In 1978, California voters approved an amendment to the
California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. Article XIIIA limits ad valorem taxes on
real property and restricts the ability of taxing entities to increase
real property taxes. However, legislation passed subsequent to
Proposition 13 provided for the redistribution of California's General
Fund surplus to local agencies, the reallocation of revenues to local
agencies and the assumption of certain local obligations by the state so
as to help California municipal issuers raise revenue to pay their bond
obligations. It is unknown whether additional revenue redistribution
legislation will be enacted in the future and whether, if enacted, such
legislation will provide sufficient revenue for such California issuers
to pay their obligations.
The state is also subject to another constitutional amendment,
Article XIIIB, which may have an adverse impact on California state and
municipal issuers. Article XIIIB restricts the state from spending
certain appropriations in excess of an appropriations limit imposed for
each state and local government entity. If revenues exceed such
appropriations limit, such revenues must be returned either as revisions
in the tax rates or fee schedules. In 1988, California voters approved
an initiative known as Proposition 98, which in addition to amending
Article XIIIB, amended Article XVI to require a minimum level of funding
for public schools and community colleges. In 1992-93 and 1993-94, the
state budget met part of its commitment to education through $1.8 billion
in off-book loans. The legality of these loans was challenged in a
lawsuit by the California Teachers Association. A lower court in
California has ruled against the state, and under this decision the
schools would not be required to repay these loans. If upheld on appeal,
the ruling would increase the state's officially recognized 1994-95 year-
end deficit by $1.8 billion.
Because of the uncertain impact of the aforementioned legislation,
the possible inconsistencies in the respective terms of the statutes and
the impossibility of predicting the level of future appropriations and
applicability of related statutes to such questions, it is not currently
possible to assess the impact of such legislation and policies on the long
term ability of the State of California and California municipal issuers
to pay interest or repay principal on their obligations.
California has substantial size, wealth and a diverse economy. It
is the largest in population of the states, and accounts for about 13% of
personal income in the U.S. Through the 1980s, the rate of state
population growth was more than twice that for the country. However,
although the national economic recovery continued at a strong pace in the
first quarter of 1994, California is still experiencing the effects of a
recession. However, the state's budget for fiscal year 1994-95 assumes
that the state will begin to recover from recessionary conditions in 1994,
with a modest upturn in 1994 and continuing in 1995. Substantial
contraction in California's defense related industries, overbuilding in
commercial real estate, and consolidation and decline in the state's
financial services industry will likely produce slower overall growth for
several years.
Although the median home prices in the state have continued to
decline, home sales have increased sharply. Median home prices in July
1994 were down 1.0% from July 1993, while home sales increased 4.6% from
a year earlier. Unemployment, however, has been above the national
average since 1990. In July 1994, unemployment in California stood at
9.0% versus 6.1% for the nation. Overall, the state has lost
approximately 600,000 jobs since the spring of 1990, notwithstanding the
continued increase in the state's population. Employment is expected to
fall 0.3% in 1994. With a slow recovery, economic forecasts predict
annual growth in employment of 1.5% and 1.6% in 1995 and 1996,
respectively. Personal bankruptcy filings also continue to increase, as
statewide filings rose 17% in 1992.
These economic difficulties have exacerbated the budget imbalance
which has been evident since 1985-86. Since that time, the state has
recorded General Fund operating deficits in five of the past six fiscal
years. Many of these problems have been attributable to a great
population increase which has increased demand for educational and social
services at a pace far greater than the growth in revenues.
By June 30, 1994, the General Fund had an accumulated deficit, on a
budgeted basis, of approximately $2.0 billion. In addition, the deficit
over the previous three years had exhausted the state's available cash
reserves and resources. In July and August, 1994, the state was required
to issue a total of $7 billion of short-term revenue anticipation warrants
to fund, in part, the state's cash flow management needs for the 1994-95
fiscal year.
On July 8, 1994, the Governor signed into law a new $57.5 billion
budget which includes General Fund spending of $40.9 billion, up 4.2% from
the level of spending during the 1993-94 fiscal year. The budget also
envisions General Fund spending climbing another 8.4% in the 1995-96
fiscal year. The budget forecasts levels of revenue and expenditures
which will result in operating surpluses in both 1994-95 and 1995-96,
leading to the elimination of the budget deficit by June 30, 1996.
Because of the State of California's continuing budget problems, the
state's General Obligation bonds were downgraded in July 1994 from Aa to
A1 by Moody's, from A+ to A by Standard & Poor's and from AA to A by
Fitch. All three rating agencies expressed uncertainty in the state's
ability to balance its budget by 1996.
On January 17, 1994, Northridge, California experienced an earthquake
that registered 6.8 on the Richter scale, resulting in significant
property damage to private and public facilities throughout the Los
Angeles and Ventura Counties, and to parts of the Orange and San
Bernardino Counties. The total amount of damage is estimated to be
between $13 billion and $20 billion. In mid-February Congress approved
an earthquake relief package totaling about $8.6 billion, bringing total
federal support to $9.5 billion. The California legislature approved $2
billion in bond financing in mid-March for earthquake recovery costs and
seismic safety improvements. However, the bond issue was rejected by
California voters in the June 1994 election. It now appears that the
state will pay for its share of the recovery costs through a reallocation
of existing funds and borrowing from the federal government. The
Commission on State Finance believes that, although it may carry long-term
implications for the City of Los Angeles, the earthquake will not derail
the state's economic recovery.
Other Investment Techniques and Strategies
-- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in securities on a "when-issued" or
"delayed delivery" basis. Payment for and delivery of the securities
generally settles within 45 days of the date the offer is accepted. The
purchase price and yield are fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from
the investment. However, the Fund intends to be as fully invested as
possible and will not invest in when-issued securities if its income or
net asset value will be materially adversely affected. At the time the
Fund makes the commitment to purchase a Municipal Security on a when-
issued basis, it will record the transaction on its books and reflect the
value of the security in determining its net asset value. It will also
segregate cash or other high quality liquid Municipal Securities equal in
value to the commitment for the when-issued securities. While when-issued
securities may be sold prior to settlement date, the Fund intends to
acquire the securities upon settlement unless a prior sale appears
desirable for investment reasons. There is a risk that the yield
available in the market when delivery occurs may be higher than the yield
on the security acquired.
-- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Corporation's
Board of Directors from time to time. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate
effective for the period during which the repurchase agreement is in
effect. The majority of these transactions run from day to day, and
delivery pursuant to the resale typically will occur within one to five
days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act, collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
-- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Directors of the Corporation
or by the Manager under Board-approved guidelines. Those guidelines take
into account the trading activity for such securities and the availability
of reliable pricing information, among other factors. If there is a lack
of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Portfolio Turnover. The Fund may purchase or sell Municipal
Securities without regard to the length of time the security has been
held, to take advantage of short-term differentials in yields consistent
with the Fund's investment objective. While short-term trading increases
portfolio turnover, the execution cost for such securities is
substantially less than for equivalent dollar values of equity securities.
However, short-term trading may affect the Fund's status as an investment
company under the Internal Revenue Code (see "Dividends, Capital Gains and
Taxes" in the Prospectus).
-- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
-- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Futures,
(ii) buy puts, or (iii) write covered calls on securities held by it or
on Futures (as described in the Prospectus). When hedging to establish
a position in the securities markets as a temporary substitute for the
purchase of individual debt securities the Fund may: (i) buy Futures, or
(ii) buy calls on such Futures or securities. Normally, the Fund would
then purchase the debt securities and terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's investment activities in the underlying
cash market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
-- Purchasing Calls and Puts. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. When the Fund purchases a
call (other than in a closing purchase transaction), it pays a premium and
has the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a
fixed exercise price. In purchasing a call, the Fund benefits only if the
call is sold at a profit or if, during the call period, the market price
of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the call is
exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Fund will
lose its premium payment and the right to purchase the underlying
investment. When the Fund purchases a call or put (discussed below) on
an index or Future, it pays a premium, but settlement is in cash rather
than by delivery of the underlying investment to the Fund. Gain or loss
depends on changes in the index in question (and thus on price movements
in the securities market generally) rather than on price movements in
individual securities or futures contracts.
When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a
seller of a put on a corresponding investment during the put period at a
fixed exercise price. Buying a put on securities or Futures the Fund owns
enables the Fund to attempt to protect itself during the put period
against a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise price
to a seller of a corresponding put. If the market price of the underlying
investment is equal to or above the exercise price and, as a result, the
put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to sell the underlying investment; the put may, however, be sold prior to
expiration (whether or not a profit).
Puts and calls on broadly-based municipal bond indices or Future are
similar to puts and calls on securities or futures contracts except that
all settlements are in cash and gain or loss depends on changes in the
index in question rather than on price movements of individual securities
or futures contracts. When the Fund buys a call on a municipal bond index
or Future, it pays a premium. If the Fund exercises the call during the
call period, a seller of a corresponding call on the same investment will
pay the Fund an amount of cash to settle the call if the closing level of
the index or Future upon which the call is based is greater than the
exercise price of the call. That cash payment is equal to the difference
between the closing price of the call and the exercise price of the call
times a specified multiple (the "multiplier") which determines the total
dollar value for each point of difference. When the Fund buys a put on
an index or Future, it pays a premium and has the right during the put
period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to deliver cash to the Fund to settle the put if the
closing level of the index or Future upon which the put is based is less
than the exercise price of the put. That cash payment is determined by
the multiplier, in the same manner as described above as to calls.
When the Fund purchases a put on an index, or on a Future not owned
by it, the put protects the Fund to the extent that the index moves in a
similar pattern to the securities the Fund holds. The Fund can either
resell the put or, in the case of a put on a Future, buy the underlying
investment and sell it at the exercise price. The resale price of the put
will vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise price, and
as a result the put is not exercised, the put will become worthless on the
expiration date. In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to attempt
to offset some or all of its loss on its portfolio securities.
-- Writing Put Options. The Fund may write put options on debt
securities or Futures but only if such puts are covered by segregated
liquid assets. The Fund will not write puts if, as a result, more than
50% of the Fund's net assets would be required to be segregated to cover
such put obligations. In writing puts, there is the risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated
liquid assets equal to the exercise price of the put has the same economic
effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option period
to buy the underlying investment from the buyer of the put at the exercise
price, even though the value of the investment may fall below the exercise
price. If the put lapses unexercised, the Fund (as the writer of the put)
realizes a gain in the amount of the premium. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the current market value of the underlying investment and
the premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
-- Interest Rate Futures. The Fund may buy and sell futures
contracts relating to debt securities ("Interest Rate Futures") and
municipal bond indices ("Municipal Bond Index Futures," discussed below).
Interest Rate Futures obligates the seller to deliver and the purchaser
to take a specific debt security at a specified price on a specified date.
No price is paid or received upon the purchase or sale of an Interest Rate
Future. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, equal to a specified
percentage of the contract amount, with the futures commission merchant
(the "futures broker"). The initial margin will be deposited with the
Fund's Custodian in an account registered in the futures broker's name;
however, the futures broker can gain access to that account only under
specified conditions. As the Future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be made to and from the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund and any gain or loss is
then realized for tax purposes. Although Interest Rate Futures by their
terms call for settlement by the delivery of debt securities, in most
cases the obligation is fulfilled by entering into an offsetting
transaction. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are
traded.
-- Municipal Bond Index Futures. Municipal Bond Index Futures are
similar to Interest Rate Futures except that settlement is made in cash.
The obligation under such contracts may also be satisfied by entering into
an offsetting contract to close out the futures position. Net gain or
loss on options on Municipal Bond Index Futures depends on the price
movements of the securities included in the index. The strategies which
the Fund employs regarding Municipal Bond Index Futures are similar to
those described above with regard to Interest Rate Futures.
-- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in respect of one or more swap transactions, the net amount
payable on that date in that currency shall be paid. In addition, the
master netting agreement may provide that if one party defaults generally
or on one swap, the counterparty may terminate the swaps with that party.
Under such agreements, if there is a default resulting in a loss to one
party, the measure of that party's damages is calculated by reference to
the average cost of a replacement swap with respect to each swap (i.e.,
the mark-to-market value at the time of the termination of each swap).
The gains and losses on all swaps are then netted, and the result is the
counterparty's gain or loss on termination. The termination of all swaps
and the netting of gains and losses on termination is generally referred
to as "aggregation." Income earned on interest rate swaps may be taxable,
and subject to the Fund's limitations on investments in taxable
securities.
-- Additional Information About Hedging Instruments and Their Use.
The Corporations's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the securities on which
the Fund has written options or as to other acceptable escrow securities,
so that no margin will be required for such transactions. OCC will
release the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be closed out
only on a market which provides secondary trading for options of the same
series, and there is no assurance that a liquid secondary market will
exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. This formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security ("in-the-money"). For any OTC
option a Fund writes, it will treat as illiquid (for purposes of the
restriction on illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The SEC is evaluating the
general issue of whether or not OTC options should be considered as liquid
securities, and the procedure described above could be affected by the
outcome of that evaluation.
An option position may be closed out only in a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on securities or Futures may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to sell
the underlying investment for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys
or sells a call, buys a put or an underlying investment in connection with
the exercise of a put or call. Such commissions may be higher, on a
relative basis, than those which would apply to direct purchases or sales
of the underlying investments. Premiums paid for options are small in
relation to the market value of such investments and consequently, put and
call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
-- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule ("CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC") under the Commodity Exchange Act (the
"CEA"). The CEA excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA), if the Fund complies
with the CFTC Rule. Under these restrictions, the Fund will not, as to
any positions, whether long, short or a combination thereof, enter into
Futures transactions and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use Futures
and options thereon solely for "bona fide hedging purposes" within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Municipal Bond Index Future, the Fund will maintain, in a
segregated account or accounts with its Custodian, cash or readily-
marketable, short-term (maturing in one year or less) debt instruments in
an amount equal to the market value of the securities underlying such
Future, less the margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its taxable income and
realized capital gains to shareholders without having to pay tax on them.
This avoids a "double tax" on that taxable income and capital gains, since
shareholders normally will be taxed on the dividends and capital gains
they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax). One
of the tests for the Fund's qualification as a regulated investment
company is that less than 30% of its gross income must be derived from
gains realized on the sale of securities held for less than three months.
To comply with this 30% cap, the Fund will limit the extent to which it
engages in the following activities, but will not be precluded from them:
(i) selling investments, including Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
-- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by (i) selling Futures or (ii)
purchasing puts on Futures to attempt to protect against declines in the
value of the Fund's securities. The risk is that the prices of such
Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions,
due to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the portfolio securities being hedged and movements in the price
of the hedging instruments, the Fund may use hedging instruments in a
greater dollar amount than the dollar amount of the portfolio securities
being hedged if the historical volatility of the prices of the debt
securities being hedged is more than the historical volatility of the
applicable index. It is also possible that if the Fund has used hedging
instruments in a short hedge, the market may advance and the value of the
debt securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of debt securities will tend to
move in the same direction as the indices upon which the hedging
instruments are based.
If the Fund uses hedging instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual particular debt securities (long hedging) by buying Interest
Rate Futures, Municipal Bond Index Futures and/or calls on such Futures,
on debt securities or on municipal bond indices, it is possible that the
market may decline. If the Fund then concludes not to invest in such
securities at that time because of concerns as to a possible further
market decline or for other reasons, the Fund will realize a loss on the
hedging instruments that is not offset by a reduction in the price of the
debt securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a majority vote is defined as the vote of the
holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (ii) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) invest in
interests in oil or gas exploration or development programs or in
commodities; however, the Fund may buy and sell any of the Hedging
Instruments that it may use as permitted by any of its other policies,
whether or not such Hedging Instrument is considered to be a commodity or
commodity contract; (2) invest in real estate or in interests in real
estate; however, the Fund may purchase securities of issuers holding real
estate or interests therein (including securities of real estate
investment trusts); (3) purchase securities on margin; however, the Fund
may make margin deposits in connection with the use of Hedging Instruments
as permitted by any of its other policies; (4) invest in companies for the
purpose of acquiring control or management thereof; (5) underwrite
securities of other companies, except insofar as it might be deemed to be
an underwriter for purposes of the Securities Act of 1933 in the resale
of any securities held in its own portfolio; (6) invest or hold securities
of any issuer if those officers and directors of the Corporation or its
adviser owning individually more than 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities or such issuer; (7)
invest in other open-end investment companies, or invest more than 5% of
its net assets through open market purchases in closed-end investment
companies, including small business investment companies, nor make any
such investments at commission rates in excess of normal brokerage
commissions; or (8) pledge, mortgage or otherwise encumber, transfer or
assign any of its assets to secure a debt; collateral arrangements for
premium and margin payments in connection with Hedging Instruments are not
deemed to be a pledge of assets.
-- Diversification. For purposes of diversification under the
Investment Company Act, the identification of the "issuer" of a Municipal
Security depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the subdivision and the security is backed only by the assets and revenues
of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond, if that
bond is backed only by the assets and revenues of the nongovernmental
user, then such nongovernmental user would be deemed to be the sole
issuer. However, if in either case the creating government or some other
entity guarantees the security, such guarantee would be considered a
separate security and would be treated as an issue of such government or
other agency.
In applying restriction (2) in the Prospectus, the Manager will
consider a nongovernmental user of facilities financed by industrial
development bonds as being in a particular industry, despite the fact that
there is no industry concentration limitation as to Municipal Securities.
Although this application of the restriction is not technically a
fundamental policy of the Fund, it will not be changed without shareholder
approval. Should any such change be made, the Prospectus and/or this
Additional Statement will be supplemented to reflect such change.
How the Fund is Managed
Organization and History. It is not contemplated that regular annual
shareholder meetings will be held. The Fund will hold meetings when
required to do so by the Investment Company Act or other applicable law,
or when a shareholder meeting is called by the Directors or upon proper
request of the shareholders. A meeting of shareholders will be called for
a specified purpose (which may include removal of a Director) upon the
written request of the record holders of at least 25% of the outstanding
shares eligible to be voted at that meeting. The Fund has undertaken that
it will then either give the applicants access to the Fund's shareholder
list or mail the applicants' communication to all other shareholders at
the applicants' expense.
Directors and Officers of the Corporation. The Corporation's Directors
and officers and their principal occupations and business affiliations
during the past five years are listed below. All of the Directors are
also trustees, directors or managing general partners of Centennial
America Fund, L.P., Oppenheimer Limited-Term Government Fund, Oppenheimer
Tax-Exempt Bond Fund, Oppenheimer Equity Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Cash Reserves, Oppenheimer High Yield Fund,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Short-Term Income
Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Total Return Fund, Inc.,
Oppenheimer Champion High Yield Fund, Oppenheimer Integrity Funds, The New
York Tax-Exempt Income Fund, Inc., Centennial Government Trust, Centennial
Money Market Trust, Centennial California Tax Exempt Trust, Centennial Tax
Exempt Trust, Centennial New York Tax Exempt Trust and Daily Cash
Accumulation Fund, Inc. (all of the foregoing funds are collectively
referred to as the "Denver-based OppenheimerFunds"). Messrs. Bishop,
Bowen, Donohue, Farrar and Zack hold similar positions as officers of all
such funds. Mr. Fossel is President and Mr. Swain is Chairman of the
Denver-based OppenheimerFunds. As of September 26, 1994, the Directors
and officers in the aggregate owned less than 1% of the Fund's and the
Corporation's respective outstanding shares.
Robert G. Avis, Director*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Director
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Director
1447 Vista del Cerro, Las Cruces, New Mexico 88005
Vice President of McDonnell Douglas Space Systems Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Director*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a Director of the Manager;
President and director of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; President and a Director of
HarbourView Asset Management Corp. ("HarbourView"), subsidiary of the
Manager; a Director of Shareholder Financial Services, Inc. ("SFSI")
and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries
of the Manager; formerly President of the Manager.
Raymond J. Kalinowski, Director
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies, Ltd.; formerly Vice Chairman and a
Director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc., (a broker-dealer), of which he was a Senior
Vice President.
C. Howard Kast, Director
2552 East Alameda, Denver, Colorado 80209
Formerly a Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Director
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Director
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a Director of the Van Gilder Insurance Corp. (insurance
brokers).
James C. Swain, Chairman and Director*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and a Director of Centennial
Asset Management Corporation ("Centennial"), an investment adviser
subsidiary of the Manager; formerly Chairman of the Board of SSI.
Robert E. Patterson, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Andrew J. Donohue, Vice President
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer
of other OppenheimerFunds; formerly Senior Vice President and
Associate General Counsel of the Manager and the Distributor, Partner
in Kraft & McManimon (a law firm), an officer of First Investors
Corporation (a broker-dealer) and First Investors Management Company,
Inc. (broker-dealer and investment adviser), and director and an
officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a Director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
[FN]
- ------------------
*A Director who is an "interested person" as defined in the Investment
Company At.
-- Remuneration of Directors. The officers of the Corporation are
affiliated with the Manager. They and the Directors of the Corporation
who are affiliated with the Manager (Messrs. Fossel and Swain, both of
whom are an officer and Director) receive no salary or fee from the
Corporation. During the Fund's fiscal year ended June 30, 1994, the
remuneration (including expense reimbursements) attributable to the Fund
paid to all Directors of the Corporation (excluding Messrs. Fossel and
Swain) as a group for services as Directors and as members of one or more
committees totaled $1,397. The Corporation has an Audit Committee,
comprised of William A Baker (Chairman), Charles Conrad, Jr. and Robert
M. Kirchner. This Committee meets regularly to review audits, audit
procedures, financial statements and other financial and operational
matters of the Fund.
-- Major Shareholders. To the knowledge of the Corporation, as of
September 26, 1994, no person owned beneficially 5% or more of the
respective outstanding shares of the Fund or the Corporation except for
The Springer Family Trust, 1435 Roxbury Drive, Los Angeles, California
90035 which was the record owner of 8,183.306 shares (approximately 5.81%
of the Class B shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom may also
serve as officers of the Corporation and two of whom (Messrs. Fossel and
Swain) serve as directors of the Corporation.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Corporation on behalf of the Fund
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy
materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Corporation. Expenses with respect to the Corporation's
two series, including the Fund, are allocated in proportion to the net
assets of the respective funds except where allocations of direct expenses
could be made. Certain expenses are further allocated to certain classes
of shares of a series as explained in the Prospectus and under "How to Buy
Shares" below. The advisory agreement lists examples of expenses paid by
the Corporation, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Directors, legal and audit
expenses, transfer agent and custodian expenses, share issuance costs,
certain printing and registration expenses and non-recurring expenses,
including litigation costs. During the Fund's fiscal years ended June 30,
1992, 1993 and 1994, the management fees paid by the Corporation on behalf
of the Fund to the Manager were $26,681, $120,465 and $318,921,
respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has voluntarily undertaken that the total expenses of the Fund in any
fiscal year (including the management fee, but excluding taxes, interest,
brokerage commissions, distribution assistance payments and extraordinary
expenses such as litigation costs) shall not exceed the most stringent
expense limitation imposed under state law applicable to the Fund.
Pursuant to the undertaking, the Manager's fee will be reduced at the end
of a month so that there will not be any accrued but unpaid liability
under this undertaking. Currently, the most stringent state expense
limitation is imposed by California, and limits expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2.0% of the next $70 million, and 1.5% of the average annual net assets
in excess of $100 million. Any assumption of the Fund's expenses under
this limitation lowers the Fund's overall expense ratio and increases its
total return during the time such expenses are limited. The Manager
reserves the right to terminate or amend the undertaking at any time.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties under the advisory agreement, the Manager is not
liable for any loss resulting from a good faith error or omission on its
part with respect to any of its duties thereunder. The advisory agreement
permits the Manager to act as investment adviser for any other person,
firm or corporation, and to use the name "Oppenheimer" and "Main Street"
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 right of the Corporation to use
the name "Main Street" as part of its name and the name of the Fund may
be withdrawn.
-- The Distributor. Under its General Distributor's Agreement with
the Corporation, the Distributor acts as the Corporation's principal
underwriter in the continuous public offering of the Fund's Class A and
Class B shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than as paid under the 12b-
1 plans), including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders, are
borne by the Distributor. During the Fund's fiscal years ended June 30,
1992, 1993 and 1994, the aggregate amount of sales charges on sales of the
Fund's Class A shares was $903,656, $1,139,735 and $663,089, respectively,
of which the Distributor retained in the aggregate $149,657, $183,933 and
$108,300 in those respective years. During the Fund's fiscal year ended
June 30, 1994, the Distributor retained $4,375 as reimbursement for Class
B sales commissions and service fee advances, as well as financing costs.
For additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions of the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors, implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding, but is expected to minimize the commissions paid to
the extent consistent with the interests and policies of the Fund as
established by the Board of Directors.
Under the advisory agreement, the Manager is authorized to 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 have charged if
a good faith determination is made by the Manager that the commission is
fair and reasonable in relation to the services provided. Subject to the
foregoing considerations, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager and its
affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager under the supervision of the Manager's executive officers.
As most purchases made by the Fund are principal transactions at net
prices, the Fund incurs little or no brokerage costs. The Fund usually
deals directly with the selling or purchasing principal or market makers
without incurring charges for the services of a broker on its behalf
unless it is determined that better price or execution can be obtained by
utilizing the services of a broker. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price. The Fund seeks to obtain prompt execution of orders at
the most favorable net pace. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or it affiliates are combined. Transactions effected pursuant to
such combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The Board of Directors has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolios or being considered for purchase. The Board,
including the "Independent Directors" (those Directors who are not
"interested persons" as defined in the Investment Company Act, and who
have no direct or indirect financial interest in the operation of the
advisory agreement or the Distribution Plans described below) annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services so that the Board may ascertain
whether the amount of such commissions was reasonably related to the value
or the benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "tax-equivalent yield," "dividend yield," "average annual total
return," "total return" and "total return at net asset value" of an
investment in each class of Fund shares may be advertised. An explanation
of how standardized yield, tax-equivalent yield, dividend yield, average
annual total return and total return are calculated for each class and the
components of those calculations is set forth below. Class B shares were
first publicly offered on October 29, 1993.
-- Standardized Yields.
-- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled to
receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund
to shareholders in the 30-day period, but is a hypothetical yield based
on the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended June 30, 1994, the standardized yields for the
Fund's Class A and Class B shares were 5.47% and 4.60%, respectively.
-- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal and state tax rate. The tax equivalent yield is based on a 30-day
period, and is computed by dividing the tax-exempt portion of the Fund's
current yield (as calculated above) by one minus a stated income tax rate
and adding the result to the portion (if any) of the Fund's current yield
that is not tax-exempt. The tax-equivalent yield may be used to compare
the tax effects of income derived from the Fund with income from taxable
investments at the tax rates stated. Appendix B includes a tax equivalent
yield table, based on various effective tax brackets for individual
taxpayers. Such tax brackets are determined by a taxpayer's Federal and
state taxable income (the net amount subject to Federal and state income
tax after deductions and exemptions). The tax-equivalent yield tables
assume that the investor is taxed at the highest bracket, regardless of
whether a switch to non-taxable investments would cause a lower bracket
to apply. For taxpayers with income above certain levels, otherwise
allowable itemized deductions are limited. The Fund's tax-equivalent
yield for its Class A and Class B shares for the 30-day period ended June
30, 1994 were 10.17 and 8.56, respectively, for an individual in the
California/Federal combined 46.24% tax bracket.
-- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the Class A or Class B share dividends
derived from net investment income during a stated period. Distribution
return includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time, similar calculations may also be made using the
Class A net asset value (instead of its respective maximum offering price)
at the end of the period. The dividend yields on Class A shares for the
30-day period ended June 30, 1994 were 5.91% and 6.36% when calculated at
maximum offering price and net asset value, respectively. The dividend
yield on Class B shares for the 30-day period ended June 30, 1994 was 5.19
when calculated at net asset value.
-- Total Return Information.
-- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The "average annual total return" on an investment in Class A shares
of the Fund for the one year period ended June 30, 1994 was -5.32%, and
for the period from May 18, 1990 through June 30, 1994 was 6.65%.
-- Cumulative Total Return. The "cumulative total return"
calculation measures the change in the value of a hypothetical investment
of $1,000 over an entire period of years. Its calculation uses some of
the same factors as average annual total return, but it does not average
the rate of return on an annual basis. Cumulative total return is
determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
contingent deferred sales charge of 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 is applied, as described in the
Prospectus. Total returns also assume that all dividends and capital
gains distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is redeemed
at the end of the period. The "total return" on an investment in Class
A shares of the Fund (using the method described above) for the period
from May 18, 1990 (commencement of operations) through June 30, 1994, was
30.37%. The cumulative total return on Class B shares for the period from
October 29, 1993 (the commencement of the offering of the shares) through
June 30, 1994 was (10.15%).
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The "total return at net asset value"
on the Fund's Class A shares for the one-year period ended June 30, 1994
and for the period May 18, 1990 (commencement of operations) through June
30, 1994, was (.60%) and 36.87%, respectively. The total return at net
asset value for the Fund's Class B shares for the period from October 29,
1993 through June 30, 1994 was (5.42%).
-- Other Performance Comparisons. From time to time, the Fund may
publish the ranking of the performance of its Class A or Class B shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund is ranked against (i) all other fixed-income
funds, other than money market funds, and (ii) all other California
municipal bond funds. The Lipper performance analysis includes the
reinvestment of capital gain distributions and income dividends but does
not take sales charge or taxes into consideration. From time to time the
Fund may include in its advertisement and sales literature performance
information about the Fund cited in other newspapers and periodicals such
as The New York Times, which may include performance quotations from other
sources, including Lipper and Morningstar.
From time to time, the Fund may publish the ranking of the
performance of its Class A or Class B shares by Morningstar, Inc.
("Morningstar"), an independent mutual fund monitoring service that ranks
various mutual funds, including the Fund, monthly in broad investment
categories (equity, taxable bond, municipal bond and hybrid) based upon
the funds' three, five and ten-year average annual total returns (when
available) and a risk factor that reflects fund performances relative to
three-month U.S. Treasury bill monthly returns. Such returns are adjusted
for fees and sales loads. There are five ranking categories with a
corresponding number of stars: highest (5), above average (4), neutral
(3), below average (2) and lowest (1). The top ten percent of the funds,
series or classes in an investment category receive five stars; 22.5%
receive four stars; 35% receive three stars; 22.5% receive two stars; and
the bottom 10% receive one star. Morningstar ranks the Fund in relation
to other municipal bond funds.
Investors may also wish to compare the Fund's Class A or Class B
return to the returns on fixed income investments available from banks and
thrift institutions, such as certificates of deposit, ordinary interest-
paying checking and savings accounts, and other forms of fixed or variable
time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed and will
fluctuate daily, while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period will not be a
predication or representation by the Fund of future returns. The returns
of the Class A and Class B shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its operating expenses
allocated to a particular class.
Distribution and Service Plan
The Corporation has adopted a Distribution and Service Plan for Class
B shares of the Fund (the "Class B Plan") under Rule 12b-1 of the
Investment Company Act pursuant to which the Corporation will reimburse
the Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of Class B shares, as
described in the Prospectus. Class A shares of the Fund do not have a
plan of distribution. The Plan has been approved by a vote of (i) the
Board of Directors of the Corporation, including a majority of the
"Independent Directors" (those Directors of the Corporation who are not
"interested persons," as defined in the Investment Company Act, and who
have no direct or indirect financial interest in the operation of the Plan
or in any agreements relating to the Plan), cast in person at a meeting
called for the purpose of voting on the Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the Class B
shares of the Fund, such vote having been cast by the Manager as the sole
initial holder of Class B shares of the Fund.
In addition, under the Class B Plan, the Manager and the Distributor,
in their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Class B Plan) for distribution and administrative services they
perform. The Distributor and the Manager may, in their sole discretion,
increase or decrease the amount of payments they make from their own
resources to Recipients.
Unless terminated as described below, the Class B Plan shall continue
in effect from year to year but only as long as such continuance is
specifically approved at least annually by the Corporation's Board of
Directors and its Independent Directors by a vote cast in person at a
meeting called for the purpose of voting on such continuance. The Class
B Plan may be terminated at any time by the vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding Class B shares.
The Class B Plan may not be amended to increase materially the amount of
payments to be made, unless such amendment is approved by shareholders of
Class B shares. All material amendments must be approved by the
Independent Directors.
While the Class B Plan is in effect, the Treasurer of the Corporation
shall provide a written report to the Corporation's Board of Directors at
least quarterly on the amount of all payments made pursuant to the Class
B Plan, the purpose for which each payment was made and the identity of
each Recipient of a payment. The report for the Class B Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the cost allocations on
which they are based, will be subject to the review and approval of the
Independent Directors in the exercise of their fiduciary duty. The Class
B Plan further provides that while it is in effect, the selection and
nomination of those Directors of the Corporation who are not "interested
persons" of the Corporation is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others
in such selection and nomination if the final decision on any such
selection or nomination is approved by a majority of the Independent
Directors.
Under the Class B Plan, no payment will be made to any Recipient in
any quarter if the aggregate net asset value of all Fund shares held by
the Recipient for itself and its customer does not exceed a minimum
amount, if any, that may be determined from time to time by a majority of
the Corporation's Independent Directors. Initially, the Board of
Directors has set the fee at the maximum rate and set no minimum amount.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class
B shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. For the fiscal period October
29, 1993 through June 30, 1994, payments under the Class B Plan totaled
$4,375, which was retained by the Distributor as reimbursement for Class
B sales commissions and service fee advances, as well as financing costs.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Corporation under the Class B Plan
is intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of sale,
plus financing costs, as described in the Prospectus. Such payments may
also be used to pay for the following expenses in connection with the
distribution of Class B shares: (i) financing the advance of the service
fee payment to Recipients under the Class B Plan, (ii) compensation and
expenses of personnel employed by the Distributor to support distribution
of Class B shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and
state "blue sky" registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The conversion of Class B shares to Class A shares as described in
the Prospectus, 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 holder under Federal income tax
law. If such a revenue ruling or opinion is no longer available, the
automatic conversion feature may be suspended, in which event no further
conversions of Class B shares would occur while such suspension remained
in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class
B shares might continue to be subject to the asset-based sales charge for
longer than six years.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Directors, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined each day
The New York Stock Exchange (the "NYSE") is open, as of 4:00 P.M., New
York time, that day, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The NYSE's most recent annual announcement (which is subject
to change) states that it will close New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Dealers other than NYSE
members may conduct trading in Municipal Securities on certain days on
which the NYSE is closed of after 4:00 P.M. on a regular business day.
Because the Fund's net asset values will not be calculated on those days,
the Fund's net asset value per share may be significantly affected, on
such days when shareholders will not have the ability to purchase or
redeem shares.
The Corporation's Board of Directors has established procedures for
the valuation of the Fund's securities, generally, as follows: (i) equity
securities traded on a securities exchange or on the NASDAQ for which last
sale information is regularly reported are valued at the last sales prices
on their primary exchange or the NASDAQ that day (or, in the absence of
sales that day, at values based on the last sale prices of the preceding
trading day or closing bid and asked prices); (ii) NASDAQ and other
unlisted equity securities for which last sale prices are not regularly
reported but for which over-the-counter market quotations are readily
available are valued at the highest closing bid price at the time of
valuation, or, if no closing bid price is reported, on the basis of a
closing bid price obtained from a dealer who maintains an active market
in that security; (iii) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under
the Board's procedures; (iv) long-term debt securities, and short-term
debt securities having a remaining maturity in excess of 60 days, are
valued at the mean between the asked and bid prices determined by a
portfolio pricing service appointed by the Corporation's Board of
Directors or obtained from active market makers in the security; and (v)
short-term debt securities having a remaining maturity of 60 days or less
are valued at cost, adjusted for amortization of premiums and accretion
of discounts.
In the case of U.S. Government Securities, mortgage-backed securities
and Municipal Securities, where last sale information is not generally
available, such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved (such as the tax-exempt status of the
interest paid by Municipal Securities). The Directors will monitor the
accuracy of pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sale prices on the
principal exchanges (or the NASDAQ National Market System) on which they
are traded. If there are no sales that day, in accordance with (i) above.
When the Fund writes an option, an amount equal to the premium received
by the Fund is included in its Statement of Assets and Liabilities as an
asset, and an equivalent deferred credit is included in the liability
section. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights of
Accumulation and Letters of Intent because of the economies of sales
efforts and reduction of expenses realized by the Distributor and dealers
making such sales. No sales charge is imposed in certain circumstances
described in the Prospectus because the Distributor incurs little or no
selling expenses. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents-in-law, sons- and
daughters-in law, parents, siblings, a spouse's siblings and a sibling's
spouse.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a sales
charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for Fund
shares (for example, when checks submitted to purchase shares are returned
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the date of cancellation is less than on the purchase
date. That loss is equal to the difference in net asset value multiplied
by the number of shares in the purchase order. The investor is
responsible for such loss. If the investor fails to compensate the
Corporation for the loss, the Distributor will do so. The Corporation may
reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or by seeking other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Directors of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
-- Involuntary Redemptions. The Corporation's Board of Directors 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 $500
or such lesser amount as the Board may fix. The Board of Directors will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How To Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required redemption documents, with signature(s) guaranteed
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B shareholders should not establish withdrawal
plans because of the imposition of the Class B contingent deferred sales
charge on such withdrawals (except where the Class B contingent deferred
sales charge is waived as described in the Prospectus under "Class B
Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares (except for Oppenheimer Strategic
Diversified Income Fund), but only the following other OppenheimerFunds
offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Government Securities Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Tax-Exempt Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within six years of the initial purchase
of the exchanged Class B shares.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. During the Fund's fiscal year ended
June 30, 1994, the Fund maintained the practice, to the extent consistent
with the amount of the Fund's net investment income and other
distributable income, of attempting to pay dividends on Class A shares at
a constant level of $.0611 per share each month, although the amount of
such dividends was subject to change from time to time depending on market
conditions, the composition of the Fund's portfolio and expenses borne by
the Fund. The practice of attempting to pay dividends on Class A shares
at a constant level required the Manager, consistent with the Fund's
investment objective and investment restrictions, to monitor the Fund's
portfolio and select higher yielding securities when deemed appropriate
to maintain necessary net investment income levels. This practice did not
affect the net asset value of the Fund's Class A shares. The Board of
Directors may change the Fund's targeted dividend level at any time,
without prior notice to shareholders; the Fund does not otherwise have a
fixed dividend rate and there can be no assurance as to the payment of any
dividends or the realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends
to qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. A portion of
the exempt-interest dividends paid by the Fund may be an item of tax
preference for shareholders subject to the alternative minimum tax. All
of the Fund's dividends (excluding capital gains distributions) paid
during 1994 were exempt from Federal and California personal income taxes.
The amount of any dividends attributable to tax preference items for
purposes of the alternative minimum tax will be identified when tax
information is distributed by the Fund. ____% of the Fund's dividends
(excluding distributions) paid during 1993 were a tax preference item for
shareholders subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; (3) income or gains from options or
Futures; or (4) an excess of net short-term capital gain over net long-
term capital loss from the Fund, treats the dividend as a receipt of
either ordinary income or long-term capital gain in the computation of
gross income, regardless of whether the dividend is reinvested. The
Fund's dividends will not be eligible for the dividends-received deduction
for corporations. Shareholders receiving Social Security benefits should
be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized
by shareholders on the redemption of Fund shares within six months of
purchase (which period may be shortened by regulation) will be disallowed
for Federal income tax purposes to the extent of exempt-interest dividends
received on such shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
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 Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
California law relating to taxation of regulated investment companies
and their shareholders was generally conformed to federal law effective
January 1, 1993. In any year in which the Fund qualifies as a regulated
investment company under the Code and is exempt from federal income tax,
(i) the Fund will also be exempt from the California corporate income and
franchise taxes to the extent it distributes its income and (ii), provided
50% or more of the value of the total assets of the Fund at the close of
each quarter of its taxable year consists of obligations ("California
Obligations"), the interest on which (when held by an individual) is
exempt from personal income taxation under the laws of California, the
Fund will be qualified under California law to pay exempt-interest
dividends which will be exempt from the California personal income tax.
Individual shareholders of the Fund who reside in California will not
be subject to the California personal income tax on distributions received
from the Fund which are exempt-interest dividends. The portion of any
distribution constituting exempt-interest dividends is that (i) portion
derived from California Obligations and (ii) designated as such by the
Fund. The total amount of exempt-interest dividends paid by the Fund to
its shareholders with respect to any taxable year cannot exceed the amount
of interest received by the Fund during such year on California
Obligations less any expenses and expenditures deemed to have been paid
from such interest.
Distributions from the Fund that are attributable to sources other
than California Obligations generally will be taxable to such shareholders
as ordinary income. In addition, distributions of short-term capital
gains realized by the Fund will be taxable to the shareholders as ordinary
income. Distributions of long-term capital gains will be taxable as such
to the shareholders regardless of how long they held their shares. Any
dividends paid to corporate shareholders subject to the California
franchise tax will be taxed to such shareholders.
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund will not be deductible for California
personal income tax purposes. As a result of California's incorporation
of certain provisions of the Code, a loss realized by a shareholder upon
the sale of shares held for six months or less may be disallowed to the
extent of any exempt-interest dividends received with respect to such
shares. Any loss realized upon the redemption of shares within 30 days
before or after the acquisition of other shares of the same series may be
disallowed under the "wash sale" rules. With respect to individual
shareholders, California does not treat tax-exempt interest as a tax
preference item for purposes of its alternative minimum tax. To the
extent a corporate shareholder receives dividends which are exempt from
California taxation, a portion of such dividends may be subject to the
alternative minimum tax.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or distributions in shares of the same class
of any of the other OppenheimerFunds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. Class B shareholders
should be aware that as of the date of this Statement of Additional
Information, not all of the OppenheimerFunds offer Class B shares. The
names of the funds that do as of the date of the document can be obtained
by referring to "How to Exchange Shares," above or by calling the
Distributor at 1-800-525-7048. To elect this option, a shareholder must
notify the Transfer Agent in writing and either must have an existing
account in the fund selected for investment or must obtain a prospectus
for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share
in effect at the close of business on the payable date of the dividend or
distribution. Dividends and distributions from other Eligible Funds may
be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
portfolio securities to and from the Fund. The Manager has represented
to the Fund that its banking relationships with the Custodian have been
and will continue to be unrelated to and unaffected by the relationship
between the Fund and the Custodian. It will be the practice of the Fund
to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and 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>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Main Street
California Tax-Exempt Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Main Street
California Tax-Exempt Fund as of June 30, 1994, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended June 30, 1994 and 1993, and the financial
highlights for the period May 18, 1990 to June 30, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at June 30, 1994 by correspondence with
the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Oppenheimer Main Street California Tax-Exempt Fund at June 30, 1994, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
Denver, Colorado
July 22, 1994
<PAGE>
Statement of Investments June 30, 1994
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------
Municipal Bonds and Notes--98.1%
- ------
California--86.2% Alameda County, California Certificates of
Participation, Prerefunded, BIG Insured, 7.25%, 6/1/09 Aaa/AAA
$1,635,000 $1,839,542
- ------
Anaheim, California Public Financing Authority
Tax Allocation Revenue Bonds, MBIA Insured,
9.72%, 12/28/18(1) Aaa/AAA 1,000,000 1,028,398
- ------
California Educational Facilities Authority Revenue Bonds, Santa Clara
University Project,
6.25%, 2/1/16 A1/NR 1,000,000 979,076
California Health Facilities Financing Authority:
Revenue Bonds:
Episcopal Homes Project, Series A,
OSHPD Insured,
7.80%, 7/1/15 NR/A+ 1,000,000 1,080,854
Henry Mayo Newhall Project, Series A,
OSHPD Insured,
8%, 10/1/18 NR/A+ 280,000 305,834
Revenue Refunding Bonds, Catholic Health
Facilities, Series A, MBIA Insured,
5%, 7/1/11 Aaa/AAA 2,500,000 2,185,082
- ------
California Housing Finance Agency Revenue Bonds, Home Mtg., Series C:
FHA Insured, 7.60%, 8/1/30 Aa/A+ 75,000 77,456
6.75%, 2/1/25 Aa/A+ 5,000,000 5,069,714
- ------
California Pollution Control Financing Authority Revenue Bonds, Pacific
Gas and
Electric Co., Series B,
6.35%, 6/1/09 A1/A 2,000,000 1,971,482
- ------
California State Department of Water Resources Revenue Bonds, Central
Valley
Water System Project, Series L,
5.50%, 12/1/23 Aa/AA 2,000,000 1,748,456
- ------
California State General Obligation Bonds, FSA Insured,
5.50%, 4/1/19 Aaa/AAA/AAA 2,500,000 2,219,265
- ------
California State Public Works Board Lease Revenue Bonds:
Department of Corrections California State Prison, Series B, MBIA Insured,
5.50%, 12/1/12 Aaa/AAA/A+ 3,000,000 2,764,941
Regents of the University of California, Prerefunded, Series A,
7%, 9/1/15 Aaa/AAA/AAA 150,000 166,281
- ------
Capistrano, California University School District Community Facilities
Special
Tax Bonds, No. 87-1,
7.60%, 9/1/14 NR/NR 1,000,000 1,017,478
- ------
Contra Costa, California Water District Revenue Bonds, Prerefunded, Series
A,
6.875%, 10/1/20 A/A+ 1,100,000 1,212,945
- ------
Corona, California Certificates of Participation, Prerefunded, Series B,
10%, 11/1/20 Aaa/AAA 2,250,000 2,966,168
- ------
East Bay, California Municipal Utility District Water System Revenue
Bonds,
Prerefunded, AMBAC Insured,
6.375%, 6/1/21 Aaa/AAA/AAA 1,000,000 1,078,550
- ------
Los Angeles, California Community Redevelopment Agency Finance Revenue
Bonds,
Grand Central Qualified Redevelopment, Series A,
5.90%, 12/1/13 A2/A
1,000,000 884,096
- ------
Los Angeles, California Department of Water and Power Electric Plant
Revenue
Bonds: Second Issue 1991,
6%, 6/1/12 Aa/AA 500,000 483,473
7.375%, 2/1/29 Aa/AA 2,000,000 2,234,378
<PAGE>
- ------
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------
California (continued) Los Angeles, California Wastewater System
Revenue
Refunding Bonds, Series D, FGIC Insured,
8.70%, 11/1/03 Aaa/AAA/AAA $5,115,000 $6,267,650
- ------
Los Angeles County, California Certificates of Participation, Correctional
Facilities Project, MBIA Insured,
6.50%, 9/1/13 Aaa/AAA 400,000 408,584
- ------
Los Angeles County, California Transportation: Revenue Bonds, Commission
Sales
Tax, Prerefunded, Series A, FGIC Insured,
6.75%, 7/1/18 Aaa/AAA/AAA 1,000,000 1,097,976
Revenue Refunding Bonds, Commission Sales Tax, Prerefunded, Series A,
8%, 7/1/16 Aaa/A+/A+ 1,000,000 1,110,403
- ------
Metropolitan Water District Revenue Bonds, Southern California Waterworks
Project:
5%, 7/1/20 Aa/AA 2,500,000 2,016,460
8.005%, 10/30/20(1) Aa/AA 1,500,000 1,150,183
- ------
Orange County, California Community Facilities District Special Tax Bonds:
No. 87-3 Mission Viejo, Series A,
8.05%, 8/15/08 A/NR 1,480,000 1,623,846
No. 88-1 Aliso Viejo, Prerefunded, Series A,
7.35%, 8/15/18 NR/NR 2,000,000 2,280,546
- ------
Pittsburg, California Improvement Bond Act of 1915 Bonds, Assessment
District
1990-01,
7.75%, 9/2/20 NR/NR 100,000 100,768
- ------
Rancho, California Water District Financing Authority Revenue Refunding
Bonds,
AMBAC Insured,
5%, 8/15/14 Aaa/AAA/AAA 1,500,000 1,262,617
- ------
Redding, California Electric System Revenue Certificates of Participation:
FGIC Insured, 8.043%, 6/1/19(1) Aaa/AAA/AAA 1,150,000 926,680
MBIA Insured, 9.461%, 7/8/22(1) Aaa/AAA 500,000 493,109
- ------
Riverside County, California Community Facilities District Bonds, Special
Tax
No. 88-12,
7.55%, 9/1/17 NR/NR 1,500,000 1,515,208
- ------
Sacramento, California Municipal Utility District Electric Revenue
Refunding
Bonds:
Series B, FGIC Insured, 9.376%, 8/15/18(1) Aaa/AAA/AAA 1,500,000
1,487,415
Series D, MBIA Insured, 5.25%, 11/15/20 Aaa/AAA/A- 2,000,000
1,706,446
- ------
San Bernardino County, California Certificates of Participation, Medical
Center
Financing Project,
5.50%, 8/1/17 Baa1/A 2,500,000 2,108,652
- ------
San Diego County, California Water Authority Revenue Certificates of
Participation, Series B, MBIA Insured,
9.28%, 4/8/21(1) Aaa/AAA 1,000,000 994,013
- ------
San Francisco, California Bay Area Rapid Transit District Revenue
Refunding
Bonds, AMBAC Insured,
6.75%, 7/1/11 Aaa/AAA/AAA 1,000,000 1,060,548
- ------
San Francisco, California City and County Airport Commission International
Airport Revenue Refunding Bonds, Second Series, Issue I, AMBAC Insured,
6.30%, 5/1/11 Aaa/AAA/AAA 1,000,000 1,010,109
- ------
San Joaquin Hills, California Transportation Corridor Agency Toll Road
Revenue
Bonds, Sr. Lien,
6.75%, 1/1/32 NR/NR/BBB 3,500,000 3,348,859
<PAGE>
- ------
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------
California (continued) South Orange County, California Public
Financing
Authority Special Tax Revenue Bonds, Sr. Lien, Series A, MBIA Insured,
6.20%, 9/1/13 Aaa/AAA $1,000,000 $987,758
- ------
Southern California Home Financing Authority Single Family Mtg. Revenue
Bonds,
GNMA and FNMA Mtg.-Backed Securities, Series A,
7.35%, 9/1/24 NR/AAA 285,000 297,185
- ------
Southern California Public Power Authority Revenue Refunding Bonds,
8.848%, 7/1/12(1) Aa/AA- 2,500,000 2,369,835
- ------
University of California Revenue Refunding Bonds, Multiple Purpose
Project,
Series A,
6.875%, 9/1/16 A/A- 1,000,000 1,109,214
- ------
Victorville, California Special Tax Bonds, Community Facilities District
No.
90-1 (Western Addition), Series A,
8.30%, 9/1/16 NR/NR 450,000 468,852
- ------
West Basin, California Municipal Water District Certificates of
Participation,
Prerefunded, AMBAC Insured,
6.85%, 8/1/16 Aaa/AAA/AAA 1,000,000 1,099,815
- ------
69,616,200
- ------
U.S. Possessions--11.9% Puerto Rico Commonwealth Highway Authority
Revenue
Bonds,Prerefunded, Series P,
8.125%, 7/1/13 Aaa/AAA 2,000,000 2,268,576
- ------
Puerto Rico Commonwealth Public Improvement General Obligation Bonds:
Prerefunded, Series A, 7.75%, 7/1/17 NR/AAA 1,000,000
1,132,213
Prerefunded, 7.25%, 7/1/12 NR/AAA 1,430,000 1,558,711
YCNS, MBIA Insured, 8.314%, 7/1/08(1) Aaa/AAA 1,500,000
1,517,763
- ------
Puerto Rico Housing Finance Corp. Single Family Mtg. Revenue Bonds,
Portfolio 1,
Series B,
7.65%, 10/15/22 Aaa/AAA 380,000 391,638
- ------
Puerto Rico Public Buildings Authority Guaranteed Public Education and
Health
Facilities Revenue Bonds, Prerefunded, Series H,
7.875%, 7/1/07 Aaa/AAA 2,500,000 2,766,995
- ------
9,635,896
- ------
Total Investments, at Value (Cost $81,294,291) 98.1% 79,252,096
- ------
Other Assets Net of Liabilities 1.9 1,505,267
- ------ ------
Net Assets 100.0% $80,757,363
- ------ ------
- ------ ------
(1) Represents the current interest rate for a variable rate bond.
Variable rate
bonds known as "inverse floaters" pay interest at a rate that varies
inversely
with short-term interest rates. As interest rates rise, inverse floaters
produce
less current income. Their price may be more volatile than the price of
a
comparable fixed-rate security.
See accompanying Notes to Financial Statements.
<PAGE>
- ------
Statement of Assets and Liabilities June 30, 1994
- ------
Assets Investments, at value (cost $81,294,291)--see accompanying
statement
$79,252,096
- ------
Cash 181,329
- ------
Receivables:
Interest 1,564,695
Shares of capital stock sold 145,006
- ------
Deferred organization costs 1,391
- ------
Other 8,736
- ------
Total assets 81,153,253
- ------
Liabilities Payables and other liabilities:
Dividends 265,443
Shares of capital stock redeemed 92,116
Distribution and service plan fees--Note 4 1,031
Other 37,300
- ------
Total liabilities 395,890
- ------
Net Assets $80,757,363
- ------
- ------
- ------
Composition of Net Assets
Par value of shares of capital stock 68,336
- ------
Additional paid-in capital 82,845,340
- ------
Overdistributed net investment income (95,768)
- ------
Accumulated net realized loss from investment transactions (18,350)
- ------
Net unrealized depreciation on investments--Note 3 (2,042,195)
- ------
Net assets $80,757,363
- ------
- ------
- ------
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (net assets of $79,554,826
and
6,731,736 shares of capital stock outstanding) $11.82
Maximum offering price per share (net asset value plus sales charge of
4.75% of
offering price) $12.41
- ------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net
assets of $1,202,537 and 101,906 shares of capital stock outstanding)
$11.80
See accompanying Notes to Financial Statements.
<PAGE>
- ------
Statement of Operations For the Year Ended June 30, 1994
- ------
Investment Income Interest $5,432,409
- ------
Expenses Management fees--Note 4 318,921
- ------
Transfer and shareholder servicing agent fees--Note 4 51,532
- ------
Shareholder reports 32,644
- ------
Legal and auditing fees 16,104
- ------
Registration and filing fees:
Class A 5,418
Class B 391
- ------
Distribution and service plan fees--Class B--Note 4 4,375
- ------
Custodian fees and expenses 2,333
- ------
Directors' fees and expenses 1,397
- ------
Other 3,982
- ------
Total expenses 437,097
- ------
Net Investment Income 4,995,312
- ------
Realized and Unrealized
Loss on Investments
Net realized loss on investments (102,647)
- ------
Net change in unrealized appreciation or depreciation on investments
(5,742,053)
- ------
Net realized and unrealized loss on investments (5,844,700)
- ------
Net Decrease in Net Assets Resulting From Operations $(849,388)
- ------
- ------
See accompanying Notes to Financial Statements.
<PAGE>
- ------
Statements of Changes in Net Assets
Year Ended June 30,
1994 1993
- ------
Operations Net investment income $4,995,312 $3,542,119
- ------
Net realized gain (loss) on investments (102,647) 175,417
- ------
Net change in unrealized appreciation or depreciation on investments
(5,742,053) 2,790,047
- ------ ------
Net increase in net assets resulting from operations (849,388)
6,507,583
- ------
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A ($.729 and $.81 per share, respectively) (4,729,265)
(3,585,299)
Class B ($.37 per share) (19,459) --
- ------
Dividends in excess of net investment income:
Class A ($.028 per share) (179,070) --
Class B ($.014 per share) (737) --
- ------
Distributions from net realized gain on investments:
Class A ($.02 per share) -- (78,238)
- ------
Distributions in excess of gain on investments:
Class A ($.028 per share) (186,921) --
Class B ($.028 per share) (599) --
- ------
Capital Stock
Transactions
Net increase in net assets resulting from Class A capital stock
transactions--Note 2 13,070,898 29,488,371
- ------
Net increase in net assets resulting from Class B capital stock
transactions--Note 2 1,264,874 --
- ------
Net Assets Total increase 8,370,333 32,332,417
- ------
Beginning of year 72,387,030 40,054,613
- ------ ------
End of year (including overdistributed net investment income
of $95,768 and $43,180, respectively) $80,757,363 $72,387,030
- ------ ------
- ------ ------
See accompanying Notes to Financial Statements.
<PAGE>
- ------
Financial Highlights
Class A Class B
- ------ ------
Year Ended Period Ended
June 30, June 30,
1994 1993 1992 1991 1990(2) 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period $12.66 $12.05 $11.61 $11.56 $11.43
$12.90
Income (loss) from
investment operations:
Net investment income .75 .80 .82 .83(3) .06(3)
.38
Net realized and unrealized
gain (loss) on investments (.80) .64 .45 .05 .13
(1.07)
- ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (.05) 1.44 1.27 .88 .19
(.69)
- ------
Dividends and distributions to shareholders:
Dividends from net
investment income (.73) (.81) (.82) (.83) (.06)
(.37)
Dividends in excess of net
investment income (.03) -- -- -- -- (.01)
Distributions from net realized
gain on investments -- (.02) (.01) -- -- --
Distributions in excess of net
realized gain on investments (.03) -- -- -- --
(.03)
- ------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.79) (.83) (.83) (.83)
(.06) (.41)
- ------
Net asset value, end of period $11.82 $12.66 $12.05 $11.61
$11.56 $11.80
- ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------
- ------
Total Return, at Net Asset Value(4) (.60)% 12.53% 11.21%
7.94% 1.95% (5.42)%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $79,555 $72,387 $40,055 $13,924 $2,027
$1,203
- ------
Average net assets
(in thousands) $81,741 $54,840 $26,304 $6,661 $1,685
$649
- ------
Number of shares outstanding
at end of period (in thousands) 6,732 5,719 3,324 1,199
175
102
- ------
Ratios to average net assets:
Net investment income 6.09% 6.46% 6.74% 6.94%
5.48%(5)
4.91%(5)
Expenses .53% .39% .32% .33%(3) .20%(3)(5)
1.62%(5)
- ------
Portfolio turnover rate(6) 20.2% 5.8% 25.7% 14.6% 0.0%
20.2%
1. For the period from October 29, 1993 (inception of offering) to June
30, 1994.
2. For the period from May 18, 1990 (commencement of operations) to June
30, 1990.
3. Net investment income would have been $.82 and $.04 per share in 1991
and 1990 absent the voluntary expense assumption, resulting in an expense
ratio of .42% and 1.93%, respectively.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended June 30, 1994 were $29,672,105
and $15,979,622, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
- ------
Notes to Financial Statements
- ------
1. Significant Accounting Policies
Oppenheimer Main Street California Tax-Exempt Fund (the Fund), formerly
named Main Street Funds, Inc. -- California Tax-Exempt Fund, is a separate
series of Oppenheimer Main Street Funds, Inc., an open-end management
investment company registered under the Investment Company Act of 1940,
as amended. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers both Class A and Class B
shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge. Both classes
of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own expenses directly attributable to a
particular class and exclusive voting rights with respect to matters
affecting a single class. In addition, Class B shares have their own
distribution plan and will automatically convert to Class A shares six
years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
- ------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Long-term debt securities are valued by
a portfolio pricing service approved by the Board of Directors. Long-term
debt securities which cannot be valued by the approved portfolio pricing
service are valued by averaging the mean between the bid and asked prices
obtained from two active market makers in such securities. Short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Directors to determine fair value in good faith.
- ------
Allocation of Income, Expenses and Gains and Losses. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
- ------
Federal Income Taxes. The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
- ------
Organization Costs. The Manager advanced $16,719 for organization and
start-up costs of the Fund. Such expenses are being amortized over a
five-year period from the date operations commenced. In the event that all
or part of the Manager's initial investment in shares of the fund is
withdrawn during the amortization period, the redemption proceeds will be
reduced to reimburse the Fund for any unamortized expenses, in the same
ratio as the number of shares redeemed bears to the number of initial
shares outstanding at the time of such redemption.
- ------
Distributions to Shareholders. The Fund intends to declare dividends
separately for Class A and Class B shares from net investment income each
day the New York Stock Exchange is open for business and pay such
dividends monthly. Distributions from net realized gains on investments,
if any, will be declared at least once each year.
- ------
Change in Accounting for Distributions to Shareholders. Effective July 1,
1993, the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, subsequent to June 30, 1993 amounts have been reclassified
to reflect a decrease in undistributed net investment income of $14,319,
and a decrease in overdistributed capital loss on investments of $14,319.
During the year ended June 30, 1994, in accordance with Statement of
Position 93-2, undistributed net income was decreased by $105,050, and
overdistributed capital loss on investments was decreased by $105,050.
- ------
Other. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date).Original issue discount on
securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements. Realized
gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same
basis used for federal income tax purposes. For bonds acquired after April
30, 1993, accrued market discount is recognized at maturity or disposition
as taxable ordinary income. Taxable ordinary income is realized to the
extent of the lesser of gain or accrued market discount.
<PAGE>
- ------
Notes to Financial Statements (Continued)
- ------
2. Capital Stock
The Fund has authorized 26,250,000 shares of $.01 par value capital
stock of each class. Transactions in shares of capital stock were as
follows:
Year Ended June 30, 1994(1) Year Ended June 30, 1993
- ------ ------
Shares Amount Shares Amount
- ------
Class A
Sold 1,640,622 $20,818,911 2,642,454 $32,529,648
Dividends and distributions reinvested 275,074 3,448,622
201,620
2,481,021
Redeemed (903,096) (11,196,635) (449,110) (5,522,298)
- ------ ------ ------ ------
Net increase 1,012,600 $13,070,898 2,394,964 $29,488,371
- ------ ------ ------ ------
- ------ ------ ------ ------
- ------
Class B
Sold 101,400 $1,258,622 -- $--
Dividends and distributions reinvested 1,061 12,907 -- --
Redeemed (555) (6,655) -- --
- ------ ------ ------ ------
Net increase 101,906 $1,264,874 -- $--
- ------ ------ ------ ------
- ------ ------ ------ ------
1. For the year ended June 30, 1994 for Class A shares and for the period
from October 29, 1993 (inception of offering) to June 30, 1994 for Class
B shares.
- ------
3. Unrealized Gains and Losses on Investments
At June 30, 1994, net unrealized depreciation on investments of $2,042,195
was composed of gross appreciation of $1,286,705, and gross depreciation
of $3,328,900.
- ------
4. Management Fees and Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .55%
on net assets, with a contractual waiver when net assets are less than
$100 million. Annual fees, reflecting this waiver, are .40% on net assets
of $75 million or more but less than $100 million, .25% of net assets of
$50 million or more but less than $75 million, .15% of net assets of $25
million or more but less than $50 million, and 0% on net assets less than
$25 million. The Manager has agreed to assume Fund expenses (with
specified exceptions) in excess of the regulatory limitation of the State
of California.
For the year ended June 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $663,089, of which $108,300
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager as general distributor.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under a separate approved plan, the Fund may expend up to .25% of its
Class B net assets annually to reimburse OFDI for costs incurred in
connection with the personal service and maintenance of accounts that hold
Class B shares of the Fund, including amounts paid to brokers, dealers,
banks and other institutions. In addition, Class B shares are subject to
an asset-based sales charge of .75% of net assets annually, to reimburse
OFDI for sales commissions paid from its own resources at the time of sale
and associated financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of Trustees may allow the
Fund to continue payment of the asset-based sales charge to OFDI for
distribution expenses incurred on Class B shares sold prior to termination
or discontinuance of the plan. During the year ended June 30, 1994, OFDI
retained $4,375 as reimbursement for Class B sales commissions and service
fee advances, as well as financing costs.
<PAGE>
Appendix A
RATINGS OF INVESTMENTS
Municipal Bonds
Moody's Investors Service, Inc.. The four highest ratings of Moody's
Investors Service, Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A
and Baa. Municipal Bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds which are of "high
quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat larger than Aaa rated
Municipal Bonds. The Aaa and Aa rated bonds comprise what are generally
known as "high grade bonds." Municipal Bonds which are rated A by Moody's
possess many favorable investment attributes and are considered "upper
medium grade obligations." Factors giving security to principal and
interest of A rated bonds are considered adequate, but elements may be
present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated Baa are considered "medium grade"
obligations. 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. Those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
attributes are designated Aa1, A1 and Baa1, respectively.
In addition to the alphabetic rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability to periodically tender ("put") the portion of
the debt covered by the demand feature, may also have a short-term rating
assigned to such demand feature. The short-term rating uses the symbol
VMIG to distinguish characteristics which include payment upon periodic
demand rather than fund or scheduled maturity dates and potential reliance
upon external liquidity, as well as other factors. The highest investment
quality is designated by the VMIG 1 rating and the lowest by VMIG 4.
Standard & Poor's Corporation. The four highest ratings of Standard &
Poor's Corporation ("S&P") for Municipal Bonds are AAA (Prime), AA (High
Grade), A (Good Grade), and BBB (Medium Grade). Municipal Bonds rated AAA
are "obligations of the highest quality." The rating of AA is accorded
issues with investment characteristics "only slightly less marked than
those of the prime quality issues." The category of A describes "the
third strongest capacity for payment of debt service." Principal and
interest payments on bonds in this category are regarded as safe. It
differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic
base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one
such weakness might impair the ability of the issuer to meet debt
obligations at some future date. With respect to revenue bonds, debt
service coverage is good, but not exceptional. Stability of the pledged
revenues could show some variations because of increased competition or
economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appears
adequate.
The BBB rating is the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than
one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
With respect to revenue bonds, debt coverage is only fair. Stability of
the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger. The ratings AA,
A, and BBB may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Fitch. The four highest ratings of Fitch for Municipal Bonds are AAA, AA,
A, and BBB. Municipal Bonds rated AAA are judged to be of the "highest
credit quality." The rating of AA is assigned to bonds of "very high
credit quality." Municipal Bonds which are rated A by Fitch are
considered to be of "high credit quality." The rating of BBB is assigned
to bonds of "satisfactory credit quality." The A and BBB rated bonds are
more vulnerable to adverse changes in economic conditions than bonds with
higher ratings.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations rated
Aaa, Aa or A by Moody's, AAA, AA or A by S&P or F+1-, F-1, F-2 or F-1 by
Fitch. The Moody's corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds. Corporate debt
obligations rated AAA by S&P are "highest grade obligations." Obligations
bearing the rating of AA also qualify as "high grade obligations" and "in
the majority of instances differ from AAA issues only in small degrees."
Corporate debt obligations rated A by S&P are regarded as "upper medium
grade" and have considerable investment strength, but are not entirely
free from adverse effects of changes in economic and trade conditions.
The Fitch ratings shown do not differ from those set forth below for tax-
exempt municipal notes.
Commercial Paper
The commercial paper ratings of A-1 by S&P, P-1 by Moody's, and F-1+
by Fitch are the highest commercial paper ratings of the respective
agencies. The issuer's earnings, quality of long-term debt, management
and industry position are among the factors considered in assigning such
ratings.
Tax-Exempt Municipal Notes
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established
and broad-based access to the market for financing. Notes bearing the
designation "MIG-2" are of high quality with ample margins of protection,
although not as large as notes rated "MIG." Such short-term notes which
have demand features may also carry a rating using the symbol VMIG as
described above, with the designation MIG-1/VMIG 1 denoting best quality,
with superior liquidity support in addition to those characteristics
attributable to the designation MIG-1.
S&P's rating for Municipal Notes due in three years or less are SP-1
and SP-2. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified
by a plus sign, it compares with bonds rated AA or AAA by S&P. SP-2
describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated BBB by S&P.
Fitch's rating for Municipal Notes due in three years or less are F-
1+, F-1, F-2 and F-3. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment.
F-1 describes notes with a very strong credit quality and assurance of
timely payment is only slightly less in degree than issues rated F-1+.
F-2 describes notes with a good credit quality and a satisfactory
assurance of timely payment, but the margin of safety is not as great for
issues assigned F-1+ or F-1 ratings. F-3 describes notes with a fair
credit quality and an adequate assurance of timely payment, but near-term
adverse changes could cause such securities to be rated below investment
grade.
<PAGE>
APPENDIX B
TAX-EQUIVALENT YIELDS
The equivalent yield tables below compare tax-free income with taxable
income under Federal individual income tax rates effective January 1,
1994, and California state individual income tax rates effective January
1, 1993 (California tax brackets are adjusted for inflation sometime
between June 1 and August 1 of the current year). "Combined Taxable
Income" refers to the net amount subject to Federal and California income
taxes after deductions and exemptions. The tables assume that an
investor's highest tax bracket applies to the change in taxable income
resulting from a switch between taxable and non-taxable investments, and
that state tax payments are currently deductible for Federal tax purposes
and that the investor is not subject to Federal or state alternative
minimum tax. The income tax brackets are subject to indexing in future
years to reflect changes in the Consumer Price Index. The brackets do not
reflect the phaseout of itemized deductions and personal exemptions at
higher income levels, resulting in higher effective tax rates (and tax
equivalent yields).
Combine Taxable Income
<TABLE>
<CAPTION>
Oppenheimer Main Street California Tax-Exempt Fund Yield of:
Joint Return Effective Tax Bracket 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%
But Cali-
Over Not Over Federal fornia Combined Is Approximately Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22,118 $ 34,906 15.00% 4.00% 18.40% 3.68% 4.29% 4.90% 5.51% 6.13% 6.74% 7.35%
$ 34,906 $ 38,000 15.00% 6.00% 20.10% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88% 7.51%
$ 38,000 $ 48,456 28.00% 6.00% 32.32% 4.43% 5.17% 5.91% 6.65% 7.39% 8.13% 8.87%
$ 48,456 $ 61,240 28.00% 8.00% 33.76% 4.53% 5.28% 6.04% 6.79% 7.55% 8.30% 9.06%
$ 61,240 $ 91,850 28.00% 9.30% 34.70% 4.59% 5.36% 6.13% 6.89% 7.66% 8.42% 9.19%
$ 91,850 $140,000 31.00% 9.30% 37.42% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59%
$140,000 $212,380 36.00% 9.30% 41.95% 5.17% 6.03% 6.89% 7.75% 8.61% 8.47% 10.34%
$212,380 $250,000 36.00% 10.00% 42.40% 5.21% 6.08% 6.94% 7.81% 8.68% 9.55% 10.42%
$250,000 $424,760 39.60% 10.00% 45.64% 5.52% 6.44% 7.36% 8.28% 9.20% 10.12% 11.04%
$424,760 39.60% 11.00% 46.24% 5.58% 6.51% 7.44% 8.37% 9.30% 10.23% 11.16%
Single Return:
But
Over Not Over
$ 17,453 $ 22,750 15.00% 6.00% 20.10% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88% 7.51%
$ 22,750 $ 24,228 28.00% 6.00% 32.32% 4.43% 5.17% 5.91% 6.65% 7.39% 8.13% 8.87%
$ 24,228 $ 30,620 28.00% 8.00% 33.76% 4.53% 5.28% 6.04% 6.79% 7.55% 8.30% 9.06%
$ 30,620 $ 55,100 28.00% 9.30% 34.70% 4.59% 5.36% 6.13% 6.89% 7.66% 8.42% 9.19%
$ 55,100 $106,190 31.00% 9.30% 37.42% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59%
$106,190 $115,000 31.00% 10.00% 37.90% 4.83% 5.64% 6.44% 7.25% 8.05% 8.86% 9.66%
$115,000 $212,380 36.00% 10.00% 42.40% 5.21% 6.08% 6.94% 7.81% 8.68% 9.55% 10.42%
$212,380 $250,000 36.00% 11.00% 43.04% 5.27% 6.14% 7.02% 7.90% 8.78% 9.66% 10.53%
$250,000 39.60% 11.00% 46.24% 5.58% 6.51% 7.44% 8.37% 9.30% 10.23% 11.16%
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights (See Part A, Prospectus): Filed
herewith.
(2) Independent Auditors' Report (See Part B, Statement of
Additional Information): Filed herewith.
(3) Statements of Investments (See Part B, Statement of
Additional Information): Filed herewith.
(4) Statements of Assets and Liabilities (See Part B,
Statement of Additional Information): Filed herewith.
(5) Statements of Operations (See Part B, Statement of
Additional Information): Filed herewith.
(6) Statements of Changes in Net Assets (See Part B,
Statement of Additional Information): Filed herewith.
(7) Notes to Financial Statements (See Part B, Statement
of Additional Information): Filed herewith.
(b) Exhibits
(1) (i) Articles of Incorporation dated 10/5/87: Filed
with Registrant's Post-Effective Amendment No. 12, 10/25/93, and
incorporated herein by reference.
(ii) Amended Articles of Incorporation dated 12/9/87:
Filed with Registrant's Post-Effective Amendment No. 12, 10/25/93, and
incorporated herein by reference.
(iii) Articles Supplementary to the Articles of
Incorporation dated 8/18/88: Filed with Registrant's Post-Effective
Amendment No. 12, 10/25/93, and incorporated herein by reference.
(iv) Articles Supplementary to the Articles of
Incorporation dated 1/20/89: Filed with Registrant's Post-Effective
Amendment No. 12, 10/25/93, and incorporated herein by reference.
(v) Articles Supplementary to the Articles of
Incorporation dated 4/16/90: Filed with Registrant's Post-Effective
Amendment No. 12, 10/25/93, and incorporated herein by reference.
(vi) Amendment to the Articles of Incorporation dated
8/27/93: Filed with Registrant's Post-Effective Amendment No. 12,
10/25/93, and incorporated herein by reference.
(vii) Amendment to the Articles of Incorporation dated
10/20/93: Filed with Registrant's Post-Effective Amendment No. 12,
10/25/93, and incorporated herein by reference.
(viii) Articles Supplementary to the Articles of
Incorporation dated 10/27/93: Filed herewith.
(ix) Articles Supplementary to the Articles of
Incorporation dated 11/29/93: Filed herewith.
(x) Articles Supplementary to the Articles of
Incorporation dated 4/28/94: Filed herewith.
(xi) Articles Supplementary to the Articles of
Incorporation dated 9/30/94: Filed herewith.
(2) By-Laws as amended through 6/26/90: Previously filed with
Post-Effective Amendment No. 8, 10/22/91, to Registrant's Registration
Statement and refiled herewith pursuant to Item 102 of Regulation S-T.
(3) Not applicable.
(4) (i) Specimen Class A Stock Certificate - Oppenheimer
Main Street Income & Growth Fund: Filed with Registrant's Post-Effective
Amendment No. 12, 10/25/93, and incorporated herein by reference.
(ii) Specimen Class B Stock Certificate - Oppenheimer
Main Street Income & Growth Fund: Filed herewith.
(iii) Specimen Class C Stock Certificate - Oppenheimer
Main Street Income & Growth Fund: Filed with Registrant's Post-Effective
Amendment No. 12, 10/25/93, and incorporated herein by reference.
(iv) Specimen Class A Stock Certificate - Oppenheimer
Main Street California Tax-Exempt Fund: Filed with Registrant's Post-
Effective Amendment No. 12, 10/25/93, and incorporated herein by
reference.
(vi) Specimen Class B Stock Certificate - Oppenheimer
Main Street California Tax-Exempt Fund: Filed with Registrant's Post-
Effective Amendment No. 12, 10/25/93, and incorporated herein by
reference.
(5) (i) Investment Advisory Agreement dated 10/22/90 for
Oppenheimer Main Street Income & Growth Fund: Filed with Registrant's
Post-Effective Amendment No. 6, 11/1/90, and refiled herewith pursuant to
Item 102 of Regulation S-T.
(ii) Investment Advisory Agreement dated 10/22/90 for
Oppenheimer Main Street California Tax-Exempt Fund: Filed with
Registrant's Post-Effective Amendment No. 2 of Main Street Funds,
Inc./California Tax-Exempt Fund (Reg. No. 33-34270), 11/1/90, and refiled
herewith pursuant to Item 102 of Regulation S-T.
(6) (i) General Distributor's Agreement dated 10/13/92:
Filed with Post-Effective Amendment No. 11 to Registrant's Registration
Statement, 8/25/93, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed herewith.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed herewith.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed herewith.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed with
Post-Effective Amendment No. 25 of Oppenheimer Special Fund (Reg. No. 2-
45272), 11/1/86, and refiled with Post-Effective Amendment No. 45 of
Oppenheimer Special Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
(7) Not applicable.
(8) Custody Agreement dated 8/5/92: Filed with Registrant's
Post-Effective Amendment No. 10, 10/19/92, and refiled herewith pursuant
to Item 102 of Regulation S-T.
(9) (i) Agreement and Plan of Reorganization dated 4/28/92
between Main Street Funds, Inc. - Asset Allocation Fund, and Main Street
Funds, Inc. - Income & Growth Fund: Filed with Post-Effective Amendment
No. 11 to Registrant's Registration Statement, 8/25/93, and incorporated
herein by reference.
(ii) Agreement and Plan of Reorganization dated 6/18/92
between Main Street Funds, Inc. - Tax-Free Income Fund and Oppenheimer
Tax-Free Bond Fund: Filed with Post-Effective Amendment No. 11 to
Registrant's Registration Statement, 8/25/93, and incorporated herein by
reference.
(iii) Agreement and Plan of Reorganization dated 8/20/93
between Main Street Funds, Inc. - Government Securities Fund and
Oppenheimer Government Securities Fund: Filed with Post-Effective
Amendment No. 11 to Registrant's Registration Statement, 8/25/93, and
incorporated herein by reference.
(10) (i) Opinion and Consent of Counsel dated 2/1/88: Filed
with Registrant's Post-Effective Amendment No. 1, 6/28/88, and refiled
herewith pursuant to Item 102 of Regulation S-T.
(ii) Opinion and Consent of Counsel dated 1/20/89:
Filed with Registrant's Post-Effective Amendment No. 4, 10/30/89, and
refiled herewith pursuant to Item 102 of Regulation S-T.
(iii) Opinion and Consent of Counsel dated 4/23/90: Filed
with Pre-Effective Amendment No. 1 of Main Street Funds, Inc./California
Tax-Exempt Fund (Reg. No. 33-34270), 4/26/90 and refiled herewith pursuant
to Item 102 of Regulation S-T.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) (i) Investment Letter dated 12/22/88 from Oppenheimer
Management Corporation to Registrant: Filed with Registrant's Post-
Effective Amendment No. 3, 1/17/89, and refiled herewith pursuant to Item
102 of Regulation S-T.
(14) (i) Form of Individual Retirement Account Plan Trust
Agreement: Filed with Post-Effective Amendment No. 21 of Oppenheimer U.S.
Government Trust (Reg. No. 2-76645), 8/20/93, and incorporated herein by
reference.
(ii) Form of Prototype Standardized and Non-Standardized
Profit Sharing Plan and Money Purchase Pension Plan for self-employed
persons and corporations: Filed with Post-Effective Amendment No. 3 of
Oppenheimer Global Growth & Income Fund (File No. 33-33799), 1/31/92, and
incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt organizations:
Previously filed with Post Effective Amendment No. 22 of Oppenheimer
Directors Fund (File No. 2-62240), 2/1/90, and incorporated herein by
reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 36 of Oppenheimer Equity Income Fund (Reg.
No. 2-33043), 10/23/91, and incorporated herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA:
Filed with Post-Effective Amendment No. 19 to the Registration Statement
for Oppenheimer Integrity Funds (File No. 2-76547), 3/1/94, and
incorporated herein by reference.
(15) (i) Amended and Restated Service Plan and Agreement
dated 10/25/93 for Class A shares of Oppenheimer Main Street Income &
Growth Fund: Filed herewith.
(ii) Distribution and Service Plan and Agreement for
Class B shares of Oppenheimer Main Street Income & Growth Fund dated
10/1/94: Filed herewith.
(iii) Distribution and Service Plan and Agreement for
Class C shares of Oppenheimer Main Street Income & Growth Fund dated
12/1/93: Filed herewith.
(iv) Distribution and Service Plan and Agreement for
Class B shares of Oppenheimer Main Street California Tax-Exempt Fund dated
2/23/94: Filed herewith.
(16) Performance Computation Schedule for Oppenheimer Main
Street Income & Growth Fund and Main Street California Tax-Exempt Fund:
Filed herewith.
(17) (i) Financial Data Schedule for Class A Shares of
Oppenheimer Main Street Income & Growth Fund: Filed herewith.
(ii) Financial Data Schedule for Class C Shares of
Oppenheimer Main Street Income & Growth Fund: Filed herewith.
(iii) Financial Data Schedule for Class A Shares of
Oppenheimer Main Street California Tax-Exempt Fund: Filed herewith.
(iv) Financial Data Schedule for Class B Shares of
Oppenheimer Main Street California Tax-Exempt Fund: Filed herewith.
-- Powers of Attorney (including Certified Board resolutions):
Filed with Post-Effective Amendment No. 11 to Registrant's Registration
Statement, 8/25/93, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
Number of Record
Holders as of
September 26, 1994
Oppenheimer Main Street Income &
Growth Fund Class A Shares 114,153
Oppenheimer Main Street Income &
Growth Fund Class B Shares 22,218
Oppenheimer Main Street Income &
Growth Fund Class C Shares 0
Oppenheimer Main Street California
Tax-Exempt Fund Class A Shares 2,410
Oppenheimer Main Street California
Tax-Exempt Fund Class B Shares 71
Item 27. Indemnification
Reference is made to paragraph (b) of Section 7 of Article SEVENTH
of Registrant's Articles of Incorporation filed as Exhibit 24(b)(1)
hereto.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Directors, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a Director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. (a) Business and Other Connections of Investment Adviser
Oppenheimer Management Corporation is the investment
adviser of the Registrant. Oppenheimer Management Corporation and certain
subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Part B of this Registration
Statement.
(b) For information as to the business, profession, vocation
or employment of a substantial nature of each of the officers and
directors of Oppenheimer Management Corporation, reference is made to Part
B of this Registration Statement and to the registration on Form ADV by
Oppenheimer Management Corporation filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
Item 29. Principal Underwriters
(a) Oppenheimer Funds Distributor, Inc. (formerly Oppenheimer Fund
Management, Inc.) is the Distributor of Registrant's shares. It is also
the Distributor of certain other registered open-end investment companies
for which Oppenheimer Management Corporation is the investment adviser,
as described in Parts A and B of this Registration Statement.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor Inc., filed under the Securities Exchange
Act of 1934, is incorporated herein by reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231.
Item 31. Management Services
Not applicable.
Item 32. Undertaking
(a) Not applicable.
(b) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 30th day of September, 1994.
OPPENHEIMER MAIN STREET FUNDS, INC.
By: /s/ James C. Swain*
------------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ James C. Swain* Chairman of the
- ------------------ Board of Directors September 30, 1994
James C. Swain
/s/ Jon S. Fossel* Chief Executive
- -------------------- Officer and September 30, 1994
Jon S. Fossel Director
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting September 30, 1994
George C. Bowen Officer
/s/ Robert G. Avis* Director September 30, 1994
- ------------------
Robert G. Avis
/s/ William A. Baker* Director September 30, 1994
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Director September 30, 1994
- -----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Director September 30, 1994
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director September 30, 1994
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director September 30, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Director September 30, 1994
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
Registration No. 33-17850
Post-Effective Amendment No. 14
Index to Exhibits
Exhibit No. Description
24(b)(1)(viii) Articles Supplementary to the Articles of Incorporation
dated 10/27/94
24(b)(1)(ix) Articles Supplementary to the Articles of Incorporation
dated 11/29/93
24(b)(1)(x) Articles Supplementary to the Articles of Incorporation
dated 4/28/94
24(b)(1)(xi) Articles Supplementary to the Articles of Incorporation
dated 9/30/94
24(b)(2) By-Laws as amended through 6/26/90
24(b)(4)(ii) Specimen Class B Stock Certificate for Oppenheimer Main
Street Income & Growth Fund
24(b)(5)(i) Investment Advisory Agreement for Oppenheimer Main
Street Income & Growth Fund dated 10/22/90
24(b)(5)(ii) Investment Advisory Agreement for Oppenheimer Main
Street California Tax-Exempt Fund dated 10/22/90
24(b)(6)(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement
24(b)(6)(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement
24(b)(6)(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement
24(b)(8) Custody Agreement dated 8/5/92
24(b)(10)(i) Opinion and Consent of Counsel dated 2/1/88
24(b)(10)(ii) Opinion and Consent of Counsel dated 1/20/89
24(b)(10)(iii) Opinion and Consent of Counsel dated 4/23/90
24(b)(11) Independent Auditors' Consent
24(b)(13)(i) Investment Letter dated 12/22/88
24(b)(15)(i) Amended and Restated Service Plan and Agreement dated
10/25/93 for Class A shares of Oppenheimer Main Street
Income & Growth Fund
24(b)(15)(ii) Distribution and Service Plan and Agreement dated
10/1/94 for Class B shares of Oppenheimer Main Street
Income & Growth Fund
24(b)(15)(iii) Distribution and Service Plan and Agreement dated
12/1/93 for Class C shares of Oppenheimer Main Street
Income & Growth Fund
24(b)(15)(iv) Distribution and Service Plan and Agreement dated
2/23/94 for Class B shares of Oppenheimer Main Street
California Tax-Exempt Fund
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A shares of
Oppenheimer Main Street Income & Growth Fund
24(b)(17)(ii) Financial Data Schedule for Class C shares of
Oppenheimer Main Street Income & Growth Fund
24(b)(17)(iii) Financial Data Schedule for Class A shares of
Oppenheimer Main Street California Tax-Exempt Fund
24(b)(17)(iv) Financial Data Schedule for Class B shares of
Oppenheimer Main Street California Tax-Exempt Fund
</TABLE>
<PAGE>
Exhibit 24(b)(15)(iv)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
BETWEEN OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND OPPENHEIMER MAIN STREET FUNDS, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd
day of February, 1994 by and between OPPENHEIMER MAIN STREET FUNDS, INC.
(the "Corporation"), on behalf of OPPENHEIMER MAIN STREET CALIFORNIA TAX-
EXEMPT FUND, a series of the Corporation (the "Fund"), and OPPENHEIMER
FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Corporation will compensate the Distributor
for a portion of its costs incurred in connection with the distribution
of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Corporation may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (1)
distribution assistance in connection with the sale of Shares and/or (2)
administrative support services with respect to Accounts. Such Recipients
are intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in (i) the 1940 Act, (ii) the Rule, (iii) Article III, Section
26, of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., or its successor (the "NASD Rules of Fair
Practice") and (iv) any conditions pertaining either to distribution-
related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by
the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Corporation's Board of Directors
(the "Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in
the operation of this Plan or in any agreements relating to this Plan
(the "Independent Directors") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Corporation will make payments to the Distributor, (i)
within forty-five (45) days of the end of each calendar quarter, in
the aggregate amount of 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of the Shares computed as of the close of each business day (the
"Service Fee"), plus (ii) within ten (10) days of the end of each
month, in the aggregate amount of 0.0625% (0.75% on an annual basis)
of the average during the month of the aggregate net asset value of
Shares computed as of the close of each business day (the "Asset-
Based Sales Charge") outstanding for six years or less (the "Maximum
Holding Period"). Such Service Fee payments received from the
Corporation will compensate the Distributor and Recipients for
providing administrative support services of the type approved by the
Board with respect to Accounts. Such Asset-Based Sales Charge
payments received from the Fund will compensate the Distributor and
Recipients for providing distribution assistance in connection with
the sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by
its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of Shares computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to the Distributor on demand a pro rata portion of such Advance
Service Fee Payments, based on the ratio of the time such shares were
held to one (1) year. The Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Directors. A majority of
the Independent Directors may at any time or from time to time
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings, Maximum Holding Period and Minimum
Holding Period, if any, and the rate of payments hereunder applicable
to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a
revised current prospectus shall constitute sufficient notice. The
Distributor may make Plan payments to any "affiliated person" (as
defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than the Maximum Holding Period, in each case computed as of the
close of each business day during that period and subject to
reduction or elimination of such amounts under the limits to which
the Distributor is, or may become, subject under Article III, Section
26, of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution
assistance and administrative support services in connection with the
sale of Shares to be rendered by the Distributor may include, but
shall not be limited to, the following: (i) paying sales commissions
to any broker, dealer, bank or other institution that sells Shares,
and\or paying such persons Advance Service Fee Payments in advance
of, and\or greater than, the amount provided for in Section 3(a) of
this Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and
other borrowing costs on unreimbursed Carry Forward Expenses (as
hereafter defined) at the rate paid by the Distributor or, if such
amounts are financed by the Distributor from its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which
shall mean the most preferential interest rate on corporate loans at
large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is
no longer so reported, such other rate as may be designated from time
to time by the Distributor with the approval of the Independent
Directors); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on
unreimbursed Carry Forward Expenses, second, to reduce any
unreimbursed Carry Forward Expenses, third, to reduce Distribution
and Service Costs during that quarter, and fourth, to reduce the
Asset-Based Sales Charge payments by the Corporation to the
Distributor in that quarter. Carry Forward Expenses shall be carried
forward by the Corporation until payment can be made under the
Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in effect,
the selection and nomination of those persons to be Directors of the
Corporation who are not "interested persons" of the Corporation
("Disinterested Directors") shall be committed to the discretion of such
Disinterested Directors. Nothing herein shall prevent the Disinterested
Directors from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Disinterested
Directors.
5. Reports. While this Plan is in effect, the Treasurer of the
Corporation shall provide at least quarterly a written report to the
Corporation's Board for its review, detailing distribution expenditures
properly attributable to the Shares, including the amount of all payments
made pursuant to this Plan, the identity of the Recipient of each such
payment, the amount paid to the Distributor and the Distribution and
Service Costs and Carry Forward Expenses for that period. The report shall
state whether all provisions of Section 3 of this Plan have been complied
with. The Distributor shall annually certify to the Board the amount of
its total expenses incurred that year and its total expenses incurred in
prior years and not previously recovered with respect to the distribution
of Shares in conjunction with the Board's annual review of the
continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Directors or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Directors cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on February 23, 1994 for the purpose of
voting on this Plan, and replaces the Fund's Distribution and Service Plan
and Agreement dated October 25, 1993. Unless terminated as hereinafter
provided, it shall continue in effect from year to year thereafter or as
the Board may otherwise determine only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may not be amended to increase
materially the amount of payments to be made without approval of the Class
B Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Directors.
This Plan may be terminated at any time by vote of a majority of the
Independent Directors or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. In the event of such termination, the Board and its
Independent Directors shall determine whether the Distributor shall be
entitled to payment from the Fund of any Carry Forward Expenses and
related costs properly incurred in respect of Shares sold prior to the
effective date of such termination, and whether the Fund shall continue
to make payment to the Distributor in the amount the Distributor is
entitled to retain under part (c) of Section 3 hereof, until such time as
the Distributor has been reimbursed for all or part of such amounts by the
Fund and by retaining CDSC payments.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of
OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
By: /s/ Andrew J. Donohue
---------------------------------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
--------------------------------------------
Katherine P. Feld, Vice President & Secretary
<PAGE>
Exhibit 24(b)(15)(i)
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER MAIN STREET FUNDS, INC.
FOR CLASS A SHARES OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 25th day of October,
1993, by and between OPPENHEIMER MAIN STREET FUNDS, INC. (the
"Corporation"), on behalf of OPPENHEIMER MAIN STREET INCOME & GROWTH FUND,
a series of the Corporation (the "Fund"), and OPPENHEIMER FUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Corporation's registration statement as of the
date this Plan takes effect, contemplated by and to comply with Article
III, Section 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, pursuant to which the Corporation will reimburse
the Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of the Fund. The Corporation may
be deemed to be acting as distributor of securities of which it is the
issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act"), according to the terms of this Plan. The Distributor
is authorized under the Plan to pay "Recipients," as hereinafter defined,
for rendering services and for the maintenance of Accounts. Such
Recipients are intended to have certain rights as third-party
beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning such service; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Corporation's Board of Directors (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Directors") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments.
(a) Under the Plan, the Corporation will make payments to the
Distributor, within forty-five (45) days of the end of each calendar
quarter, in the amount of the lesser of: (i) .0625% (.25% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares, computed as of the close of
each business day, or (ii) the Distributor's actual expenses under
the Plan for that quarter of the type approved by the Board. The
Distributor will use such fee received from the Corporation in its
entirety to reimburse itself for payments to Recipients and for its
other expenditures and costs of the type approved by the Board
incurred in connection with the personal service and maintenance of
Accounts including, but not limited to, the services described in the
following paragraph. The Distributor may make Plan payments to any
"affiliated person" (as defined in the 1940 Act) of the Distributor
if such affiliated person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients
in connection with the personal service and the maintenance of
Accounts may include, but shall not be limited to, the following:
answering routine inquiries from the Recipient's customers concerning
the Fund, providing such customers with information on their
investment in shares, assisting in the establishment and maintenance
of accounts or sub-accounts in the Fund, making the Fund's investment
plans and dividend payment options available, and providing such
other information and customer liaison services and the maintenance
of Accounts as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided services qualifying
for compensation under the Plan if it has Qualified Holdings of
Shares to entitle it to payments under the Plan. In the event that
either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient
may not be rendering appropriate services, then the Distributor, at
the request of the Board, shall require the Recipient to provide a
written report or other information to verify that said Recipient is
providing appropriate services in this regard. If the Distributor
still is not satisfied, it may take appropriate steps to terminate
the Recipient's status as such under the Plan, whereupon such
entity's rights as a third-party beneficiary hereunder shall
terminate.
Payments received by the Distributor from the Corporation under
the Plan will not be used to pay any interest expense, carrying
charges or other financial costs, or allocation of overhead by the
Distributor, or for any other purpose other than for the payments
described in this Section 3. The amount payable to the Distributor
each quarter will be reduced to the extent that reimbursement
payments otherwise permissible under the Plan have not been
authorized by the Board for that quarter. Any unreimbursed expenses
incurred for any quarter by the Distributor may not be recovered in
later periods.
(b) The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at
a rate not to exceed .0625% (.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares, computed as of the close of each business day, of Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers. However, no such payments shall be made to any Recipient
for any such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a
majority of the Independent Directors. A majority of the Independent
Directors may at any time or from time to time increase or decrease
and thereafter adjust the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rate set forth above,
and/or increase or decrease the number of shares constituting Minimum
Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings and the rate of payments hereunder
applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such
provisions in a revised current prospectus shall constitute
sufficient notice.
(c) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Corporation), or (ii) by the Distributor (a subsidiary of
OMC), from its own resources.
4. Selection and Nomination of Directors. While this Plan is in effect,
the selection or replacement of Independent Directors and the nomination
of those persons to be Directors of the Corporation who are not
"interested persons" of the Corporation shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
Independent Directors from soliciting the views or the involvement of
others in such selection or nomination if the final decision on any such
selection and nomination is approved by a majority of the incumbent
Independent Directors.
5. Reports. While this Plan is in effect, the Treasurer of the
Corporation shall provide at least quarterly a written report to the
Corporation's Board for its review, detailing the amount of all payments
made pursuant to this Plan, the identity of the Recipient of each such
payment, and the purposes for which the payments were made. The report
shall state whether all provisions of Section 3 of this Plan have been
complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the
personal service and maintenance of Accounts in conjunction with the
Board's annual review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Directors or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its "assignment" (as defined in the 1940 Act); (iii) it shall
go into effect when approved by a vote of the Board and its Independent
Directors cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board and its Independent
Directors cast in person at a meeting called for the purpose of voting on
such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Independent Directors cast in person
at a meeting called on June 22, 1993 for the purpose of voting on this
Plan, and takes effect as of October 25, 1993. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1993
and from year to year thereafter or as the Board may otherwise determine
only so long as such continuance is specifically approved at least
annually by the Board and its Independent Directors cast in person at a
meeting called for the purpose of voting on such continuance. This Plan
may be terminated at any time by vote of a majority of the Independent
Directors or by the vote of the holders of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities of the Class. This
Plan may not be amended to increase materially the amount of payments to
be made without approval of the Class A Shareholders, in the manner
described above, and all material amendments must be approved by a vote
of the Board and of the Independent Directors.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of OPPENHEIMER MAIN STREET
INCOME & GROWTH FUND
By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
------------------------------------
Katherine P. Feld
Vice President & Secretary
<PAGE>
Exhibit 24(b)(15)(ii)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
BETWEEN OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND OPPENHEIMER MAIN STREET FUNDS, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 1st day
of October, 1994 by and between OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the
"Distributor") and OPPENHEIMER MAIN STREET FUNDS, INC. (the
"Corporation"), on behalf of OPPENHEIMER MAIN STREET FUND, a series of the
Corporation (the "Fund") for the Fund's Class B shares.
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Corporation will compensate the Distributor
for a portion of its costs incurred in connection with the distribution
of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Corporation may act as
distributor of securities of which it is the issuer, pursuant to the Rule,
according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (1)
distribution assistance in connection with the sale of Shares and/or (2)
administrative support services with respect to Accounts. Such Recipients
are intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in (i) the 1940 Act, (ii) the Rule, (iii) Article III, Section
26, of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., or its successor (the "NASD Rules of Fair
Practice") and (iv) any conditions pertaining either to distribution-
related expenses or to a plan of distribution, to which the Fund is
subject under any order on which the Fund relies, issued at any time by
the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Corporation's Board of Directors
(the "Board") who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in
the operation of this Plan or in any agreements relating to this Plan
(the "Independent Directors") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient, or
(ii) such customers, clients and/or accounts as to which such
Recipient is a fiduciary or custodian or co-fiduciary or co-custodian
(collectively, the "Customers"), but in no event shall any such
Shares be deemed owned by more than one Recipient for purposes of
this Plan. In the event that two entities would otherwise qualify
as Recipients as to the same Shares, the Recipient which is the
dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Corporation on behalf of the Fund will make payments
to the Distributor, (i) within forty-five (45) days of the end of
each calendar quarter, in the aggregate amount of 0.0625% (0.25% on
an annual basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the close of
each business day (the "Service Fee"), plus (ii) within ten (10) days
of the end of each month, in the aggregate amount of 0.0625% (0.75%
on an annual basis) of the average during the month of the aggregate
net asset value of Shares computed as of the close of each business
day (the "Asset-Based Sales Charge") outstanding for six years or
less (the "Maximum Holding Period"). Such Service Fee payments
received from the Corporation will compensate the Distributor and
Recipients for providing administrative support services of the type
approved by the Board with respect to Accounts. Such Asset-Based
Sales Charge payments received from the Fund will compensate the
Distributor and Recipients for providing distribution assistance in
connection with the sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of Shares
to be rendered by the Distributor and Recipients may include, but
shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any
Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate
net asset value of Shares computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record
by the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by
its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of Shares computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to the Distributor on demand a pro rata portion of such Advance
Service Fee Payments, based on the ratio of the time such shares were
held to one (1) year. The Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Directors. A majority of
the Independent Directors may at any time or from time to time
decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth
above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of
the Minimum Qualified Holdings, Maximum Holding Period and Minimum
Holding Period, if any, and the rate of payments hereunder applicable
to Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a
revised current prospectus shall constitute sufficient notice. The
Distributor may make Plan payments to any "affiliated person" (as
defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than the Maximum Holding Period, in each case computed as of the
close of each business day during that period and subject to
reduction or elimination of such amounts under the limits to which
the Distributor is, or may become, subject under Article III, Section
26, of the NASD Rules of Fair Practice. Such amount is collectively
referred to as the "Quarterly Limitation." The distribution
assistance and administrative support services in connection with the
sale of Shares to be rendered by the Distributor may include, but
shall not be limited to, the following: (i) paying sales commissions
to any broker, dealer, bank or other institution that sells Shares,
and\or paying such persons Advance Service Fee Payments in advance
of, and\or greater than, the amount provided for in Section 3(a) of
this Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by Recipients;
(iii) paying of or reimbursing the Distributor for interest and
other borrowing costs on unreimbursed Carry Forward Expenses (as
hereafter defined) at the rate paid by the Distributor or, if such
amounts are financed by the Distributor from its own resources or by
an affiliate, at the rate of 1% per annum above the prime rate (which
shall mean the most preferential interest rate on corporate loans at
large U.S. money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime rate is
no longer so reported, such other rate as may be designated from time
to time by the Distributor with the approval of the Independent
Directors); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly
Limitation plus any contingent deferred sales charge ("CDSC")
payments recovered by the Distributor on the proceeds of redemption
of Shares over (ii) Distribution and Service Costs during that
quarter, shall be applied in the following order of priority: first,
to interest on unreimbursed Carry Forward Expenses, second, to reduce
any unreimbursed Carry Forward Expenses, third, to reduce
Distribution and Service Costs during that quarter, and fourth, to
reduce the Asset-Based Sales Charge payments by the Corporation to
the Distributor in that quarter. Carry Forward Expenses shall be
carried forward by the Corporation until payment can be made under
the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in effect,
the selection and nomination of those persons to be Directors of the
Corporation who are not "interested persons" of the Corporation
("Disinterested Directors") shall be committed to the discretion of such
Disinterested Directors. Nothing herein shall prevent the Disinterested
Directors from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Disinterested
Directors.
5. Reports. While this Plan is in effect, the Treasurer of the
Corporation shall provide at least quarterly a written report to the
Corporation's Board for its review, detailing distribution expenditures
properly attributable to the Shares, including the amount of all payments
made pursuant to this Plan, the identity of the Recipient of each such
payment, the amount paid to the Distributor and the Distribution and
Service Costs and Carry Forward Expenses for that period. The report shall
state whether all provisions of Section 3 of this Plan have been complied
with. The Distributor shall annually certify to the Board the amount of
its total expenses incurred that year and its total expenses incurred in
prior years and not previously recovered with respect to the distribution
of Shares in conjunction with the Board's annual review of the
continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Directors or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Directors cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Directors cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Directors
cast in person at a meeting called on June 28, 1994 for the purpose of
voting on this Plan, and takes effect as of October 1, 1994. Unless
terminated as hereinafter provided, it shall continue in effect from year
to year thereafter or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Directors cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Directors. This Plan may be terminated at any time
by vote of a majority of the Independent Directors or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Directors shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
OPPENHEIMER MAIN STREET FUNDS, INC.,
on behalf of OPPENHEIMER MAIN STREET
INCOME & GROWTH FUND
By: /s/ Andrew J. Donohue
-------------------------------------
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
---------------------------------------------
Katherine P. Feld, Vice President & Secretary
<PAGE>
Exhibit 24(b)(15)(iii)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND OPPENHEIMER MAIN STREET FUNDS, INC.
FOR CLASS C SHARES OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the
1st day of December, 1993, by and between OPPENHEIMER MAIN STREET
FUNDS, INC. (the "Corporation") on behalf of MAIN STREET INCOME &
GROWTH FUND (the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution plan
for Class C shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"1940 Act"), pursuant to which the Fund will compensate the
Distributor for a portion of its costs incurred in connection with
the distribution of Shares, and the personal service and
maintenance of shareholder accounts that hold Shares ("Accounts").
The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients,"
as hereinafter defined, for rendering (1) distribution assistance
in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under
this Plan. The terms and provisions of this Plan shall be
interpreted and defined in a manner consistent with the provisions
and definitions contained in (i) the 1940 Act, (ii) the Rule, (iii)
Article III, Section 26, of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., or its successor
(the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution related expenses or to a plan of
distribution, to which the Fund is subject under any order on which
the Fund relies, issued at any time by the Securities and Exchange
Commission.
2. Definitions. As used in this Plan, the following terms shall
have the following meanings:
(a)"Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has
provided administrative support services with respect to Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to
answer such questions as may arise concerning the sale of
Shares; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing,
a majority of the Fund's Board of Directors (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this
Plan (the "Independent Directors") may remove any broker,
dealer, bank or other institution as a Recipient, whereupon such
entity's rights as a third-party beneficiary hereof shall
terminate.
(b)"Qualified Holdings" shall mean, as to any Recipient, all
Shares owned beneficially or of record by: (i) such Recipient,
or (ii) such customers, clients and/or accounts as to which such
Recipient is a fiduciary or custodian or co-fiduciary or co-
custodian (collectively, the "Customers"), but in no event shall
any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books
shall be deemed the Recipient as to such Shares for purposes of
this Plan.
3. Payments for Distribution Assistance and Administrative
Support Services.
(a)The Fund will make payments to the Distributor, within forty-
five (45) days of the end of each calendar quarter, in the
aggregate amount (i) of 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net
asset value of the Shares computed as of the close of each
business day (the "Service Fee"), plus (ii) 0.1875% (0.75% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the close
of each business day (the "Asset Based Sales Charge"). Such
Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services of the type approved by the Board with respect to
Accounts. Such Asset Based Sales Charge payments received from
the Fund will compensate the Distributor and Recipients for
providing distribution assistance in connection with the sale of
Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not
be limited to, the following: answering routine inquiries
concerning the Fund, assisting in establishing and maintaining
accounts or sub-accounts in the Fund and processing Share
redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other
information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request. The
distribution assistance in connection with the sale of Shares to
be rendered by Recipients may include, but shall not be limited
to, the following: distributing sales literature and
prospectuses other than those furnished to current holders of
the Fund's Shares ("Shareholders"), and providing such other
information and services in connection with the distribution of
Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for
payment under the Plan if it has Qualified Holdings of Shares to
entitle it to payments under the Plan. In the event that either
the Distributor or the Board should have reason to believe that,
notwithstanding the level of Qualified Holdings, a Recipient may
not be rendering appropriate distribution assistance in
connection with the sale of Shares or administrative support
services for the Accounts, then the Distributor, at the request
of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is
providing appropriate distribution assistance and/or services in
this regard. If the Distributor still is not satisfied, it may
take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-
party beneficiary hereunder shall terminate.
(b)The Distributor shall make service fee payments to any
Recipient quarterly, within forty-five (45) days of the end of
each calendar quarter, at a rate not to exceed 0.0625% (0.25% on
an annual basis) of the average during the calendar quarter of
the aggregate net asset value of Shares, computed as of the
close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers
for a period of more than the minimum period (the "Minimum
Holding Period"), if any, to be set from time to time by a
majority of the Independent Directors. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter,
at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares
computed as of the close of business on the day such Shares are
sold, constituting Qualified Holdings sold by the Recipient
during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares computed as of the close of
each business day, constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not
exceed the limits on payments to Recipients that are, or may be,
imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. The Advance Service Fee Payments described in part
(i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the
end of the calendar quarter. In addition, the Distributor shall
make asset-based sales charge payments to any Recipient
quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.1875% (0.75% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares computed as of the close of
each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for
a period of more than one (1) year. However, no such service
fee or asset-based sales charge payments (collectively, the
"Recipient Payments") shall be made to any Recipient for any
such quarter in which its Qualified Holdings do not equal or
exceed, at the end of such quarter, the minimum amount ("Minimum
Qualified Holdings"), if any, to be set from time to time by a
majority of the Independent Directors. A majority of the
Independent Directors may at any time or from time to time
decrease and thereafter adjust the rate of fees to be paid to
the Distributor or to any Recipient, but not to exceed the rates
set forth above, and/or direct the Distributor to increase or
decrease the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings or Minimum Holding Period, if any,
and the rates of Recipient Payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in
a revised current prospectus shall constitute sufficient notice.
The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such
affiliated person qualifies as a Recipient.
(c)The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the
Service Fee on Shares outstanding for less than the Minimum
Holding Period, (ii) the Asset-Based Sales Charge on Shares
outstanding for not more than one (1) year, plus (iii) any
additional Asset-Based Sales Charge payment which no Recipient
qualifies to receive, in each case computed as of the close of
each business day during that period and subject to reduction or
elimination of such amounts under the limits to which the
Distributor is, or may become, subject under Article III,
Section 26, of the NASD Rules of Fair Practice. Such amount is
collectively referred to as the "Quarterly Limitation." The
distribution assistance and administrative support services in
connection with the sale of Shares to be rendered by the
Distributor may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer,
bank or other institution that sell Shares, and\or paying such
persons Advance Service Fee Payments in advance of, and\or
greater than, the amount provided for in Section 3(a) of this
Agreement; (ii) paying compensation to and expenses of personnel
of the Distributor who support distribution of Shares by
Recipients; (iii) paying of or reimbursing the Distributor for
interest and other borrowing costs on unreimbursed Carry Forward
Expenses (as hereafter defined) at the rate paid by the
Distributor or, if such amounts are financed by the Distributor
from its own resources or by an affiliate, at the rate of 1% per
annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S.
money center commercial banks) then being reported in the
Eastern edition of the Wall Street Journal (or if such prime
rate is no longer so reported, such other rate as may be
designated from time to time by the Distributor with the
approval of the Independent Directors); (iv) other direct
distribution costs of the type approved by the Board, including
without limitation the costs of sales literature, advertising
and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and
(v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The
Distributor's costs of providing the above-mentioned services
are hereinafter collectively referred to as "Distribution and
Service Costs." "Carry Forward Expenses" are Distribution and
Service Costs that are not paid in the fiscal quarter in which
they arise because they exceed the Quarterly Limitation. In the
event that the Board should have reason to believe that the
Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with
the sale of Shares, then the Distributor, at the request of the
Board, shall provide the Board with a written report or other
information to verify that the Distributor is providing
appropriate services in this regard.
(d)The excess in any fiscal quarter of (i) the Quarterly
Limitation plus any contingent deferred sales charge ("CDSC")
payments recovered by the Distributor on the proceeds of
redemption of Shares over (ii) Distribution and Service Costs
during that quarter, shall be applied in the following order of
priority: first to interest on unreimbursed Carry Forward
Expenses, second to reduce any unreimbursed Carry Forward
Expenses, third to reduce Distribution and Service Costs during
that quarter, and fourth, to reduce the Asset Based Sales Charge
payments by the Fund to the Distributor in that quarter. Carry
Forward Expenses shall be carried forward by the Fund until
payment can be made under the Quarterly Limitation.
(e)Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own
resources (which may include profits derived from the advisory
fee it receives from the Fund), or (ii) by the Distributor (a
subsidiary of OMC), from its own resources, from Asset Based
Sales Charge payments or from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in
effect, the selection and nomination of those persons to be
Directors of the Fund who are not "interested persons" of the Fund
("Disinterested Directors") shall be committed to the discretion of
such Disinterested Directors. Nothing herein shall prevent the
Disinterested Directors from soliciting the views or the
involvement of others in such selection or nomination if the final
decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the
Fund shall provide at least quarterly a written report to the
Fund's Board for its review, detailing distribution expenditures
properly attributable to the Shares, including the amount of all
payments made pursuant to this Plan, the identity of the Recipient
of each such payment, the amount paid to the Distributor and the
Distribution and Service Costs and Carry Forward Expenses for that
period. The report shall state whether all provisions of Section 3
of this Plan have been complied with. The Distributor shall
annually certify to the Board the amount of its total expenses
incurred that year and its total expenses incurred in prior years
and not previously recovered with respect to the distribution of
Shares in conjunction with the Board's annual review of the
continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall
be in writing and shall provide that: (i) such agreement may be
terminated at any time, without payment of any penalty, by a vote
of a majority of the Independent Directors or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class, on not more than sixty
days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act); (iii) it shall go into
effect when approved by a vote of the Board and its Independent
Directors cast in person at a meeting called for the purpose of
voting on such agreement; and (iv) it shall, unless terminated as
herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by
a vote of the Board and its Independent Directors cast in person at
a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved by a vote of the Board and its Independent
Directors cast in person at a meeting called on October 26, 1993
for the purpose of voting on this Plan, and takes effect as of the
date first set forth above. Unless terminated as hereinafter
provided, it shall continue in effect from year to year from the
date first set forth above or as the Board may otherwise determine
only so long as such continuance is specifically approved at least
annually by a vote of the Board and its Independent Directors cast
in person at a meeting called for the purpose of voting on such
continuance. This Plan may not be amended to increase materially
the amount of payments to be made without approval of the Class C
Shareholders, in the manner described above, and all material
amendments must be approved by a vote of the Board and of the
Independent Directors. This Plan may be terminated at any time by
vote of a majority of the Independent Directors or by the vote of
the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. In the event of
such termination, the Board and its Independent Directors shall
determine whether the Distributor is entitled to payment from the
Fund of all Carry Forward Expenses and related costs properly
incurred in respect of Shares sold prior to the effective date of
such termination, and whether the Fund shall continue to make
payment to the Distributor in the amount the Distributor is
entitled to retain under part (c) of Section 3 hereof, until such
time as the Distributor has been reimbursed for all such amounts by
the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder and Director Liability. The
Distributor understands that the obligations of the Fund under this
Plan are not binding upon any Director or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The
Distributor represents that it has notice of the provisions of the
Articles of Incorporation of the Fund disclaiming shareholder and
Director liability for acts or obligations of the Fund.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of OPPENHEIMER MAIN STREET
INCOME & GROWTH FUND
By: /s/ Robert G. Zack
--------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
----------------------------------------------
Katherine P. Feld, Vice President and Secretary
<PAGE>
Exhibit 24(b)(6)(iv)
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270, DENVER, COLORADO 80217-5270
From: AGENCY AGREEMENT
for the OPPENHEIMERFUNDS
To: OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270
DENVER, CO 80217-5270
Gentlemen:
We desire to enter into an agreement with you for making available to
our customers and reselling to you shares of each of the open-end
investment companies of which you are, or may become, Distributor or Sub-
Distributor (hereinafter collectively referred to as the "Funds" and
individually as a "Fund") and whose shares are offered to the public at
an offering price which may or may not include a sales charge (hereinafter
referred to as "Shares"). Upon acceptance of this Agreement by you, we
understand that we may offer shares and act as authorized agent for our
customers' purchase of Shares from you, subject, however, to all of the
following terms and conditions, and to your right, without notice, to
suspend or terminate the sale of the Shares of any one or more of the
Funds;
1. Shares will be made available at the current offering price in
effect at the time the order of such Shares is confirmed and accepted by
you at your office in Denver, Colorado. All purchase orders, resale
orders and applications of our customers submitted by us are subject to
acceptance or rejection in your sole discretion and, if accepted, each
purchase will be deemed to have been consummated at your office in Denver,
Colorado.
2. We represent and warrant to you that we are a "bank" as defined
in section 3(a)(6) of the Securities Exchange Act of 1934, as amended.
We agree to abide by the provisions of the Investment Company Act of 1940,
as amended (the "1940 Act"), the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and all applicable rules
and regulations of the Securities and Exchange Commission ("SEC") and the
NASD, including without limitation, the NASD Rules of Fair Practice,
whether or not we are a broker-dealer subject to the jurisdiction of the
SEC and the NASD. We further agree to comply with all applicable state
and Federal laws and the rules and regulations of authorized regulatory
agencies. We agree that we will not offer Shares in any state or other
jurisdiction where they have not been qualified for sale or if you have
not advised us in advance that such sale is exempt from such qualification
requirements. We are responsible under this Agreement for inquiring of
you as to the jurisdictions in which Shares have been qualified for sale.
3. We will make available to our customers Shares of any Fund only
in accordance with the terms and conditions of its then current Prospectus
and Statement of Additional Information (collectively referred to as the
"Prospectus") and we will make no representations about such Shares not
included in said Prospectus or in any authorized supplemental material
supplied or authorized by you. We will use reasonable efforts in the
offer of Shares and agree to be responsible for the proper instruction and
training of all brokerage personnel in this area employed by us, in order
that the Shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws, rules and
regulations. We agree to hold you harmless and indemnify you, the Funds,
and your and their respective officers, directors, trustees and employees
in the event that we, or any of our current or former employees or agents
should violate any law, rule or regulation, or any provisions of this
Agreement, which violation may result in any loss or liability to you,
your affiliates or any Fund. If you determine to refund any amounts paid
by an investor by reason of any such violation, we shall promptly return
to you on demand any agency commissions previously paid by you to us with
respect to the transaction for which the refund is made. Furthermore, we
agree to indemnify you, your affiliates and the Funds against any and all
claims, demands, controversies, actions, losses, damages, liabilities,
expenses, arbitrations, complaints or investigations, including without
limitation, reasonable attorneys' fees and court costs that are the result
of or arise directly or indirectly, in whole or in part, from you, your
affiliates or the Funds acting upon instructions for the purchase,
exchange or resale of uncertificated book shares received through your
manual or automated phone system or the Fund/SERV program of National
Securities Clearing Corporation; provided such loss, liability or damages
are not the result of the gross negligence, recklessness or intentional
misconduct of you, your affiliates or the Funds. All expenses which we
incur in connection with our activities under this Agreement shall be
borne by us. In connection with all purchase or resale orders, we are
acting as agent for our customer and each transaction is for the account
of our customer and not for our own account. Termination or cancellation
of this Agreement shall not relieve us from the requirements of this
paragraph as to transactions or occurrences arising prior to such
termination.
4. Any applicable sales charge and agency commission relative to any
sales of Shares made to our customers will only be at a rate or rates set
forth in the then current Prospectus of the Fund.
5. The rate(s) of any agency commissions for sale of Shares are
subject to change by you from time to time, and any decreases in such
commissions shall be made upon 30 days' written notice, and any orders
placed after the effective date of such change, will be subject to the
rate(s) in effect at the time of receipt of the payment by you. Such
notice requirement shall not apply to any changes in the asset-based sales
charge or service fees paid for such shares.
6. Payments for purchases of Shares made by telephone or wire order
(including purchase orders received through your manual or automated phone
system, or via the Fund/SERV program of National Securities Clearing
Corporation), and all necessary account information required by you to
establish an account or to settle a resale order, including, without
limitation, the tax identification number of the purchaser, certified
either by the purchaser or by us, shall be provided to you and received
by you within five business days after your acceptance of our order or
such shorter time as may be required by law. If such payment or other
settlement information are not timely received by you, we understand that
you reserve the right, without notice, to cancel the purchase or resale
order, or, at your option in the case of a purchase order, to sell the
Shares ordered by us back to the Fund, and in either case we may be held
responsible for any loss, including loss of profit, suffered by you or
any Fund resulting from our failure to make the aforesaid timely payment
or settlement. If sales of any Fund's Shares are contingent upon the
Fund's receipt of Federal Funds in payment therefor, we will forward
promptly to you any purchase orders and/or payments received by us for
such Shares from our customers. With respect to purchase orders of
uncertificated book shares placed via Fund/SERV, we shall retain in our
files all applications and other documents required by you to establish
an account or to settle a resale order. We will provide you with the
original of such documents at your request.
7. We agree that we will act as agent with respect to Shares only
if they are purchased from you or repurchased by you from our customers.
If Shares are purchased from you by our customers, we warrant that such
purchases are only for investment. If Shares are purchased by us from our
customers for resale to you, we agree that such customers will be paid not
less than the applicable redemption or repurchase price then quoted by the
Fund.
8. You may consider any order we place for Fund shares to be the
total holding of Shares by the investor, and you may assume that the
investor is not entitled to any reduction in sales price beyond that
accorded to the amount of that purchase order as determined by the
schedule set forth in the then current Prospectus, unless we advise you
otherwise when we place the order.
9. We may place resale orders with you for Shares owned by our
customers, but only in accordance with the terms of the applicable Fund
Prospectus. We understand and agree that by placing a resale order with
you by wire or telephone (including resale orders for uncertificated book
shares placed via your manual or automated phone system or via the
Fund/SERV program of National Securities Clearing Corporation), we
represent to you that a request for the redemption of the shares covered
by the resale order has been delivered to us by the registered owner(s)
of such shares, and that such request has been executed in the manner and
with the signature(s) of such registered owner(s) guaranteed as required
by the then-current Prospectus of the applicable Fund. Such resale orders
shall be subject to the following additional conditions:
(a) We shall furnish you with the exact registration, account
number and Class of Shares to be redeemed at the time we place
a resale order by wire or telephone. Other than for resale
orders of uncertificated book shares placed via Fund/SERV, we
shall tender to you, within 5 business days of our placing such
resale order: (i) a stock power or letter, duly signed by the
registered owner(s) of the Shares which are the subject of the
order, duly guaranteed, (ii) any Share certificates required for
such redemption, and (iii) any additional documents which may
be required by the applicable Fund or its transfer agent, in
accordance with the terms of the then-current Prospectus of the
applicable Fund and the policies of the transfer agent. With
respect to resale orders of uncertificated book shares placed
via Fund/SERV, we shall retain in our files all documents
required by you to effect such transaction. We will provide you
with the original of such documents at your request.
(b) The resale price will be the next net asset value per share
of the Shares computed after your receipt, prior to the close
of the New York Stock Exchange ("NYSE"), of an order placed by
us to resell such Shares, except that orders placed by us after
the close of the NYSE on a business day will be based on the
Fund's net asset value per share determined that day, but only
if such orders were received by us from our customer prior to
the close of business of the NYSE that day and if we placed our
resale order with you prior to your normal close of business
that day.
(c) In connection with a resale order we have placed, if we
fail to make delivery of all required certificates and documents
in a timely manner, as stated above (other than for resale
orders placed via Fund/SERV), or if the registered owner of the
Shares subject to the resale order redeems such Shares prior to
our settlement of the order, you have the right to cancel our
resale order. If any cancellation of a resale order or if any
error in the timing of the acceptance of a resale order placed
by us shall result in a loss to you or the applicable Fund, we
shall promptly reimburse you for such loss.
10. If any Shares sold to our customers under the terms of this
Agreement are redeemed by any of the Funds (including without limitation
redemptions resulting from an exchange for Shares of another Fund) or are
repurchased by you as agent for the Fund or are tendered to a Fund for
redemption within seven business days after your confirmation to our
customers of our original purchase order for such Shares, we shall
promptly repay you the full amount of the agency commission (including any
supplemental commission) allowed to us on the original sale, provided you
notify us of such repurchase or redemption. Termination, amendment or
cancellation of this Agreement shall not relieve us from the requirements
of this paragraph.
11. We will comply with, and conform our practices to, any and all
written compliance standards and policies and procedures that you may from
time to time provide to us.
12. Your obligations to us under this Agreement are subject to the
provisions of any agreements entered into between you and the Funds and
any plans adopted by the Funds under Rule 12b-1 under the 1940 Act. If
we are paid a service fee by you or by any of the Funds, we agree to
provide, at the request of you or such Funds, verification that such
payments were used for personal services and/or the maintenance of
personal accounts, related to the Shares held by our customers. We
understand and agree that you are in no way responsible for the manner of
our performance of, or for any of our acts or omissions in connection
with, the services we provide under this Agreement. Nothing in this
Agreement shall be construed to constitute us or any of our agents,
employees or representatives as the agent or employee of you or any of the
Funds.
13. We may terminate this Agreement by written notice to you, which
termination shall become effective ten days after the date of mailing such
notice to you. We agree that you have and reserve the right, in your sole
discretion without notice to us, to suspend sales of Shares of any of the
Funds, at any time, or to withdraw entirely the offering of Shares of any
of the Funds, at any time, or, in your sole discretion, to modify, amend
or cancel this Agreement upon written notice to us of such modification,
amendment or cancellation, which shall be effective on the date stated in
such notice. Without limiting the foregoing, you may terminate this
Agreement if we violate any of the provisions of this Agreement, said
termination to become effective on the date you mail such notice to us.
Without limiting the foregoing, and any provision hereof to the contrary
notwithstanding, the appointment of a trustee for all or substantially all
of our business assets, or our violation of applicable state or Federal
laws or rules and regulations of authorized regulatory agencies will
terminate this Agreement effective upon the date you mail notice to us of
such termination. Your failure to terminate this Agreement for a
particular cause shall not constitute a waiver of your right to terminate
this Agreement at a later date for the same or any other cause. All
notices hereunder shall be to the respective parties at the addresses
listed hereon, unless such address is changed by written notice sent to
the last address of the other party provided under this Agreement.
14. This Agreement shall become effective as of the date when it is
executed and dated by you below and shall be in substitution of any prior
agreement between you and us covering any of the Funds. This Agreement
and all the rights and obligations of the parties hereunder shall be
governed by and construed under the laws of the State of New York
applicable to agreements to be performed in New York, without giving
effect to choice of law rules. This Agreement is not assignable or
transferable, except that you may without notice or consent from us,
assign or transfer this Agreement to any successor firm or corporation
which becomes the Distributor or Sub-Distributor of the Funds or assign
any of your duties under this Agreement to any entity under common control
with you.
15. By signing this Agreement, we represent and warrant to you that
this Agreement has been duly authorized by us by all necessary action,
corporate or otherwise, and is signed on our behalf by our duly authorized
officer or principal.
__________________________________________________
(Name of Bank)
__________________________________________________
(Address)
By: ______________________________________________
(Authorized Signature of Bank)
__________________________________________________
(Name) (Title)
Accepted:
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:_______________________________
Date:_____________________________
8/93
<PAGE>
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF MULTI-CLASS OPPENHEIMERFUNDS
As certain OppenheimerFunds (the "Multi-Class OppenheimerFunds")
offer one or more of the following classes of shares -- shares subject to
a front-end sales charge ("Class A Shares"), shares subject to an asset
based sales charge and a long-term declining contingent deferred sales
charge ("Class B Shares") or shares subject to an asset based sales charge
and a 12 month contingent deferred sales charge ("Class C Shares") -- it
is important for investors not only to choose an OppenheimerFund
appropriate for their investment objectives, but also to choose the
appropriate distribution arrangement, based on a variety of factors
including the amount invested and the expected duration of the investment.
To assist investors in these decisions, we are instituting the following
policy.
1. Purchase order(s) by a "single purchaser" in any one day
for $100,000 or more of Class B shares of OppenheimerFunds described in
their respective prospectuses as "Eligible Funds" but less than $1 million
must be reviewed by [Dealer's appropriate supervisor], who must approve
the purchase order ticket in light of the relevant facts and
circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of the time the investor expects the
investment will be held; and
(c) any other relevant circumstances, such as the
availability of a reduced sales charge for purchasing
Class A Shares under rights of accumulation or a
letter of intent, and anticipated changes in the
fund's per share net asset value.
2. Purchase order(s) by a "single purchaser" in any one day
for $1 million or more of either Class B or Class C shares of one or more
OppenheimerFunds described in their
respective prospectuses as "Eligible Funds" will not be permitted.
The instances in which one distribution arrangement may be more
appropriate than the other include the following. Investors who would
qualify for a reduced front-end sales charge on Class A Shares may
determine that payment of such a reduced front-end sales charge is
preferable to payment of a higher ongoing asset based sales charge in
another Class. On the other hand, investors whose orders would not
qualify for a Class A reduced sales charge may wish to defer the sales
charge and have their entire investment applied to purchase Class B or
Class C Shares. However, if such an investor anticipates redeeming Class
B Shares within a short period of time, such as within one year, that
investor may, depending on the amount purchased, bear higher distribution
expenses than if Class A Shares had been purchased instead. In addition,
investors who intend to hold their shares for a significantly long time
may not wish to bear the higher ongoing asset based sales charges of Class
B or Class C Shares irrespective of the fact that the contingent deferred
sales charge that would apply to a redemption of Class B shares is reduced
over time and is ultimately eliminated, or that the contingent deferred
sales charge that would apply to a redemption of Class C shares is
relatively small in duration and amount. Investors may be affected by
differences in account features (such as check-writing) that may not be
available or not be advisable for Class B or Class C shareholders. It is
important that investors understand that the purpose of the Class B and
Class C contingent deferred sales charges is the same as the purpose of
the front-end sales charge on Class A shares: to compensate Oppenheimer
Funds Distributor, Inc. for commissions it pays to dealers and financial
institutions for sales of shares.
[Dealer's appropriate supervisor] must ensure that all employees
receiving investor inquiries about the purchase of shares of Multi-Class
OppenheimerFunds advise the investor of the alternative distribution
methods offered, and the impact of choosing one method over another. It
may be appropriate for [Dealer's appropriate supervisor] to discuss
specific purchases of the types described above with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares of all Multi-Class OppenheimerFunds. Questions
relating to this policy should be directed to [Dealer's appropriate senior
management personnel], who may obtain further information from Oppenheimer
Funds Distributor, Inc.'s Dealer Services, Department at 1-800-525-7040.
10/94
<PAGE>
Exhibit (24)(1)(viii)
OPPENHEIMER MAIN STREET FUNDS, INC.
ARTICLES SUPPLEMENTARY
OPPENHEIMER MAIN STREET FUNDS, INC., a Maryland corporation having
its principal office in Maryland in the City of Baltimore (hereinafter
called the "Corporation"), certifies that:
FIRST: Pursuant to authority contained in Article FOURTH of the
Articles of Incorporation, as amended, of the Corporation (the "Articles
of Incorporation"), (i) eight million seven hundred and fifty thousand
(8,750,000) shares of authorized but unissued Class A shares of
Oppenheimer Main Street California Tax-Exempt Fund, a series of the
Corporation (the "Fund") and (ii) seventeen million five hundred thousand
(17,500,000) shares of authorized but unissued Class A shares of
Oppenheimer Main Street Government Securities Fund have been duly
reclassified by the Board of Directors as authorized but unissued Class
B shares of the Fund, par value one cent ($.01) per share. Upon such
reclassification, the Corporation will have one hundred and five million
(105,000,000) shares authorized, each with a par value of one cent ($.01)
and with an aggregate par value of $1,050,000. These Articles
Supplementary do not increase the authorized stock of the Corporation.
In addition, upon such reclassification, the authorized shares of the Fund
shall consist of twenty-six million two hundred and fifty thousand
(26,250,000) Class A shares and twenty-six million two hundred and fifty
thousand (26,250,000) Class B shares, each with a par value of one cent
($.01) per share. As hereinafter referred to in these Articles
Supplementary, Class A shares shall be deemed to refer to Class A shares
of the Fund and Class B shares shall be deemed to refer to Class B shares
of the Fund.
SECOND: Acting pursuant to Article FOURTH (A) and (B) of the
Articles of Incorporation, the Board of Directors has set the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of Class B shares together with those set forth in other
provisions of the Articles of Incorporation relating to stock of the Fund.
(1) As more fully set forth hereinafter, the liabilities and the
expenses of the Class B shares shall be determined separately from those
of the Class A shares and from those of any other class of the Fund's
stock and, accordingly, the net asset value, the dividends and
distributions payable to holders, and the amounts distributable in the
event of liquidation of the Corporation to holders of shares of the Fund
stock may vary from class to class. The other provisions of the Articles
of Incorporation shall be construed in such manner as to reflect the
provisions of the immediately prior sentence and of these Articles
Supplementary generally. Except for these differences and certain other
differences hereinafter set forth, the Class B shares shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of,
and rights to require redemption of the Class A shares, and any other
class of the Fund's stock that represents an interest in the same
portfolio of investments as the Class B shares.
(2) The Class B shares shall represent interests in the same
portfolio of investments as the Class A shares.
(3) The dividends and distributions of investment income and capital
gains to holders of the Class B shares shall be in such amounts as may be
declared from time to time by the Board of Directors, and such dividends
and distributions may vary from the dividends and distributions of
investment income and capital gains to holders of the Class A shares and
any other class of the Fund's stock to reflect differing allocations of
the liabilities and expenses of the Fund among the classes of shares and
any resultant differences among the net asset values per share of the
classes of shares, to such extent and for such purposes as the Board of
Directors may deem appropriate. The allocation of investment income,
capital gains, expenses and liabilities of the Fund among the Class A
shares, the Class B shares, and any other class of the Fund's stock that
represents an interest in the same portfolio of investments as the Class
B shares shall be determined by the Board of Directors in a manner that
is consistent with the order dated 11/24/92 (Investment Company Act of
1940 Release No. 19173) issued by the Securities and Exchange Commission
in connection with the application for exemption filed by Oppenheimer
Management Corporation, et al., and any existing or future amendment to
such order or any order, rule or interpretation under the Investment
Company Act of 1940 or its successor that modifies or supersedes such
order.
(4) Except as may otherwise be required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of the Class B shares shall
have exclusive voting rights with respect to any matter submitted to a
vote of stockholders that affects only holders of the Class B shares and
no voting rights with respect to any matter submitted to a vote of
stockholders that does not affect holders of the Class B shares.
(5) (a) Each Class B share shall be converted automatically and
without any action or choice on the part of the holder thereof, into Class
A shares at the close of business on the Conversion Date thereof,
established as provided in the next following sentence. The Conversion
Date for Class B shares shall be determined by the Board of Directors in
a manner and pursuant to terms and conditions consistent with the Order
dated 11/24/92 (Investment Company Act of 1940 Rel. No. 19123) issued by
the Securities and Exchange Commission in connection with the application
for exemption filed by Oppenheimer Management Corporation, et al., and any
existing or future amendment to such Order or any order, rule or
interpretation under the Investment Company Act of 1940 or its successor
that modifies or supersedes such Order and which Conversion Date is
described, from time to time, in the Fund's then current prospectus.
(b) The number of Class A shares into which a Class B share is
converted pursuant to paragraph (5)(a) hereof shall equal the number
(including for this purpose fractions of a share) obtained by dividing the
net asset value per share of the Class B shares for purposes of sales and
redemption thereof on the Conversion Date by the net asset value per share
of the Class A shares for purposes of sales and redemption thereof on the
Conversion Date.
(c) On the Conversion Date, the Class B shares converted into
Class A shares will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to
receive the number of Class A shares into which the Class B shares have
been converted and declared but unpaid dividends to the Conversion Date)
will cease. Certificates representing Class A shares resulting from the
conversion need not be issued until certificates representing the Class
B shares converted, if issued, have been received by the Corporation or
its agent duly endorsed for transfer.
(d) The automatic conversion of the Class B shares into Class
A shares as set forth in paragraph (5)(a) shall be suspended at any time
that the Board of Directors determines (i) that there is not available a
private letter ruling from the Internal Revenue Service or a reasonably
satisfactory opinion of counsel to the effect that the conversion of the
Class B shares does not constitute a taxable event under federal income
tax law, or that (ii) any other condition to conversion set forth in the
Fund's prospectus, as such prospectus may be amended from time to time,
is not satisfied.
(e) The automatic conversion of the Class B shares into Class
A shares as set forth in paragraph (5)(a) may also be suspended by action
of the Board of Directors at any time that the Board of Directors
determines such suspension to be appropriate in order to comply with, or
satisfy the requirements of, the Investment Company Act of 1940, as
amended, and in effect from time to time, or any rule, regulation or order
issued thereunder relating to voting by the holders of the Class B shares
on any plan with respect to the Class A shares proposed under Rule 12b-1
of the Investment Company Act of 1940, as amended, and in effect from time
to time, and in connection with, or in lieu of, any such suspension, the
Board of Directors may provide holders of the Class B shares with
alternative conversion or exchange rights into other classes of stock of
the Fund in a manner consistent with the law, rule, regulation or order
giving rise to the possible suspension of the conversion right.
THIRD: The Class B shares aforesaid have been duly reclassified by
the Corporation's Board of Directors pursuant to authority and power
contained in the Articles of Incorporation.
IN WITNESS WHEREOF, Oppenheimer Main Street Funds, Inc. has caused
these Articles Supplementary to be executed by its Vice President and
witnessed by its Assistant Secretary on this 27th day of October, 1993.
The Vice President of the Corporation who signed these Articles
Supplementary acknowledges them to be the act of the Corporation and
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein relating
to authorization and approval hereof are true in all material respects.
OPPENHEIMER MAIN STREET FUNDS, INC.
By: /s/ Andrew J. Donohue (SEAL)
----------------------------------
Andrew J. Donohue, Vice President
WITNESS:
/s/ Robert G. Zack
- ------------------
Robert G. Zack, Assistant Secretary
<PAGE>
Exhibit 24(b)(1)(ix)
OPPENHEIMER MAIN STREET FUNDS, INC.
ARTICLES SUPPLEMENTARY
OPPENHEIMER MAIN STREET FUNDS, INC., a Maryland corporation having
its principal office in Maryland in the City of Baltimore (hereinafter
called the "Corporation"), certifies that:
FIRST: Pursuant to authority contained in Article FOURTH of the
Articles of Incorporation, as amended, of the Corporation (the "Articles
of Incorporation"), (i) eight million seven hundred and fifty thousand
(8,750,000) shares of authorized but unissued Class A shares of
Oppenheimer Main Street Income & Growth Fund, a series of the Corporation
(the "Fund") and (ii) seventeen million five hundred thousand (17,500,000)
shares of authorized but unissued Class A shares of Oppenheimer Main
Street Government Securities Fund have been duly reclassified by the Board
of Directors as authorized but unissued Class C shares of the Fund, par
value one cent ($.01) per share. Upon such reclassification, the
Corporation will have one hundred and five million (105,000,000) shares
authorized, each with a par value of one cent ($.01) and with an aggregate
par value of $1,050,000. These Articles Supplementary do not increase the
authorized stock of the Corporation. In addition, upon such
reclassification, the authorized shares of the Fund shall consist of
twenty-six million two hundred and fifty thousand (26,250,000) Class A
shares and twenty-six million two hundred and fifty thousand (26,250,000)
Class C shares, each with a par value of one cent ($.01) per share. As
hereinafter referred to in these Articles Supplementary, Class A shares
shall be deemed to refer to Class A shares of the Fund and Class C shares
shall be deemed to refer to Class C shares of the Fund.
SECOND: Acting pursuant to Article FOURTH (A) and (B) of the
Articles of Incorporation, the Board of Directors has set the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of Class C shares together with those set forth in other
provisions of the Articles of Incorporation relating to stock of the Fund.
(1) As more fully set forth hereinafter, the liabilities and the
expenses of the Class C shares shall be determined separately from those
of the Class A shares and from those of any other class of the Fund's
stock and, accordingly, the net asset value, the dividends and
distributions payable to holders, and the amounts distributable in the
event of liquidation of the Corporation to holders of shares of the Fund
stock may vary from class to class. The other provisions of the Articles
of Incorporation shall be construed in such manner as to reflect the
provisions of the immediately prior sentence and of these Articles
Supplementary generally. Except for these differences and certain other
differences hereinafter set forth, the Class C shares shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of,
and rights to require redemption of the Class A shares, and any other
class of the Fund's stock that represents an interest in the same
portfolio of investments as the Class C shares.
(2) The Class C shares shall represent interests in the same
portfolio of investments as the Class A shares.
(3) The dividends and distributions of investment income and capital
gains to holders of the Class C shares shall be in such amounts as may be
declared from time to time by the Board of Directors, and such dividends
and distributions may vary from the dividends and distributions of
investment income and capital gains to holders of the Class A shares and
any other class of the Fund's stock to reflect differing allocations of
the liabilities and expenses of the Fund among the classes of shares and
any resultant differences among the net asset values per share of the
classes of shares, to such extent and for such purposes as the Board of
Directors may deem appropriate. The allocation of investment income,
capital gains, expenses and liabilities of the Fund among the Class A
shares, the Class C shares, and any other class of the Fund's stock that
represents an interest in the same portfolio of investments as the Class
C shares shall be determined by the Board of Directors in a manner that
is consistent with the order dated 11/23/93 under Section 6(c) of the
Investment Company Act of 1940 issued by the Securities and Exchange
Commission in connection with the application for exemption filed by
Oppenheimer Management Corporation, et al., and any existing or future
amendment to such order or any order, rule or interpretation under the
Investment Company Act of 1940 or its successor that modifies or
supersedes such order.
(4) Except as may otherwise be required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of the Class C shares shall
have exclusive voting rights with respect to any matter submitted to a
vote of stockholders that affects only holders of the Class C shares and
no voting rights with respect to any matter submitted to a vote of
stockholders that does not affect holders of the Class C shares.
(5) (a) Class C shares shall have such rights of conversion as may
be determined by the Board of Directors in its sole discretion, or as
shall be required pursuant to the terms of any law, rule, regulation or
order of the Securities and Exchange Commission, and as shall be set forth
in Articles Supplementary to the Articles of Incorporation. To the extent
conversion rights for Class C shares are so provided, the following
provisions of this paragraph (5) shall govern. Each Class C share shall
be converted automatically and without any action or choice on the part
of the holder thereof, into Class A shares at the close of business on the
Conversion Date thereof, established as provided in the next following
sentence. The Conversion Date for Class C shares shall be determined by
the Board of Directors in a manner and pursuant to terms and conditions
consistent with such Order as shall be issued by the Securities and
Exchange Commission in connection with the application for exemption filed
by Oppenheimer Management Corporation, et al., and any existing or future
amendment to such Order or any order, rule or interpretation under the
Investment Company Act of 1940 or its successor that modifies or
supersedes such Order and which Conversion Date is described, from time
to time, in the Fund's then current prospectus.
(b) The number of Class A shares into which a Class C share is
converted pursuant to paragraph (5)(a) hereof shall equal the number
(including for this purpose fractions of a share) obtained by dividing the
net asset value per share of the Class C shares for purposes of sales and
redemption thereof on the Conversion Date by the net asset value per share
of the Class A shares for purposes of sales and redemption thereof on the
Conversion Date.
(c) On the Conversion Date, the Class C shares converted into Class
A shares will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to
receive the number of Class A shares into which the Class C shares have
been converted and declared but unpaid dividends to the Conversion Date)
will cease. Certificates representing Class A shares resulting from the
conversion need not be issued until certificates representing the Class
C shares converted, if issued, have been received by the Corporation or
its agent duly endorsed for transfer.
(d) The automatic conversion of the Class C shares into Class A
shares as set forth in paragraph (5)(a) shall be suspended at any time
that the Board of Directors determines (i) that there is not available a
private letter ruling from the Internal Revenue Service or a reasonably
satisfactory opinion of counsel to the effect that the conversion of the
Class C shares does not constitute a taxable event under federal income
tax law, or that (ii) any other condition to conversion set forth in the
Fund's prospectus, as such prospectus may be amended from time to time,
is not satisfied.
(e) The automatic conversion of the Class C shares into Class A
shares as set forth in paragraph (5)(a) may also be suspended by action
of the Board of Directors at any time that the Board of Directors
determines such suspension to be appropriate in order to comply with, or
satisfy the requirements of, the Investment Company Act of 1940, as
amended, and in effect from time to time, or any rule, regulation or order
issued thereunder relating to voting by the holders of the Class C shares
on any plan with respect to the Class A shares proposed under Rule 12b-1
of the Investment Company Act of 1940, as amended, and in effect from time
to time, and in connection with, or in lieu of, any such suspension, the
Board of Directors may provide holders of the Class C shares with
alternative conversion or exchange rights into other classes of stock of
the Fund in a manner consistent with the law, rule, regulation or order
giving rise to the possible suspension of the conversion right.
THIRD: The Class C shares aforesaid have been duly reclassified by
the Corporation's Board of Directors pursuant to authority and power
contained in the Articles of Incorporation.
IN WITNESS WHEREOF, Oppenheimer Main Street Funds, Inc. has caused
these Articles Supplementary to be executed by its Vice President and
witnessed by its Assistant Secretary on this 29th day of November, 1993.
The Vice President of the Corporation who signed these Articles
Supplementary acknowledges them to be the act of the Corporation and
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein relating
to authorization and approval hereof are true in all material respects.
OPPENHEIMER MAIN STREET FUNDS, INC.
By: /s/ Andrew J. Donohue (SEAL)
-----------------------------------
Andrew J. Donohue, Vice President
WITNESS:
/s/ Robert G. Zack
- -----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
Exhibit 24(b)(1)(x)
OPPENHEIMER MAIN STREET FUNDS, INC.
ARTICLES SUPPLEMENTARY
Oppenheimer Main Street Funds, Inc., an open-end investment company
registered under the Investment Company Act of 1940, as amended, organized
as a Maryland corporation having its principal office in the State of
Maryland in Baltimore City (hereinafter called the "Corporation"), hereby
certifies that:
FIRST: Pursuant to the authority contained in the Corporation's
Articles of Incorporation and pursuant to Sections 2-105(c) and 2-208.1
of the Maryland General Corporation Law, the Board of Directors of the
Corporation has increased the number of authorized Class A shares of the
Main Street Income & Growth Fund series of the Corporation, par value one
cent ($.01) per share, from twenty six million two hundred fifty thousand
(26,250,000) shares, par value $262,500, to seventy six million two
hundred fifty thousand (76,250,000) shares, aggregate par value $762,500.
These Articles Supplementary do not increase the number of authorized
shares of any other series or class of shares, and both immediately before
and after said increase in Class A shares of the Main Street Income &
Growth Fund series, the total number of shares of stock of all classes
that the Corporation has authority to issue, the number of shares of stock
of each class, the par value of the shares of each class of stock, and the
aggregate par value of all shares of all classes are:
The total number of shares of all classes of all stock:
Before: 105,000,000 After: 155,000,000
The number of shares of stock of each class and the respective par
values:
Main Street Income & Growth Fund series
Before: Class A 26,250,000 Par value: $262,500
Class C 26,250,000 Par value: 262,500
After: Class A 76,250,000 Par value: $762,500
Class C 26,250,000 Par value: 262,500
Main Street California Tax-Exempt Fund series
Before: Class A 26,250,000 Par value: $262,500
Class B 26,250,000 Par value: 262,500
After: Class A 26,250,000 Par value: $262,500
Class B 26,250,000 Par value: 262,500
The aggregate par value of all shares of all classes:
Before: $1,050,000 After: $1,550,000
SECOND: These Articles Supplementary of the Corporation have been
duly authorized and approved by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, Oppenheimer Main Street Funds, Inc. has caused
these Articles Supplementary to be executed by its Vice President and
witnessed by its Assistant Secretary on this 28th day of April, 1994. The
undersigned Vice President of the Corporation acknowledges them to be the
act of the Corporation and verifies and states under the penalties of
perjury that, to the best of his knowledge, information and belief, the
matters and facts set forth herein with respect authorization and approval
hereof are true in all material respects.
Oppenheimer Main Street Funds, Inc.
By: /s/ Andrew J. Donohue
-------------------------------------
Andrew J. Donohue, Vice President
WITNESS:
/s/ Robert G. Zack
- -------------------------
Robert G. Zack, Secretary
<PAGE>
Exhibit 24(b)(6)(iii)
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270, DENVER, COLORADO 80217-5270
From: BROKER AGREEMENT
for the OPPENHEIMERFUNDS
To: OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270
DENVER, COLORADO 80217-5270
Gentlemen:
We desire to enter into an agreement with you for making available to
our customers and reselling to you shares of each of the open-end
investment companies of which you are, or may become, Distributor or Sub-
Distributor (hereinafter collectively referred to as the "Funds" and
individually as a "Fund") and whose shares are offered to the public at
an offering price which may or may not include a sales charge (hereinafter
referred to as "Shares"). Upon acceptance of this Agreement by you, we
understand that we may offer shares and act as authorized broker for our
customers' purchase of Shares from you, subject, however, to all of the
terms and conditions, and to your right, without notice, to suspend or
terminate the sale of the Shares of any one or more of the Funds, and we
agree to the following:
1. Shares will be made available at the current offering price in
effect at the time the order of such Shares is confirmed and accepted by
you at your office in Denver, Colorado. All purchase orders, resale
orders and applications of our customers submitted by us are subject to
acceptance or rejection in your sole discretion and, if accepted, each
purchase will be deemed to have been consummated at your office in Denver,
Colorado.
2. We represent and warrant to you that we are a member of the
National Association of Securities Dealers, Inc. ("NASD"), that such
membership has not been suspended, and that we agree to maintain
membership in the NASD. We agree to abide by the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"), the
Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, and all the applicable rules and regulations of the
Securities and Exchange Commission and the NASD, including without
limitation, the NASD Rules of Fair Practice. We further agree to comply
with all other applicable state and Federal laws and the rules and
regulations of authorized regulatory agencies. We agree that we will not
offer Shares in any state or other jurisdiction where they have not been
qualified for sale or if you have not advised us in advance that such sale
is exempt from such qualification requirements. We are responsible under
this Agreement for inquiring of you as to the jurisdictions in which
Shares have been qualified for sale.
3. We will make available to our customers Shares of any Fund only
in accordance with the terms and conditions of its then current Prospectus
and Statement of Additional Information (collectively referred to as the
"Prospectus") and we will make no representations about such Shares not
included in said Prospectus or in any authorized supplemental material
supplied or authorized by you. We will not use any other offering
materials for the Funds without your written consent. We will use our
best efforts in the offer of Shares and agree to be responsible for the
proper instruction and training of all brokerage personnel in this area
employed by us, in order that the Shares will be offered in accordance
with the terms and conditions of this Agreement and all applicable laws,
rules and regulations. We agree to hold you harmless and indemnify you,
the Funds, and your and their respective officers, directors, trustees and
employees in the event that we, or any of our current or former employees
or agents should violate any law, rule or regulation, or any provisions
of this Agreement, which violation may result in any loss or liability to
you, your affiliates or any Fund. If you determine to refund any amounts
paid by an investor by reason of any such violation, we shall promptly
return to you on demand any agency commissions previously paid by you to
us with respect to the transaction for which the refund is made.
Furthermore, we agree to indemnify you, your affiliates and the Funds
against any and all claims, demands, controversies, actions, losses,
damages, liabilities, expenses, arbitrations, complaints or
investigations, including without limitation, reasonable attorneys' fees
and court costs that are the result of or arise directly or indirectly,
in whole or in part, from you, your affiliates or the Funds acting upon
instructions for the purchase, exchange or resale of uncertificated book
shares received through your manual or automated phone system or the
Fund/SERV program of National Securities Clearing Corporation; provided
such loss, liability or damages are not the result of the gross
negligence, recklessness or intentional misconduct of you, your affiliates
or the Funds. All expenses which we incur in connection with our
activities under this Agreement shall be borne by us. In connection with
all purchase or resale orders, we are acting as agent for our customers
and each transaction is for the account of our customer and not for our
own account. Termination or cancellation of this Agreement shall not
relieve us from the requirements of this paragraph as to transactions or
occurrences arising prior to such termination.
4. Any applicable charge and agency commission relative to any sales
of Shares made to our customers will only be at a rate or rates set forth
in the then current Prospectus of such Fund.
5. The rate(s) of any agency commission for sales of such Shares are
subject to change by you from time to time, and any decreases in such
commissions shall be made upon 30 days' written notice, and any orders
placed after the effective date of such change, will be subject to the
rate(s) in effect at the time of receipt of the payment by you. Such
notice requirement shall not apply to any changes in the asset-based sales
charges or service fees paid for such shares.
6. Payments for purchases of Shares made by us by telephone or wire
order (including purchase orders received through your manual or automated
phone system, or via the Fund/SERV program of National Securities Clearing
Corporation), and all necessary account information required by you to
establish an account or to settle a resale order, including, without
limitation, the tax identification number of the purchaser, certified
either by the purchaser or by us, shall be provided to you and received
by you within five business days after your acceptance of our order or
such shorter time as may be required by law. If such payment or other
settlement information are not timely received by you, we understand that
you reserve the right, without notice, to cancel the purchase or resale
order, or, at your option in the case of a purchase order, to sell the
Shares ordered by us back to the Fund, and in either case we shall
promptly reimburse you for any loss to you or the Fund, including without
limitation loss of your profit, suffered by you resulting from our failure
to make the aforesaid timely payment or settlement. If sales of any
Fund's Shares are contingent upon the Fund's receipt of Federal Funds in
payment therefor, we will forward promptly to you any purchase orders
and/or payments received by us for such Shares from our customers. With
respect to purchase orders of uncertificated book shares placed via
Fund/SERV, we shall retain in our files all applications and other
documents required by you to establish an account or to settle a resale
order. We will provide you with the original of such documents at your
request.
7. We agree that we will act as broker with respect to Shares only
if they are purchased from you or repurchased by you from our customers.
If Shares are purchased from you by our
customers, we warrant that such purchases are only for investment. If
Shares are purchased by us from our customers for resale to you, we agree
that customers will be paid not less than the applicable repurchase price
then quoted by the Fund.
8. You may consider any order we place for Fund shares to be the
total holding of Shares by the investor, and you may assume that the
investor is not entitled to any reduction in sales price beyond that
accorded to the amount of that purchase order as determined by the
schedule set forth in the then current Prospectus, unless we advise you
otherwise when we place the order.
9. We may place resale orders with you for Shares owned by our
customers, but only in accordance with the terms of the applicable Fund
Prospectus. We understand and agree that by placing a resale order with
you by wire or telephone (including resale orders for uncertificated book
shares placed via your manual or automated phone system or via the
Fund/SERV program of National Securities Clearing Corporation), we
represent to you that a request for the redemption of the shares covered
by the resale order has been delivered to us by the registered owner(s)
of such shares, and that such request has been executed in the manner and
with the signature(s) of such registered owner(s) guaranteed as required
by the then-current Prospectus of the applicable Fund. Such resale orders
shall be subject to the following additional conditions:
(a) We shall furnish you with the exact registration, account
number and Class of Shares to be redeemed at the time we place
a resale order by wire or telephone. Other than for resale
orders of uncertificated book shares placed via Fund/SERV, we
shall tender to you, within 5 business days of our placing such
resale order: (i) a stock power or letter, duly signed by the
registered owner(s) of the Shares which are the subject of the
order, duly guaranteed, (ii) any Share certificates required for
such redemption, and (iii) any additional documents which may
be required by the applicable Fund or its transfer agent, in
accordance with the terms of the then-current Prospectus of the
applicable Fund and the policies of the transfer agent. With
respect to resale orders of uncertificated book shares placed
via Fund/SERV, we shall retain in our files all documents
required by you to effect such transaction. We will provide you
with the original of such documents at your request.
(b) The resale price will be the next net asset value per share
of the Shares computed after your receipt, prior to the close
of the New York Stock Exchange ("NYSE"), of an order placed by
us to resell such Shares, except that orders placed by us after
the close of the NYSE on a business day will be based on the
Fund's net asset value per share determined that day, but only
if such orders were received by us from our customer prior to
the close of business of the NYSE that day and if we placed our
resale order with you prior to your normal close of business
that day.
(c) In connection with a resale order we have placed, if we
fail to make delivery of all required certificates and documents
in a timely manner as stated above (other than for resale orders
placed via Fund/SERV), or if the registered owner of the Shares
subject to the resale order redeems such Shares prior to our
settlement of the order, you have the right to cancel our resale
order. If any cancellation of a resale order or if any error
in the timing of the acceptance of a resale order placed by us
shall
result in a loss to you or the applicable Fund, we shall
promptly reimburse you for such loss.
10. If any Shares sold to our customers under the terms of this
Agreement are redeemed by any of the Funds (including without limitation
redemptions resulting from an exchange for Shares of another Fund) or are
repurchased by you as agent for the Fund or are tendered to a Fund for
redemption within seven business days after your confirmation to us of our
original purchase order for such Shares, we shall promptly repay you the
full amount of the agency commission (including supplemental commission)
allowed to us on the original sale, provided you notify us of such
repurchase or redemption. Termination, amendment or cancellation of this
Agreement shall not relieve us from the requirements of this paragraph.
11. We will comply with, and conform our practices to, any and all
written compliance standards and policies and procedures that you may from
time to time provide to us.
12. Your obligations to us under this Agreement are subject to the
provisions of any agreements entered into between you and the Funds and
any plans adopted by the Funds under Rule 12b-1 under the 1940 Act. If
we are paid a service fee by you or by any of the Funds, we agree to
provide, at the request of you or such Funds, verification that such
payments were used for personal services and/or the maintenance of
personal accounts, related to the Shares held by our customers. We
understand and agree that you are in no way responsible for the manner of
our performance of, or for any of our acts or omissions in connection
with, the services we provide under this Agreement. Nothing in this
Agreement shall be construed to constitute us or any of our agents,
employees or representatives as the agent or employee of you or any of the
Funds.
13. We may terminate this Agreement by written notice to you, which
termination shall become effective ten days after the date of our mailing
such notice to you. We agree that you have and reserve the right, in your
sole discretion without notice to us, to suspend sales of Shares of any
of the Funds, at any time, or to withdraw entirely the offering of Shares
of any of the Funds, at any time, or, in your sole discretion, to modify,
amend or cancel this Agreement upon written notice to us of such
modification, amendment or cancellation, which shall be effective on the
date stated in such notice. Without limiting the foregoing, you may
terminate this Agreement if we violate any of the provisions of this
Agreement, said termination to become effective on the date you mail such
notice to us. Without limiting the foregoing, and any provision hereof
to the contrary notwithstanding, our expulsion from the NASD will
automatically terminate this Agreement without notice; our suspension from
the NASD, the appointment of a trustee for all or substantially all of our
business assets, or our violation of applicable state, Federal or foreign
laws or rules and regulations of authorized regulatory agencies will
terminate this Agreement effective upon the date you mail notice to us of
such termination. Your failure to terminate this Agreement for a
particular cause shall not constitute a waiver of your right to terminate
this Agreement at a later date for the same or any other cause. All
notices hereunder shall be to the respective parties at the addresses
listed hereon, unless such address is changed by written notice sent to
the last address of the other party provided under this Agreement.
14. This Agreement shall become effective as of the date when it is
executed and dated by you below and shall be in substitution of any prior
agreement between you and us covering any of the Funds. This Agreement
and all the rights and obligations of the parties hereunder shall be
governed by and construed under the laws of the State of New York
applicable to agreements to be performed in New York, without giving
effect to choice of law rules. This Agreement is not assignable or
transferable, except that you may without notice or consent from us,
assign or transfer this Agreement to any successor firm or corporation
which becomes the Distributor or Sub-Distributor of the Funds or assign
any of your duties under this Agreement to any entity under common control
with you.
15. By signing this Agreement, we represent and warrant to you that
this Agreement has been duly authorized by us by all necessary action,
corporate or otherwise, and is signed on our behalf by our duly authorized
officer or principal.
__________________________________________________
(Name of Broker)
__________________________________________________
(Address)
By: ______________________________________________
(Authorized Signature of Broker)
__________________________________________________
(Name) (Title)
Accepted:
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:_______________________________
Date:_____________________________
<PAGE>
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF MULTI-CLASS OPPENHEIMERFUNDS
As certain OppenheimerFunds (the "Multi-Class OppenheimerFunds")
offer one or more of the following classes of shares -- shares subject to
a front-end sales charge ("Class A Shares"), shares subject to an asset
based sales charge and a long-term declining contingent deferred sales
charge ("Class B Shares") or shares subject to an asset based sales charge
and a 12 month contingent deferred sales charge ("Class C Shares") -- it
is important for investors not only to choose an OppenheimerFund
appropriate for their investment objectives, but also to choose the
appropriate distribution arrangement, based on a variety of factors
including the amount invested and the expected duration of the investment.
To assist investors in these decisions, we are instituting the following
policy.
1. Purchase order(s) by a "single purchaser" in any one day
for $100,000 or more of Class B shares of OppenheimerFunds described in
their respective prospectuses as "Eligible Funds" but less than $1 million
must be reviewed by [Dealer's appropriate supervisor], who must approve
the purchase order ticket in light of the relevant facts and
circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of the time the investor expects the
investment will be held; and
(c) any other relevant circumstances, such as the
availability of a reduced sales charge for purchasing
Class A Shares under rights of accumulation or a
letter of intent, and anticipated changes in the
fund's per share net asset value.
2. Purchase order(s) by a "single purchaser" in any one day
for $1 million or more of either Class B or Class C shares of one or more
OppenheimerFunds described in their
respective prospectuses as "Eligible Funds" will not be permitted.
The instances in which one distribution arrangement may be more
appropriate than the other include the following. Investors who would
qualify for a reduced front-end sales charge on Class A Shares may
determine that payment of such a reduced front-end sales charge is
preferable to payment of a higher ongoing asset based sales charge in
another Class. On the other hand, investors whose orders would not
qualify for a Class A reduced sales charge may wish to defer the sales
charge and have their entire investment applied to purchase Class B or
Class C Shares. However, if such an investor anticipates redeeming Class
B Shares within a short period of time, such as within one year, that
investor may, depending on the amount purchased, bear higher distribution
expenses than if Class A Shares had been purchased instead. In addition,
investors who intend to hold their shares for a significantly long time
may not wish to bear the higher ongoing asset based sales charges of Class
B or Class C Shares irrespective of the fact that the contingent deferred
sales charge that would apply to a redemption of Class B shares is reduced
over time and is ultimately eliminated, or that the contingent deferred
sales charge that would apply to a redemption of Class C shares is
relatively small in duration and amount. Investors may be affected by
differences in account features (such as check-writing) that may not be
available or not be advisable for Class B or Class C shareholders. It is
important that investors understand that the purpose of the Class B and
Class C contingent deferred sales charges is the same as the purpose of
the front-end sales charge on Class A shares: to compensate Oppenheimer
Funds Distributor, Inc. for commissions it pays to dealers and financial
institutions for sales of shares.
[Dealer's appropriate supervisor] must ensure that all employees
receiving investor inquiries about the purchase of shares of Multi-Class
OppenheimerFunds advise the investor of the alternative distribution
methods offered, and the impact of choosing one method over another. It
may be appropriate for [Dealer's appropriate supervisor] to discuss
specific purchases of the types described above with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares of all Multi-Class OppenheimerFunds. Questions
relating to this policy should be directed to [Dealer's appropriate senior
management personnel], who may obtain further information from Oppenheimer
Funds Distributor, Inc.'s Dealer Services, Department at 1-800-525-7040.
10/94
<PAGE>
Exhibit 24(b)(2)
MAIN STREET FUNDS, INC.
BY-LAWS
(as amended through June 26, 1990)
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the Stockholders (which
terms as used herein shall, together with all other terms defined in the
Articles of Incorporation, have the same meaning as in the Articles of
Incorporation) shall be held at the principal office of the Fund or at
such other place as may from time to time be designated by the Board of
Directors and stated in the notice of meeting.
Section 2. Conduct of Meeting. Meetings of stockholders shall be
held at a time designated by the Board of Directors on such date as may
be fixed by the Board of Directors at which time the stockholders shall
act on such matters as are submitted to a vote of stockholders, and may
transact any other business within the powers of the Corporation. Any
business of the Corporation may be transacted at such meeting without
being specifically designated in the notice, except such business as is
specifically required by statutes to be stated in the notice.
Notwithstanding the foregoing provisions of this Section 2, a meeting
of stockholders shall be held when the Investment Company Act of 1940, as
amended (the "1940 Act"), requires one or more of the following matters
be acted on by stockholders.
1) Election of Directors;
2) Approval of an investment advisory agreement;
3) Ratification of the selection of independent public accountants;
or
4) Approval of a distribution agreement.
Also, notwithstanding the provisions of this Section 2, a meeting of
the stockholders shall be called by the Secretary upon receipt of the
request in writing signed by stockholders holding not less than one
quarter in amount of the votes entitled to be cast thereat. Such request
shall state the purpose or purposes of the proposed meeting and the
matters proposed to be acted on at it. Meetings requested by stockholders
need not be called unless (i) required by law; and (ii) all conditions to
the calling of such meeting required by law have been met.
Section 3. Notice of Meeting of Stockholders. Not less than 10 days'
and not more than 90 days' written or printed notice of every
stockholders' meeting shall be given to each stockholder entitled to vote
thereat and to each other stockholder entitled to notice thereof by
delivering the same to him or at his residence or usual place of business
or by mailing it, postage prepaid and addressed to him at his address or
as it appears upon the books of the Fund. Said notice shall state the
time and place of the meeting and, if required by law, notice of the
purpose of said meeting.
Section 4. Record Dates. The Board of Directors may fix, in advance
or from time to time, a record date not exceeding 120 days and not less
than 10 days preceding the date of any meeting of stockholders or any
Series for the determination of the stockholders of record entitled to
notice of and to vote at a stockholders' meeting; for the determination
of stockholders entitled to receive dividends, distributions, rights, or
allotments of rights; or for any other purpose requiring the fixing of a
record date. Only stockholders of record on such date shall be entitled
to notice of and to vote at such meeting, receive such dividends, rights
or allotments, or otherwise participate as the case may be. The transfer
books of the Fund may be closed for a period not to exceed 10 days before
the date of a stockholders' meeting and for a period not to exceed 20 days
for any other purpose.
Section 5. Quorum; adjournment of meetings. The presence in person
or by proxy of the holders of one third of the Shares, or of the Shares
of any Series, outstanding and entitled to vote thereat shall constitute
a quorum at any meeting of the Stockholders or of the Stockholders of that
Series, respectively; provided, however, that if any action to be taken
by the Stockholders or by the Stockholders of a Series at a meeting
requires an affirmative vote of a majority, or more than a majority, of
the shares outstanding and entitled to vote, then in such event the
presence in person or by proxy of the holders of a majority of the shares
outstanding and entitled to vote at such a meeting shall constitute a
quorum for all purposes. At a meeting at which a quorum is present, a
vote of a majority of the quorum shall be sufficient to transact all
business at the meeting. If at any meeting of the Stockholders there
shall be less than a quorum present, the Stockholders or the Directors
present at such meeting may, without further notice, adjourn the same from
time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been
lawfully transacted had the meeting not been adjourned. Any meeting of
the Stockholders convened on a date for which it was called may be
adjourned from time to time without further notice to a date not more than
120 days after the original record date.
Section 6. Voting and Inspectors. At all meetings of Stockholders,
each Stockholder shall be entitled to one vote on each matter submitted
to a vote of the Stockholders of the affected Series for each Share
standing in his name on the books of the Corporation on the date, fixed
for determination of Stockholders of the affected Series entitled to vote
at such meeting (except, if the Board so determines, for Shares redeemed
prior to the meeting), and each such Series shall vote as an individual
class ("Individual Class Voting"); a Series shall be deemed to be affected
when a vote of the holders of that Series on a matter is required by the
1940 Act; provided, however, that as to any matter with respect to which
a vote of Stockholders is required by the 1940 Act or by any applicable
law that must be complied with, such requirements as to a vote by
Stockholders shall apply in lieu of Individual Class Voting as described
above. Any fractional Share shall carry proportionately all the rights
of a whole Share, including the right to vote and the right to receive
dividends.
All elections of Directors shall be had by a plurality of the votes
cast and all questions shall be decided by a majority of the votes cast,
in each case at a duly constituted meeting, except as otherwise provided
in the Articles of Incorporation or in these By-Laws or by specific
statutory provision superseding the restrictions and limitations contained
in the Articles of Incorporation or in these By-Laws.
At any election of Directors, the Board of Directors prior thereto
may, or, if they have not so acted, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the Shares
entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict
impartiality and according to the best of their ability, and shall after
the election make a certification of the result of the vote taken. No
candidate for the office of Director shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election of the matter, and such vote shall be taken upon the
request of the holders of ten percent (10%) of the Shares entitled to vote
on such election or matter.
Section 7. Conduct of Stockholders' Meetings. The meetings of the
Stockholders or of any Series shall be presided over by the Chairman of
the Board of Directors, if any, or if he shall not be present, by the
President, or if he shall not be present, by a Vice-President, or if none
of the Chairman of the Board of Directors, the President nor any Vice-
President is present, by a chairman to be elected at the meeting. The
Secretary of the Fund, if present, shall act as Secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act,
or if neither the Secretary nor an Assistant Secretary is present, then
the meeting shall elect its secretary.
Section 8. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary
of the meeting, who shall decide all questions touching the qualification
of voters, the validity of the proxies, and the acceptance or rejection
of votes, unless inspectors of election shall have been appointed as
provided in Section 7, in which event such inspectors of election shall
decide all such questions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Tenure of Office. The business and affairs of
the Fund shall be conducted and managed by a Board of Directors consisting
of the number of initial Directors named in the Articles of Incorporation.
The number of Directors may be increased or decreased as provided in
Section 2 of this Article. Each Director shall, except as otherwise
provided herein, hold office until the next meeting of Stockholders of the
Fund called for the purpose of electing Directors next succeeding his
election or until his successor is duly elected and qualifies. Directors
need not be Stockholders.
Section 2. Increase or Decrease in Number of Directors; Removal. The
Board of Directors, by the vote of a majority of the entire Board, may
increase the number of Directors to a number not exceeding fifteen, and
may elect Directors to fill the vacancies occurring for any reason,
including vacancies created by any such increase in the number of
Directors until the next meeting of stockholders called for the purpose
of electing Directors or until their successors are duly elected and
qualify. Notwithstanding the foregoing, no vacancies occurring in the
Board of Directors may be filled by vote of the remaining members of the
Board if immediately after filling any such vacancy less than two thirds
of the Directors then holding office shall have been elected to such
office by the holders of the outstanding voting securities (pursuant to
the 1940 Act) of the Corporation at any meeting. The Board of Directors,
by the vote of a majority of the entire Board, may likewise decrease the
number of Directors to a number not less than three but the tenure of
office of any Director shall not be affected by any such decrease. In the
event that after the proxy material has been printed for a meeting of
Stockholders at which Directors are to be elected and any one or more
nominees are named in such proxy material dies, becomes incapacitated, or
fails to stand for election, the authorized number of Directors shall be
automatically reduced by the number of such nominees, unless the Board of
Directors prior to the meeting shall otherwise determine.
A Director at any time may be removed either with or without cause
by resolution duly adopted by the affirmative votes of the holders of a
majority of all of the votes entitled to be cast for the election of
Directors, provided that a quorum is present. Any Director at any time
may be removed for cause by resolution duly adopted at any meeting of the
Board of Directors provided that notice thereof is contained in the notice
of such meeting and that such resolution is adopted by the vote of at
least two-thirds of the Directors whose removal is not proposed. As used
herein, "for cause" shall mean any cause which under Maryland law would
permit the removal of a Director of a Maryland corporation.
Section 3. Place of Meeting. The Directors may hold their meetings,
have one or more offices, and keep the books of the Fund outside Maryland,
at any office or offices of the Fund or at any other place as they may
from time to time by resolution determine, or, in the case of meetings,
as they may from time to time by resolution determine or as shall be
specified or fixed in the respective notices or waivers of notice thereof.
Section 4. Regular Meetings. All meetings of the Board of Directors
shall be held at such time and place as shall be specified in a written
waiver signed by all of the Directors. Regular meetings of the Board of
Directors shall be held at such time and on such notice, if any, as the
Directors may from time to time determine. One such regular meeting
during each fiscal year of the Fund shall be designated an annual meeting
of the Board of Directors.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the Chairman of the
Board of Directors, if any, the President or two or more of the Directors,
by oral, telegraphic or written notice duly given, served on, sent or
mailed to each Director not less than one day before such meeting. No
notice need be given to any Director who attends in person or to any
Director who in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Such
notice or waiver of notice need not state the purpose or purposes of such
meeting.
Section 6. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a
quorum shall in no case be less than one-third of the entire Board unless
otherwise permitted under applicable statutory law. If at any meeting of
the Board there shall be less than a quorum present (in person or by open
telephone line), a majority of those present may adjourn the meeting from
time to time until a quorum shall have been obtained. The act of the
majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation or by
these By-Laws.
Section 7. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the entire Board, elect from the
Directors an Executive Committee to consist of such number of Directors
(but not less than 2) as the Board may from time to time determine. The
Board of Directors by such affirmative vote shall have the power at any
time to change the members of such Committee and may fill vacancies in the
Committee by election from the Directors. When the Board of Directors is
not in session, the Executive Committee shall have and may exercise any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Fund (including the power to authorize the
seal of the Fund to be affixed to all papers which may require it) except
as provided by law and except the power to increase or decrease the size
of, or fill vacancies on, the Board. The Executive Committee may fix its
own rules of procedure, and may meet, when and as provided by such rules
or by resolution of the Board of Directors, but in every case the presence
of a majority shall be necessary to constitute a quorum. In the absence
of any member of the Executive Committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a member
of the Board of Directors to act in the place of such absent member.
Section 8. Other Committees. The Board of Directors, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members (but
not less than two Directors) and shall have and may exercise such powers
as the Board may determine in the resolution appointing them. A majority
of all members of any such committee may determine its action, and fix the
time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board of Directors shall have the power at any
time to change the members and powers of any such committee, to fill
vacancies, and to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of Directors and
Committees. Any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without
a meeting, if a written consent to such action is signed by all members
of the Board, or of such committee, as the case may be. Directors, or
members of a committee of the Board of Directors, may participate in a
meeting by means of a conference telephone or similar communications
equipment; such participation shall, except as otherwise required by the
1940 Act, have the same effect as presence in person.
Section 10. Compensation of Directors and Committee Members.
Directors and members of committees appointed by the Board shall be
entitled to receive such compensation from the Fund for their services as
may from time to time be voted by the Board of Directors.
Section 11. Dividends. Dividends or distributions payable on the
Shares of any Series of the Fund may, but need not be, declared by
specific resolution of the Board as to each dividend or distribution; in
lieu of such specific resolutions, the Board may, by general resolution,
determine the method of computation thereof, the method of determining the
Stockholders of the Series to which they are payable and the methods of
determining whether and to which Stockholders they are to be paid in cash
or in additional Shares, provided that the record date for Stockholders
entitled to receive such dividend or distribution shall not be more than
90 days before the dividend or distribution is payable.
Section 12. Indemnification. Before an indemnitee shall be
indemnified by the Fund, there shall be a reasonable determination upon
review of the facts that the person to be indemnified was not liable by
reason of disabling conduct as defined in the Declaration of Trust. Such
determination may be made either by vote of a majority of a quorum of the
Board who are neither "interested persons" of the Fund or the investment
adviser nor parties to the proceeding or by independent legal counsel.
The Fund may advance attorneys' fees and expenses incurred in a covered
proceeding to the indemnitee if the indemnitee undertakes to repay the
advance unless it is determined that he is entitled to indemnification
under the Declaration of Trust. Also at least one of the following
conditions must be satisfied: (1) the indemnitee provides security for his
undertaking, or (2) the Fund is insured against losses arising by reason
of lawful advances, or (3) a majority of the disinterested nonparty
Directors or independent legal counsel in a written opinion shall
determine, based upon review of all of the facts, that there is reason to
believe that the indemnitee will ultimately be found entitled to
indemnification.
ARTICLE III
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chairman of the Board of Directors, a
President, a Vice President, a Secretary, and a Treasurer. The Board of
Directors may designate a Vice President as the Executive Vice President
and may also choose additional Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurer. Two or more offices, except those
of Chairman of the Board and Secretary and President and Secretary, may
be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument is
required by law, the Articles of Incorporation or these By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 2. The Board of Directors at its first meeting after each
annual meeting of the Board shall choose a Chairman of the Board, a
President and shall choose one or more Vice Presidents, a Secretary and
a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such power and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall serve for one year
and until their successors are chosen and qualify. Any officer or agent
may be removed by the Board of Directors whenever, in its judgment, the
best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contractual rights, if any, of the
persons so removed. If the office of any officer becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board shall be the Chief Executive
Officer of the Corporation; he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors and shall have
general and active management of the business of the Corporation, and he
shall see that all orders and resolutions of the Board are carried to
effect.
Section 7. He shall execute in the Corporate name all authorized
deeds, mortgages, bonds, contracts or other instruments requiring a seal
under the seal of the Corporation, except in cases in which the signing
or execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
PRESIDENT
Section 8. The President, in the absence, unavailability, or
disability of the Chairman of the Board, shall perform the duties and
exercise the powers of the Chairman of the Board. In addition, the
President shall perform such duties and exercise such powers as may be
assigned to him from time to time by the Board of Directors.
EXECUTIVE VICE PRESIDENT
Section 9. If an Executive Vice President is designated by the Board
of Directors, he shall, in the absence, unavailability or disability of
the Chairman of the Board and the President, perform the duties and
exercise the powers of the Chairman of the Board. In addition, the
Executive Vice President shall perform such additional duties and exercise
such powers as may be assigned to him from time to time by the Board of
Directors.
ARTICLE IV
SHARES
Section 1. Stock Certificates. Each Stockholder of any Series of the
Fund may be issued a certificate or certificates for his Shares of that
Series, in such form as the Board of Directors may from time to time
prescribe, but only if and to the extent and on the conditions prescribed
by the Board. Except as a stockholder may be given the right by the
Fund's Registration Statement to have a certificate issued to him, all of
the shares of the Fund or of any Series shall be issued without
certificates.
Section 2. Transfer of Shares. Shares of any Series shall be
transferable on the books of the Fund by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender
and cancellation of certificates, if any, for the same number of Shares
of that Series, duly endorsed or accompanied by proper instruments of
assignment and transfer, with such proof of the authenticity of the
signature as the Fund or its agent may reasonably require; in the case of
shares not represented by certificates, the same or similar requirements
may be imposed by the Board of Directors.
Section 3. Share Ledgers. The share ledgers of the Fund, containing
the name and address of the Stockholders of each Series of the Fund and
the number of shares of that Series, held by them respectively, shall be
kept at the principal offices of the Fund, or, if the Fund employs a
transfer agent, at the offices of the transfer agent of the Fund.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may determine the conditions upon which a new certificate may
be issued in place of a certificate which is alleged to have been lost,
stolen or destroyed; and may, in its discretion, require the owner of such
certificate or his legal representative to give bond, with sufficient
surety to the Fund and the transfer agent, if any, to indemnify it and
such transfer agent against any and all loss of claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
ARTICLE V
SEAL
The Board of Directors shall provide a suitable seal of the Fund, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Fund shall be fixed by the Board of Directors.
ARTICLE VII
AMENDMENT OF BY-LAWS
The By-Laws of the Fund may be altered, amended, added to or repealed
by the Stockholders or by majority vote of the entire Board of Directors,
but any such alteration, amendment, addition or repeal of the By-Laws by
action of the Board of Directors may be altered or repealed by the
Stockholders.
<PAGE>
Exhibit 24(b)(8)
MAIN STREET FUNDS, INC
CUSTODY AGREEMENT
Agreement made as of this 5th day of August, 1992, between MAIN
STREET FUNDS, INC., a corporation organized and existing under the laws
of the State of Maryland, having its principal office and place of
business at 3410 South Galena Street, Denver, Colorado 80231 (hereinafter
called the "Fund"), a series Fund consisting of MAIN STREET ASSET
ALLOCATION FUND, MAIN STREET CALIFORNIA TAX-EXEMPT FUND, MAIN STREET
GOVERNMENT SECURITIES, MAIN STREET INCOME AND GROWTH FUND, MAIN STREET
TAX-FREE INCOME FUND and such additional series as may be added from time
to time 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 E T H
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices
and Certifications described in the Exhibits delivered in connection
herewith.
2. "Authorized Person" shall mean any person, whether or not such
person is an Officer or employee of the Fund, duly authorized by the Board
of Trustees of the Fund to give Oral Instructions and Written Instructions
on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated in any such
Certificate as an "Officer of OSS" shall be an Authorized Person only for
purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-
entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
4. "Call Option" shall mean an exchange traded Option with respect
to Securities other than Index, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof
the specified underlying instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received (irrespective of
constructive receipt) by the Custodian and signed on behalf of the Fund
by any two Officers. The term Certificate shall also include instructions
by the Fund to the Custodian communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment
company, or any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account so de-
nominated which is specifically allocated to a Series and pledged to the
Custodian as security for, and in consideration of, the Custodian's
issuance of any Put Option guarantee letter or similar document described
in paragraph 8 of Article V herein.
8. "Covered Call Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer thereof the
specified underlying instruments, currency, or Securities (excluding
Futures Contracts) which are owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission,
its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized
to act as a depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Fund's Board of
Trustees specifically approving deposits therein by the Custodian,
including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm commitment to
buy or sell financial instruments on a U.S. commodities exchange or board
of trade at a specified future time at an agreed upon price.
11. "Foreign Subcustodian" shall mean an "Eligible Foreign
Custodian" as defined in Rule 17-5 which is appointed by the Custodian to
perform or coordinate the receipt, custody and delivery of Foreign
Property of the Fund outside the United States in a manner consistent with
the provisions of this Agreement and whose written contract is approved
by the Board of Trustees of the Fund in accordance with Rule 17f-5.
References to the Custodian herein shall, when appropriate, include
reference to its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the
laws of a foreign country which operates a system outside the United
States in general use by foreign banks and securities brokers for the
central or transnational handling of securities or equivalent book-entries
which is regulated by a foreign government or agency thereof and which is
an "Eligible Foreign Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term
paper as defined in Rule 17f-5 under the Act, whether issued in registered
or bearer form.
14. "Foreign Property" shall mean Foreign Securities and money of
any currency which is held outside of the United States.
15. "Futures Contract" shall mean a Financial Futures Contract
and/or Index Futures Contracts.
16. "Futures Contract Option" shall mean an Option with respect to
a Futures Contract.
17. "Investment Company Act of 1940" shall mean the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
18. "Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount
of cash equal to a specified dollar amount times the difference between
the value of a particular index at the close of the last business day of
the contract and the price at which the futures contract is originally
struck.
19. "Index Option" shall mean an exchange traded Option entitling
the holder, upon timely exercise, to receive an amount of cash determined
by reference to the difference between the exercise price and the value
of the index on the date of exercise.
20. "Margin Account" shall mean a segregated account in the name of
a broker, dealer, futures commission merchant, or a Clearing Member, or
in the name of the Fund for the benefit of a broker, dealer, futures
commission merchant, or Clearing Member, or otherwise, in accordance with
an agreement between the Fund, the Custodian and a broker, dealer, futures
commission merchant or a Clearing Member (a "Margin Account Agreement"),
separate and distinct from the custody account, in which certain
Securities and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may from
time to time determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or withdrawn from,
a Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
21. "Money Market Security" shall mean all instruments and ob-
ligations commonly known as a money market instruments, where the purchase
and sale of such securities normally requires settlement in federal funds
on the same day as such purchase or sale, including, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and/or principal by the government of the United
States or agencies or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to Securities and bank
time deposits.
22. "Nominee" shall mean, in addition to the name of the registered
nominee of the Custodian, (i) a partnership or other entity of a Foreign
Subcustodian which is used solely for the assets of its customers other
than the Custodian and the Foreign Subcustodian, if any, by which it was
appointed; or (ii) the nominee of a Foreign Depository which is used for
the securities and other assets of its customers, members or participants.
23. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of
1934, its successor or successors, and its nominee or nominees.
24. "Officers" shall mean the President, any Vice President, the
Secretary, the Treasurer, the Controller, any Assistant Secretary, any
Assistant Treasurer, and any other person or persons, whether or not any
such other person is an officer or employee of the Fund, but in each case
only if duly authorized by the Board of Trustees of the Fund to execute
any Certificate, instruction, notice or other instrument on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as
holding the position of "Officer of OSS" shall be an Officer only for
purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option, Index
Option and/or a Put Option.
26. "Oral Instructions" shall mean verbal instructions actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian
to be an Authorized Person.
27. "Put Option" shall mean an exchange traded Option with respect
to instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
28. "Repurchase Agreement" shall mean an agreement pursuant to which
the Fund buys Securities and agrees to resell such Securities at a
described or specified date and price.
29. "Reverse Repurchase Agreement" shall mean an agreement pursuant
to which the Fund sells Securities and agrees to repurchase such
Securities at a described or specified date and price.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. Section 270.17f-5)
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended.
31. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over
the counter Options on Securities, common stocks and other securities
having characteristics similar to common stocks, preferred stocks, debt
obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds,
revenue bonds, industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or rights to any property or assets.
32. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as
a segregated account, by recordation or otherwise, within the custody
account in which certain Securities and/or other assets of the Fund
specifically allocated to such Series shall be deposited and withdrawn
from time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may from time
to time determine.
33. "Series" shall mean the various portfolios, if any, of the Fund
as described from time to time in the current and effective prospectus for
the Fund, except that if the Fund does not have more than one portfolio,
"Series" shall mean the Fund or be ignored where a requirement would be
imposed on the Fund or the Custodian which is unnecessary if there is only
one portfolio.
34. "Shares" shall mean the shares of beneficial interest of the
Fund and its Series.
35. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use
of the Terminal Link the use of an authorization code provided by the
Custodian and at least two access codes established by the Fund, provided,
that the Fund shall have delivered to the Custodian a Certificate
substantially in the form of Appendix C.
36. "Transfer Agent" shall mean Oppenheimer Shareholder Services,
a division of Oppenheimer Management Corporation, its successors and as-
signs.
37. "Transfer Agent Account" shall mean any account in the name of
the Fund, or the Transfer Agent, as agent for the Fund, maintained with
United Missouri Bank or such other Bank designated by the Fund in a
Certificate.
38. "Written Instructions" shall mean written communications
actually received (irrespective of constructive receipt) by the Custodian
from an Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person by telex or any other such system
whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the identity of the sender
of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned or held by the
Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except for monies received and maintained in the Transfer Agent
Account, or as otherwise provided in paragraph 7 of this Article or in
Article VIII or XV, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it, at any time during
the period of this Agreement, and shall specify with respect to such
Securities and money the Series to which the same are specifically
allocated, and the Custodian shall not be responsible for any Securities
or money not so delivered. Except for assets held at DTC, the Custodian
shall physically segregate, keep and maintain the Securities of the Series
separate and apart from each other Series and from other assets held by
the Custodian. Except as otherwise expressly provided in this Agreement,
the Custodian will not be responsible for any Securities and moneys not
actually received by it, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Custodian will
be entitled to reverse any credit of money made on the Fund's behalf where
such credits have been previously made and moneys are not finally col-
lected, unless the Custodian has been negligent or has engaged in willful
misconduct with respect thereto; provided that if such reversal is thirty
(30) days or more after the credit was issued, the Custodian will give
five (5) days' prior notice of such reversal. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit
in the Book-Entry System all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated and
to utilize the Book-Entry System to the extent possible in connection with
its performance hereunder, including, without limitation, in connection
with settlements of purchases and sales of Securities, loans of Securities
and deliveries and returns of Securities collateral. Prior to a deposit
of Securities specifically allocated to a Series in any Depository, the
Fund shall deliver to the Custodian a certified resolution of the Board
of Trustees of the Fund, substantially in the form of Exhibit B hereto,
approving, authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate to deposit
in such Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize such Depository to the extent
possible with respect to such Securities in connection with its per-
formance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and moneys
deposited in either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custo-
dian acts in a fiduciary or representative capacity and will be
specifically allocated on the Custodian's books to the separate account
for the applicable Series. Prior to the Custodian's accepting, utilizing
and acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board
of Trustees, substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and on-going
basis, until instructed to the contrary by a Certificate to accept,
utilize and act in accordance with such confirmations as provided in this
Agreement with respect to such Series. All Securities are to be held or
disposed of by the Custodian for, and subject at all times to the
instructions of, the Fund pursuant to the terms of this Agreement. The
Custodian shall have no power or authority to assign, hypothecate, pledge
or otherwise dispose of any Securities except as provided by the terms of
this Agreement, and shall have the sole power to release and deliver
Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account for
each Series all moneys received by it for the account of the Fund with
respect to such Series. Money credited to a separate account for a Series
shall be subject only to drafts, orders, or charges of the Custodian
pursuant to this Agreement and shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates or Resolutions of the Fund's
Board of Trustees certified by an Officer and by the Secretary or
Assistant Secretary of the Fund setting forth the name and address of the
person to whom the payment is to be made, the Series account from which
payment is to be made, the purpose for which payment is to be made, and
declaring such purpose to be a proper corporate purpose; provided,
however, that amounts representing dividends, distributions, or
redemptions proceeds with respect to Shares shall be paid only to the
Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series and
authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest, taxes,
management fees or operating expenses (including, without limitation
thereto, Board of Trustees' fees and expenses, and fees for legal
accounting and auditing services), which Certificates set forth the name
and address of the person to whom payment is to be made, state the purpose
of such payment and designate the Series for whose account the payment is
to be made.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series
basis, of all transfers to or from the account of the Fund for a Series,
either hereunder or with any co-custodian or subcustodian appointed in
accordance with this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series but held in a
Depository, the Custodian shall upon such transfer also by book-entry or
otherwise identify such Securities as belonging to such Series in a
fungible bulk of Securities registered in the name of the Custodian (or
its nominee) or shown on the Custodian's account on the books of the Book-
Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per
Series basis, of the Securities and moneys held under this Agreement for
the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and
in Article VIII, all Securities held by the Custodian hereunder, which are
issued or issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that form; all
other Securities held hereunder may be registered in the name of the Fund,
in the name of any duly appointed registered nominee of the Custodian as
the Custodian may from time to time determine, or in the name of the Book-
Entry System or a Depository or their successor or successors, or their
nominee or nominees. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered
nominee or in the name of the Book-Entry System or a Depository any
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate account in the name of
such Series physically segregated at all times from those of any other
person or persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by
itself, or through the use of the Book-Entry System or a Depository with
respect to Securities held hereunder and therein deposited, shall with
respect to all Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Promptly collect all income, dividends and dis-
tributions due or payable;
(b) Promptly give notice to the Fund and promptly present
for payment and collect the amount of money or other consideration payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix D
annexed hereto, which may be amended at any time by the Custodian without
the prior consent of the Fund, provided the Custodian gives prior notice
of such amendment to the Fund;
(c) Promptly present for payment and collect for the
Fund's account the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in
exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary de-
clarations or certificates of ownership under the Federal Income Tax Laws
or the laws or regulations of any other taxing authority now or hereafter
in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account
of a Series, all rights and similar securities issued with respect to any
Securities held by the Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies,
proxy soliciting materials, consents and other written information
(including, without limitation, notices of tender offers and exchange
offers, pendency of calls, maturities of Securities and expiration of
rights) relating to Securities held pursuant to this Agreement which are
actually received by the Custodian, such proxies and other similar
materials to be executed by the registered holder (if Securities are
registered otherwise than in the name of the Fund), but without indicating
the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository,
shall:
(a) Promptly execute and deliver to such persons as may
be designated in such Certificate proxies, consents, authorizations, and
any other instruments whereby the authority of the Fund as owner of any
Securities held hereunder for the Series specified in such Certificate may
be exercised;
(b) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation,
or the exercise of any right, warrant or conversion privilege and receive
and hold hereunder specifically allocated to such Series any cash or other
Securities received in exchange;
(c) Promptly deliver any Securities held hereunder for the
Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder
specifically allocated to such Series in exchange therefor such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such
Securities as may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount
payable upon Securities which may be called as specified in the
Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have
received a Certificate from the Fund stating, that any such instruments
or certificates are available. The Fund shall deliver to the Custodian
such a Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940 in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures
Contracts, Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise in the name the
Custodian (or any nominee of the Custodian) as custodian for the Fund;
provided, however, that notwithstanding the foregoing, payments to or
deliveries from the Margin Account and payments with respect to Securities
to which a Margin Account relates, shall be made in accordance with the
terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for
which such instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt
by the Custodian of payment therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the Custodian hereunder in
accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS,
FUTURES CONTRACT OPTIONS, REPURCHASE AGREEMENTS,
REVERSE REPURCHASE AGREEMENTS AND SHORT SALES
1. Promptly after each execution of a purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract, a Futures
Contract Option, a Repurchase Agreement, a Reverse Repurchase Agreement
or a Short Sale, the Fund shall deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money Market
Securities, a Certificate, oral Instructions or Written Instructions,
specifying with respect to each such purchase: (a) the Series to which
such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total
amount payable upon such purchase; (g) the name of the person from whom
or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker or other party to
whom payment is to be made. Custodian shall, upon receipt of such
Securities purchased by or for the Fund, pay to the broker specified in
the Certificate out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms
to the total amount payable as set forth in such Certificate, oral
Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the
Fund, other than a sale of any Option, Futures Contract, Futures Contract
Option, Repurchase Agreement, Reverse Repurchase Agreement or Short Sale,
the Fund shall deliver such to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each sale of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were specifically
allocated; (b) the name of the issuer and the title of the Security; (c)
the number of shares or principal amount sold, and accrued interest, if
any; (d) the date of sale and settlement; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the
broker through whom or the person to whom the sale was made, and the name
of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian
shall deliver the Securities specifically allocated to such Series to the
broker in accordance with generally accepted street practices and as
specified in the Certificate upon receipt of the total amount payable to
the Fund upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate, oral Instructions or
Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the
Fund other than a closing purchase transaction, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or
Security underlying such Option and the number of Options, or the name of
the in the case of an Index Option, the index to which such Option relates
and the number of Index Options purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and settlement; (g) the
total amount payable by the Fund in connection with such purchase; and (h)
the name of the Clearing Member through whom such Option was purchased.
The Custodian shall pay, upon receipt of a Clearing Member's written
statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and
registered nominee of the Custodian) as Custodian for the Fund, out of
moneys held for the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the same
conforms to the amount payable as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option purchased
by the Fund, other than a closing sale transaction, pursuant to paragraph
1 hereof, the Fund shall deliver to the Custodian a Certificate specifying
with respect to each such sale: (a) the Series to which such Option was
specifically allocated; (b) the type of Option (put or call); (c) the
instrument, currency, or Security underlying such Option and the number
of Options, or the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Index Option, the index to
which such Option relates and the number of Index Options sold; (d) the
date of sale; (e) the sale price; (f) the date of settlement; (g) the
total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph of
this Article with respect to such Option upon receipt by the Custodian of
the total amount payable to the Fund, provided that the same conforms to
the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such
Call Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares
subject to the Call Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total
amount to be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The Custo-
dian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the
Series to which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call Option was ex-
ercised, provided that the same conforms to the total amount payable as
set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series to which such Put Option was specifically
allocated; (b) the name of the issuer and the title and number of shares
subject to the Put Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total
amount to be paid to the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct a Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the
amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such
Index Option: (a) the Series to which such Index Option was specifically
allocated; (b) the type of Index Option (put or call) (c) the number of
Options being exercised; (d) the index to which such Option relates; (e)
the expiration date; (f) the exercise price; (g) the total amount to be
received by the Fund in connection with such exercise; and (h) the
Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect
to such Covered Call Option: (a) the Series for which such Covered Call
Option was written; (b) the name of the issuer and the title and number
of shares for which the Covered Call Option was written and which underlie
the same; (c) the expiration date; (d) the exercise price; (e) the premium
to be received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the premium
is to be received. The Custodian shall deliver or cause to be delivered,
upon receipt of the premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are required in accordance with
the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct a Depository to impose, upon the
underlying Securities specified in the Certificate specifically allocated
to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior
written notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described
in the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate instructing the Custodian
to deliver, or to direct the Depository to deliver, the Securities subject
to such Covered Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing
Member to whom the underlying Securities are to be delivered; and (d) the
total amount payable to the Fund upon such delivery. Upon the return
and/or cancellation of any receipts delivered pursuant to paragraph 6 of
this Article, the Custodian shall deliver, or direct a Depository to
deliver, the underlying Securities as specified in the Certificate upon
payment of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the
name of the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f)
the date such Put Option is written; (g) the name of the Clearing Member
through whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash, and/or the
amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the deposits
into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the
Custodian on the date hereof, and deliver the same to the Clearing Member
specified in the Certificate upon receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall be under
no obligation to issue any Put Option guarantee letter or similar document
if it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put
Option was written; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount payable by
the Fund upon such delivery; (e) the amount of cash and/or the amount and
kind of Securities specifically allocated to such Series to be withdrawn
from the Collateral Account for such Series and (f) the amount of cash
and/or the amount and kind of Securities, specifically allocated to such
series, if any, to be withdrawn from the Senior Security Account. Upon
the return and/or cancellation of any Put Option guarantee letter or
similar document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the moneys held for the account of
the series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set
forth in such Certificate, upon delivery of such Securities, and shall
make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect
to such Index Option: (a) the Series for which such Index Option was
written; (b) whether such Index Option is a put or a call; (c) the number
of Options written; (d) the index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received by the Fund;
(i) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; (j) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount
of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name
in which such account is to be or has been established. The Custodian
shall, upon receipt of the premium specified in the Certificate, make the
deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the
Custodian has specifically agreed to issue, which are in accordance with
the customs prevailing among Clearing Members in Index Options and make
the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certi-
ficate.
11. Whenever an Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect
to such Index Option: (a) the Series for which such Index Option was
written; (b) such information as may be necessary to identify the Index
Option being exercised; (c) the Clearing Member through whom such Index
Option is being exercised; (d) the total amount payable upon such
exercise, and whether such amount is to be paid by or to the Fund; (e) the
amount of cash and/or amount and kind of Securities, if any, to be with-
drawn from the Margin Account; and (f) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account for
such Series. Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series
to which such Stock Index Option was specifically allocated to the Clear-
ing Member specified in the Certificate the total amount payable, if any,
as specified therein.
12. Promptly after the execution of a purchase or sale by the Fund
of any Option identical to a previously written Option described in
paragraphs, 6, 8 or 10 of this Article in a transaction expressly
designated as a "Closing Purchase Transaction" or a "Closing Sale
Transaction", the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to the Option being purchased: (a)
that the transaction is a Closing Purchase Transaction or a Closing Sale
Transaction; (b) the Series for which the Option was written; (c) the
instrument, currency, or Security subject to the Option, or, in the case
of an Index Option, the index to which such Option relates and the number
of Options held; (d) the exercise price; (e) the premium to be paid by or
the amount to be paid to the Fund; (f) the expiration date; (g) the type
of Option (put or call); (h) the date of such purchase or sale; (i) the
name of the Clearing Member to whom the premium is to be paid or from whom
the amount is to be received; and (j) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Collateral
Account, a specified Margin Account, or the Senior Security Account for
such Series. Upon the Custodian's payment of the premium or receipt of
the amount, as the case may be, specified in the Certificate and the
return and/or cancellation of any receipt issued pursuant to paragraphs
6, 8 or 10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction or the Closing Sale Transaction,
the Custodian shall remove, or direct a Depository to remove, the pre-
viously imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written by
the Fund and described in this Article, the Custodian shall delete such
Option from the statements delivered to the Fund pursuant to paragraph 3
Article III herein, and upon the return and/or cancellation of any
receipts issued by the Custodian, shall make such withdrawals from the
Collateral Account, and the Margin Account and/or the Senior Security
Account as may be specified in a Certificate received in connection with
such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an
Option described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
such Futures Contract, (or with respect to any number of identical Futures
Contract (s)): (a) the Series for which the Futures Contract is being
entered; (b) the category of Futures Contract (the name of the underlying
index or financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered into
and the maturity date; (f) whether the Fund is buying (going long) or
selling (going short) such Futures Contract(s); (g) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission merchant
to whom such amount is to be paid. The Custodian shall make the deposits,
if any, to the Margin Account in accordance with the terms and conditions
of the Margin Account Agreement. The Custodian shall make payment out of
the moneys specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and deposit in the Senior Security
Account for such Series the amount of cash and/or the amount and kind of
Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract shall be made by
the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
(b) Any variation margin payment or similar payment from
a broker, dealer, or futures commission merchant to the Fund with respect
to an outstanding Futures Contract shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery
or settlement date a Certificate specifying: (a) the Futures Contract and
the Series to which the same relates; (b) with respect to an Index Futures
Contract, the total cash settlement amount to be paid or received, and
with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn
from the Senior Security Account for such Series. The Custodian shall
make the payment or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset
a Futures Contract held by the Custodian hereunder, the Fund shall deliver
to the Custodian a Certificate specifying: (a) the items of information
required in a Certificate described in paragraph 1 of this Article, and
(b) the Futures Contract being offset. The Custodian shall make payment
out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the Futures
Contract being offset from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein, and make such withdrawals from the
Senior Security Account for such Series as may be specified in the Cer-
tificate. The withdrawals, if any, to be made from the Margin Account
shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures
Contract Option by the Fund, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract Option: (a)
the Series to which such Option is specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the amount of premium to be paid by the Fund upon such
purchase; (h) the name of the broker or futures commission merchant
through whom such Option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Cus-
todian shall pay out of the moneys specifically allocated to such Series
the total amount to be paid upon such purchase to the broker or futures
commissions merchant through whom the purchase was made, provided that the
same conforms to the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) Series to which such Futures Contract Option was
specifically allocated; (b) the type of Future Contract Option (put or
call); (c) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon such sale;
and (h) the name of the broker of futures commission merchant through whom
the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of
the total amount payable to the Fund, provided the same conforms to the
total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series to
which such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option (put or call) being exercised; (c) the
type of Futures Contract underlying the Futures Contract Option; (d) the
date of exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised; (f) the
net total amount, if any, payable by the Fund; (g) the amount, if any, to
be received by the Fund; and (h) the amount of cash and/or the amount and
kind of Securities to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and Securities
specifically allocated to such Series, the payments of money, if any, and
the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series for which such
Futures Contract Option was written; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the expiration date; (e) the
exercise price; (f) the premium to be received by the Fund; (g) the name
of the broker or futures commission merchant through whom the premium is
to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon receipt of the premium specified
in the Certificate, make out of the moneys and Securities specifically
allocated to such Series the deposits into the Senior Security Account,
if any, as specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is
a call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
of cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any, specified in
such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The de-
posits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund
and which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
and kind of Securities and/or cash to be withdrawn from or deposited in,
the Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account,
if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Promptly after the execution by the Fund of a purchase of any
Futures Contract Option identical to a previously written Futures Contract
Option described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall deliver to the
Custodian a Certificate specifying with respect to the Futures Contract
Option being purchased: (a) the Series to which such Option is
specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Future Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures commission
merchant to whom the premium is to be paid; and (h) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate.
The withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian shall
(a) delete such Futures Contract Option from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein and (b) make such
withdrawals from and/or in the case of an exercise such deposits into the
Senior Security Account as may be specified in a Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be
made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of
a Futures Contract Option described in this Article shall be subject to
Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities
by any Series of the Fund, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale was
made; (b) the name of the issuer-and the title of the Security; (c) the
number of shares or principal amount sold, and accrued interest or
dividends, if any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities,
if any, which are to be deposited in a Margin Account and the name in
which such Margin Account has been or is to be established; (h) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom
such short sale was made. The Custodian shall upon its receipt of a
statement from such broker confirming such sale and that the total amount
credited to the Fund upon such sale, if any, as specified in the
Certificate is held by such broker for the account of the Custodian (or
any nominee of the Custodian) as custodian of the Fund, issue a receipt
or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any
short sale of Securities, the Fund shall promptly deliver to the Custodian
a Certificate specifying with respect to each such closing out: (a) the
Series for which such transaction is being made; (b) the name of the
issuer and the title of the Security; (c) the number of shares or the
principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net total
amount payable to the broker upon such closing-out; (h) the amount of cash
and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account; and
(j) the name of the broker through whom the Fund is effecting such
closing-out. The Custodian shall, upon receipt of the net total amount
payable to the Fund upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian with respect
to the short sale being closed-out, pay out of the moneys held for the
account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Repurchase Agreement or a
Reverse Repurchase Agreement with respect to Securities and money held by
the Custodian hereunder, the Fund shall deliver to the Custodian a Certi-
ficate, or in the event such Repurchase Agreement or Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions,
or Written Instructions specifying: (a) the Series for which the
Repurchase Agreement or Reverse Repurchase Agreement is entered; (b) the
total amount payable to or by the Fund in connection with such Repurchase
Agreement or Reverse Repurchase Agreement and specifically allocated to
such Series; (c) the broker, dealer, or financial institution with whom
the Repurchase Agreement or Reverse Repurchase Agreement is entered; (d)
the amount and kind of Securities to be delivered or received by the Fund
to or from such broker, dealer, or financial institution; (e) the date of
such Repurchase Agreement or Reverse Repurchase Agreement; and (f) the
amount of cash and/or the amount and kind of Securities, if any, specifi-
cally allocated to such Series to be deposited in a Senior Security Ac-
count for such Series in connection with such Reverse Repurchase
Agreement. The Custodian shall, upon receipt of the total amount payable
to or by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions make or accept the delivery to or from the broker,
dealer, or financial institution and the deposits, if any, to the Senior
Security Account, specified in such Certificate, Oral Instructions, or
Written Instructions.
2. Upon the termination of a Repurchase Agreement or a Reverse
Repurchase Agreement described in preceding paragraph 1 of this Article,
the Fund shall promptly deliver a Certificate or, in the event such
Repurchase Agreement or Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Repurchase Agreement or Reverse Repurchase
Agreement being terminated and the Series for which same was entered; (b)
the total amount payable to or by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received or
delivered by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e) the
name of the broker, dealer, or financial institution with whom the Repur-
chase Agreement or Reverse Repurchase Agreement is to be terminated; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Senior Securities Account for such Series. The
Custodian shall, upon receipt or delivery of the amount and kind of
Securities or cash to be received or delivered by the Fund specified in
the Certificate, Oral Instructions, or Written Instructions, make or
receive the payment to or from the broker, dealer, or financial
institution and make the withdrawals, if any, from the Senior Security
Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
3. The Certificates, Oral Instructions, or Written Instructions
described in paragraphs 1 and 2 of this Article may with respect to any
particular Repurchase Agreement or Reverse Repurchase Agreement be
combined and delivered to the Custodian at the time of entering into such
Repurchase Agreement or Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate specifying
with respect to each such loan: (a) the Series to which the loaned
Securities are specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately iden-
tified, and (f) the name of the broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the Securities
thus designated to the broker, dealer or financial institution to which
the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or a Depository only in the form of a
certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by
the Fund, the Fund shall deliver or cause to be delivered to the Custodian
a Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal
amount to be returned, (d) the date of termination, (e) the total amount
to be delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institution from
which the Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution to
which such Securities were loaned and upon receipt thereof shall pay, out
of the moneys held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE 's
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from
time to time make such deposits thereto, or withdrawals therefrom, as
specified in a Certificate. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash
and/or the amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the number
of shares or the principal amount of any particular Securities to be
deposited by the Custodian into, or withdrawn from, a Senior Securities
Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such
deposit has been made.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing
Member in whose name, or for whose benefit, the account was established
as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt
with in accordance with the terms and conditions of the Margin Account
Agreement.
4. The Custodian shall to the extent permitted by the Fund's
Declaration of Trust, investment restrictions and the Investment Company
Act of 1940 have a continuing lien and security interest in and to any
property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may
enforce its lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option guarantee letter
or similar document or any receipt issued hereunder by the Custodian;
provided, however, that the Custodian shall not be required to issue any
Put Option guarantee letter unless it shall have received an opinion of
counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien
and security interest is valid, enforceable and not limited by the
Declaration of Trust, any investment restrictions or the Investment
Company Act of 1940. In the event the Custodian should realize on any
such property net proceeds which are less than the Custodian's obligations
under any Put Option guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with
a statement with respect to each Margin Account in which money or
Securities are held specifying as of the close of business on the previous
business day: (a) the name of the Margin Account; (b) the amount and kind
of Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such Margin
Account.
6. The Custodian shall establish a Collateral Account and from time
to time shall make such deposits thereto as may be specified in a
Certificate. Promptly after the close of business on each business day
in which cash and/or Securities are maintained in a Collateral Account for
any Series, the Custodian shall furnish the Fund with a statement with
respect to such Collateral Account specifying the amount of cash and/or
the amount and kind of Securities held therein. No later than the close
of business next succeeding the delivery to the Fund of such statement,
the Fund shall furnish to the Custodian a Certificate or Written
Instructions specifying the then market value of the Securities described
in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding
Put Option guarantee letter or similar document, the Fund shall promptly
specify in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution
of the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribu-
tion, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and
the total amount payable to the Transfer Agent Account and any sub-
dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein and the
declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth
the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series
to the shareholders of record as of that date and the total amount payable
to the Transfer Agent Account on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions, or Certificate, as the case may be,
the Custodian shall pay to the Transfer Agent Account out of the moneys
held for the account of the Series specified therein the total amount
payable to the Transfer Agent Account and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or
cause to be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Fund's General Distributor,
the Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall
pay, out of the money held for the account of such Series, all original
issue or other taxes required to be paid by the Fund in connection with
such issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder
in connection with a redemption of any Shares, it shall furnish, or cause
to be furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting
forth the Series and number of Shares received by the Transfer Agent for
redemption and that such Shares are in good form for redemption, the
Custodian shall make payment to the Transfer Agent Account out of the
moneys held in the separate account in the name of the Series the total
amount specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held
by the Custodian in the separate account for such Series shall be insuffi-
cient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate, Oral
Instructions, or Written Instructions or which results in an overdraft in
the separate account of such Series for some other reason, or if the Fund
is for any other reason indebted to the Custodian with respect to a Ser-
ies, (except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate agreement
and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the
Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day
year for the actual number of days involved) equal to the Federal Funds
Rate plus 1/2%, such rate to be adjusted on the effective date of any change
in such Federal Funds Rate but in no event to be less than 6% per annum.
In addition, unless the Fund has given a Certificate that the Custodian
shall not impose a lien and security interest to secure such overdrafts
(in which event it shall not do so), the Custodian shall have a continuing
lien and security interest in the aggregate amount of such overdrafts and
indebtedness as may from time to time exist in and to any property
specifically allocated to such Series at any time held by it for the
benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or 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 For-
eign Depositories designated on Schedule A hereto. Except as provided in
Schedule A, the Custodian shall employ no other Foreign Custodian or
Foreign Depository. The Custodian and the Fund may amend Schedule A
hereto from time to time to agree to designate any additional Foreign
Subcustodian or Foreign Depository with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as subcus-
todian, and which the Custodian in its absolute discretion proposes to
utilize to hold any of the Fund's Foreign Property. Upon receipt of a
Certificate or Written Instructions from the Fund, the Custodian shall
cease the employment of any one or more of such subcustodians for
maintaining custody of the Fund's assets and such custodian shall be
deemed deleted from Schedule A.
2. The Custodian shall limit the securities and other assets
maintained in the custody of the Foreign Subcustodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash equivalents in such
amounts as the Fund may determine to be reasonably necessary to effect the
foreign securities transactions of the Fund.
3. The Custodian shall identify on its books as belonging to the
Fund, the Foreign Securities held by each Foreign Subcustodian.
4. Each agreement pursuant to which the Custodian employs a Foreign
Subcustodian shall be substantially in the form reviewed and approved by
the Fund and will not be amended in a way that materially affects the Fund
without the Fund's prior written consent and shall:
(a) require that such institution establish custody account(s)
for the Custodian on behalf of the Fund and physically segregate in each
such account securities and other assets of the fund, and, in the event
that such institution deposits the securities of the Fund in a Foreign
Depository, that it shall identify on its books as belonging to the Fund
or the Custodian, as agent for the Fund, the securities so deposited;
(b) provide that:
(1) the assets of the Fund will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of
the Foreign Subcustodian or its creditors, except a claim of payment for
their safe custody or administration;
(2) beneficial ownership for the assets of the Fund will
be freely transferable without the payment of money or value other than
for custody or administration;
(3) adequate records will be maintained identifying the
assets as belonging to the Fund;
(4) the independent public accountants for the Fund will
be given access to the books and records of the Foreign Subcustodian
relating to its actions under its agreement with the Custodian or
confirmation of the contents of those records;
(5) the Fund will receive periodic reports with respect
to the safekeeping of the Fund's assets, including, but not necessarily
limited to, notification of any transfer to or from the custody
account(s); and
(6) assets of the Fund held by the Foreign Subcustodian
will be subject only to the instructions of the Custodian or its agents.
(c) Require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian from and against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the institution's performance
of such obligations, with the exception of any such losses, damages,
costs, expenses, liabilities or claims arising as a result of an act of
God. At the election of the Fund, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims against a
Foreign Subcustodian as a consequence of any such loss, damage, cost,
expense, liability or claim of or to the Fund, if and to the extent that
the Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim.
5. Upon receipt of a Certificate or Written Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall on behalf of the Fund make or cause its Foreign
Subcustodian to transfer, exchange or deliver securities owned by the
Fund, except to the extent explicitly prohibited therein. Upon receipt
of a Certificate or Written Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
on behalf of the fund pay out or cause its Foreign Subcustodians to pay
out monies of the Fund. The Custodian shall use all means reasonably
available to it, including, if specifically authorized by the Fund in a
Certificate, any necessary litigation at the cost and expense of the Fund
(except as to matters for which the Custodian is responsible hereunder)
to require or compel each Foreign Subcustodian or Foreign Depository to
perform the services required of it by the agreement between it and the
Custodian authorized pursuant to this Agreement.
6. The Custodian shall maintain all books and records as shall be
necessary to enable the Custodian readily to perform the services required
of it hereunder with respect to the Fund's Foreign Properties. The
Custodians shall supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the Foreign Securities and other Foreign
Properties of the Fund held by Foreign Subcustodians, directly or through
Foreign Depositories, including but not limited to an identification of
entities having possession of the Fund's Foreign Securities and other
assets, an advice or other notification of any transfers of securities to
or from each custodial account maintained for the Fund or the Custodian
on behalf of the Fund indicating, as to securities acquired for the Fund,
the identity of the entity having physical possession of such securities.
The Custodian shall promptly and faithfully transmit all reports and
information received pertaining to the Foreign Property of the Fund,
including, without limitation, notices or reports of corporate action,
proxies and proxy soliciting materials.
7. Upon request of the Fund, the Custodian shall use reasonable
efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any Foreign Subcustodian, or
confirmation of the contents thereof, insofar as such books and records
relate to the Foreign Property of the Fund or the performance of such
Foreign Subcustodian under its agreement with the Custodian; provided that
any litigation to afford such access shall be at the sole cost and expense
of the Fund.
8. The Custodian recognizes that employment of a Foreign Sub-
custodian or Foreign Depository for the Fund's Foreign Securities and
Foreign Property is permitted by Section 17(f) of the Investment Company
Act of 1940 only upon compliance with Section (a) of Rule 17f-5
promulgated thereunder. With respect to the Foreign Subcustodians and
Foreign Depositories identified on Schedule A, the Custodian represents
that it has furnished the Fund with certain materials prepared by the
Custodian and with such other information in the possession of the Cus-
todian as the Fund advised the Custodian was reasonably necessary to
assist the Board of Trustees of the Fund in making the determinations
required of the Board of Trustees by Rule 17f-5, including, without
limitation, consideration of the matters set forth in the Notes to Rule
17f-5. If the Custodian recommends any additional Foreign Subcustodian
or Foreign Depository, the Custodian shall supply information similar in
kind and scope to that furnished pursuant to the preceding sentence. Fur-
ther, the Custodian shall furnish annually to the Fund, at such time as
the Fund and Custodian shall mutually agree, information concerning each
Foreign Subcustodian and Foreign Depository then identified on Schedule
A similar in kind and scope to that furnished pursuant to the preceding
two sentences.
9. The Custodian's employment of any Foreign Subcustodian or
Foreign Depository shall constitute a representation that the Custodian
believes in good faith that such Foreign Subcustodian or Foreign
Depository provides a level of safeguards for maintaining the Fund's
assets not materially different from that provided by the Custodian in
maintaining the Fund's securities in the United States. In addition, the
Custodian shall monitor the financial condition and general operational
performance of the Foreign Subcustodians and Foreign Depositories and
shall promptly inform the Fund in the event that the Custodian has actual
knowledge of a material adverse change in the financial condition thereof
or that there appears to be a substantial likelihood that the share-
holders' equity of any Foreign Subcustodian will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million , or that the Foreign Subcustodian
or Foreign Depository has breached the agreement between it and the
Custodian in a way that the Custodian believes adversely affects the Fund.
Further, the Custodian shall advise the Fund if it believes that there is
a material adverse change in the operating environment of any Foreign
Subcustodian or Foreign Depository.
ARTICLE XVI
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of
its duties hereunder, and, except as hereinafter provided, neither the
Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except
for any such loss or damage arising out of its own negligence, bad faith,
or willful misconduct or that of the subcustodians or co-custodians
appointed by the Custodian or of the officers, employees, or agents of any
of them. The Custodian may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply for and obtain the
advice and opinion of counsel to the Fund, at the expense of the Fund, or
of its own counsel, at its own expense, and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any
loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, bad faith or willful mis-
conduct on the part of the Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality
of the purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor, as specified in a Certificate, Oral
Instructions, or Written Instructions;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor, as specified
in a Certificate;
(c) The legality of the declaration or payment of any dividend
by the Fund, as specified in a resolution, Certificate, Oral Instructions,
or Written Instructions;
(d) The legality of any borrowing by the Fund using Securities
as collateral;
(e) The legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that the cash
collateral delivered to it by a broker, dealer, or financial institution
or held by it at any time as a result of such loan of portfolio Securities
of the Fund is adequate collateral for the Fund against any loss it might
sustain as a result of such loan, except that this subparagraph shall not
excuse any liability the Custodian may have for failing to act in accor-
dance with Article X hereof or any Certificate, Oral Instructions or
Written Instructions given in accordance with this Agreement. The Custo-
dian specifically, but not by way of limitation, shall not be under any
duty or obligation periodically to check or notify the Fund that the
amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to Article X
of this Agreement makes payment to it of any dividends or interest which
are payable to or for the account of the Fund during the period of such
loan or at the termination of such loan, provided, however, that the
Custodian shall promptly notify the Fund in the event that such dividends
or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund, except
that this subparagraph shall not excuse any liability the Custodian may
have for failing to establish, maintain, make deposits to or withdrawals
from such accounts in accordance with this Agreement. In addition, the
Custodian shall be under no duty or obligation to see that any broker,
dealer, futures commission merchant or Clearing Member makes payment to
the Fund of any variation margin payment or similar payment which the Fund
may be entitled to receive from such broker, dealer, futures commission
merchant or Clearing Member, to see that any payment received by the
Custodian from any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to notify the
Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft,
or other instrument for the payment of money, received by it on behalf of
the Fund until the Custodian actually receives such money directly or by
the final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. With respect to Securities held in a Depository, except as
otherwise provided in paragraph 5(b) of Article III hereof, the Custodian
shall have no responsibility and shall not be liable for ascertaining or
acting upon any calls, conversions, exchange offers, tenders, interest
rate changes or similar matters relating to such Securities, unless the
Custodian shall have actually received timely notice from the Depository
in which such Securities are held. In no event shall the Custodian have
any responsibility or liability for the failure of a Depository to
collect, or for the late collection or late crediting by a Depository of
any amount payable upon Securities deposited in a Depository which may
mature or be redeemed, retired, called or otherwise become payable. How-
ever, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against
the Depository on behalf of the Fund, except that the Custodian shall not
be under any obligation to appear in, prosecute or defend any action suit
or proceeding in respect to any Securities held by a Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often
as may be required, or alternatively, the Fund shall be subrogated to the
rights of the Custodian with respect to such claim against the Depository
should it so request in a Certificate. This paragraph shall not, however,
excuse any failure by the Custodian to act in accordance with a
Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution
by the Transfer Agent of the Fund of any amount paid by the Custodian to
the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which
such amount is payable are in default, or if payment is refused after the
Custodian has timely and properly, in accordance with this Agreement, made
due demand or presentation, unless and until (i) it shall be directed to
take such action by a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection with
any such action, but the Custodian shall have such a duty if the Secu-
rities were not in default on the payable date and the Custodian failed
to timely and properly make such demand for payment and such failure is
the reason for the non-receipt of payment.
7. The Custodian may, with the prior approval of the Board of
Trustees of the Fund, appoint one or more banking institutions as
subcustodian or subcustodians, or as co-Custodian or co-Custodians, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed
institution; provided, however, that appointment of any foreign banking
institution or depository shall be subject to the provisions of Article
XV hereof.
8. The Custodian agrees to indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of the
negligence, bad faith or willful misconduct of any subcustodian of the
Securities and moneys owned by the Fund.
la The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it,
for the account of the Fund and specifically allocated to a Series are
such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees
to pay to the Custodian all reasonable out-of-pocket expenses and such
compensation as may be agreed upon in writing from time to time between
the Custodian and the Fund. The Custodian may charge such compensation,
and any such expenses with respect to a Series incurred by the Custodian
in the performance of its duties under this Agreement against any money
specifically allocated to such Series. The Custodian shall also be
entitled to charge against any money held by it for the account of a
Series the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement attributable to, or arising out of, its
serving as Custodian for such Series. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall include, but
are not limited to, the expenses of subcustodians and foreign branches of
the Custodian incurred in settling outside of New York City transactions
involving the purchase and sale of Securities of the Fund. Notwithstanding
the foregoing or anything else contained in this Agreement to the
contrary, the Custodian shall, prior to effecting any charge for
compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing, Oral Instructions, or Written
Instructions received by the Custodian and reasonably believed by the
Custodian to be genuine. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming Oral Instructions or Written
Instructions in such manner so that such Certificate or facsimile thereof
is received by the Custodian, whether by hand delivery, telecopier or
other similar device, or otherwise, by the close of business of the same
day that such Oral Instructions or Written Instructions are given to the
Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur
no liability to the Fund in acting upon Oral Instructions or Written
Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from
an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed
by the Custodian to be given in accordance with the terms and conditions
of any Margin Account Agreement. Without limiting the generality of the
foregoing, the Custodian shall be under no duty to inquire into, and shall
not be liable for, the accuracy of any statements or representations
contained in any such instrument or other notice including, without limi-
tation, any specification of any amount to be paid to a broker, dealer,
futures commission merchant or Clearing Member. This paragraph shall not
excuse any failure by the Custodian to have acted in accordance with any
Margin Agreement it has executed or any Certificate, Oral Instructions,
or Written Instructions given in accordance with this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be
the property of the Fund. Such books and records shall be prepared and
maintained by the Custodian as required by the Investment Company Act of
1940, as amended, and other applicable Securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall
have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the Fund or
the Fund's authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reasonable request
of the Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such delivery
which are maintained by the Custodian on a computer disc, or are similarly
maintained, and the Fund shall reimburse the Custodian for its expenses
of providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the Book-
Entry system, each Depository or O.C.C., and with such reports on its own
systems of internal accounting control as the Fund may reasonably request
from time to time.
15. The Custodian shall furnish upon request annually to the Fund
a letter prepared by the Custodian's accountants with respect to the
Custodian's internal systems and controls in the form generally provided
by the Custodian to other investment companies for which the Custodian
acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising out of, or
related to, the Custodian's performance of its obligations under this
Agreement, except for any such liability, claim, loss and demand arising
out of the negligence, bad faith, or willful misconduct of the Custodian,
any co-Custodian or subcustodian appointed by the Custodian, or that of
the officers, employees, or agents of any of them.
17. Subject to the foregoing provisions of this Agreement, the
Custodian shall deliver and receive Securities, and receipts with respect
to such Securities, and shall make and receive payments only in accordance
with the customs prevailing from time to time among brokers or dealers in
such Securities and, except as may otherwise be provided by this Agreement
or as may be in accordance with such customs, shall make payment for
Securities only against delivery thereof and deliveries of Securities only
against payment therefor.
18. The Custodian will comply with the procedures, guidelines or
restrictions ("Procedures") adopted by the Fund from time to time for par-
ticular types of investments or transactions, e.g., Repurchase Agreements
and Reverse Repurchase Agreements, provided that the Custodian has
received from the Fund a copy of such Procedures. If within ten days
after receipt of any such Procedures, the Custodian determines in good
faith that it is unreasonable for it to comply with any new procedures,
guidelines or restrictions set forth therein, it may within such ten day
period send notice to the Fund that it does not intend to comply with
those new procedures, guidelines or restrictions which it identifies with
particularity in such notice, in which event the Custodian shall not be
required to comply with such identified procedures, guidelines or
restrictions; provided, however, that, anything to the contrary set forth
herein or in any other agreement with the Fund, if the Custodian identi-
fies procedures, guidelines or restrictions with which it does not intend
to comply, the Fund shall be entitled to terminate this Agreement without
cost or penalty to the Fund upon thirty days' written notice.
19. Whenever the Custodian has the authority to deduct monies from
the account for a series without a Certificate, it shall notify the Fund
within one business day of such deduction and the reason for it. Whenever
the Custodian has the authority to sell Securities or any other property
of the Fund on behalf of any Series without a Certificate, the Custodian
will notify the Fund of its intention to do so and afford the Fund the
reasonable opportunity to select which Securities or other property it
wishes to sell on behalf of such Series. If the Fund does not promptly
sell sufficient Securities or Deposited Property on behalf of the Series,
then, after notice, the Custodian may proceed with the intended sale.
20. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set
forth or referred to in this Agreement, and no covenant or obligation
shall be implied in this Agreement against the Custodian.
ARTICLE XVII
TERMINATION
1. Except as provided in paragraph 3 of this Article, this
Agreement shall continue until terminated by either the Custodian giving
to the Fund, or the Fund giving to the Custodian, a notice in writing
specifying the date of such termination, which date shall be not less than
60 days after the date of the giving of such notice. In the event such
notice or a notice pursuant to paragraph 3 of this Article is given by the
Fund, it shall be accompanied by a copy of a resolution of the Board of
Trustees of the Fund, certified by an Officer and the Secretary or an
Assistant Secretary of the Fund, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be
eligible to serve as a custodian for the Securities of a management
investment company under the Investment Company Act of 1940. In the event
such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, designating a successor custodian or custodians. In the ab-
sence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company eligible to
serve as a custodian for Securities of a management investment company
under the Investment Company Act of 1940 and which is acceptable to the
Fund. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of acceptance
by the successor custodian on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and held by it
as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon
the date specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement arising thereafter, other than the duty with
respect to Securities held in the Book Entry System which cannot be deliv-
ered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this
Agreement upon the date specified in a written notice in the event of the
"Bankruptcy" of The Bank of New York. As used in this sub-paragraph, the
term "Bankruptcy" shall mean The Bank of New York's making a general
assignment, arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or the entry of a order for
relief under any applicable bankruptcy law or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors
rights, or if a petition is presented for the winding up or liquidation
of the party or a resolution is passed for its winding up or liquidation,
or it seeks, or becomes subject to, the appointment of an administrator,
receiver, trustee, custodian or other similar official for it or for all
or substantially all of its assets or its taking any action in furtherance
of, or indicating its consent to approval of, or acquiescence in, any of
the foregoing.
ARTICLE XVIII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be
obligated to have or utilize the Terminal Link, and the provisions of this
Article shall apply if, but only if, the Fund in its sole and absolute
discretion elects to utilize the Terminal Link to transmit Certificates
to the Custodian.
2. The Terminal Link shall be utilized only for the purpose of the
Fund providing Certificates to the Custodian and the Custodian providing
notices to the Fund and only after the Fund shall have established access
codes and internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes. Each use of the
Terminal Link by the Fund shall constitute a representation and warranty
that at least two officers have each utilized an access code that such
internal safekeeping procedures have been established by the Fund, and
that such use does not contravene the Investment Company Act of 1940 and
the rules and regulations thereunder.
3. Each party shall obtain and maintain at its own cost and expense
all equipment and services, including, but not limited to communications
services, necessary for it to utilize the Terminal Link, and the other
party shall not be responsible for the reliability or availability of any
such equipment or services, except that the Custodian shall not pay any
communications costs of any line leased by the Fund, even if such line is
also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part
of, or through the Terminal Link and any proprietary data, software,
processes, information and documentation (other than any such which are
or become part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"), are the
exclusive and confidential property of the Custodian. The Fund shall, and
shall cause others to which it discloses the Information, to keep the
Information confidential by using the same care and discretion it uses
with respect to its own confidential property and trade secrets, and shall
neither make nor permit any disclosure without the express prior written
consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund
shall return to the Custodian any and all copies of the Information which
are in the Fund's possession or under its control, or which the Fund
distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be
copyrighted and shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from
time to time without notice to the Fund, except that the Custodian shall
give the Fund notice not less than 75 days in advance of any modification
which would materially adversely affect the Fund's operation, and the Fund
agrees not to modify or attempt to modify the Terminal Link without the
Custodian's prior written consent. The Fund acknowledges that any
software provided by the Custodian as part of the Terminal Link is the
property of the Custodian and, accordingly, the Fund agrees that any
modifications to the same, whether by the Fund or the Custodian and
whether with or without the Custodian's consent, shall become the property
of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link makes
any warranties or representations, express or implied, in fact or in law,
including but not limited to warranties of merchantability and fitness for
a particular purpose.
8. Each party will cause its officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the other to act in accordance
with and rely on Certificates and notices received by it through the
Terminal Link. Each party acknowledges that it is its responsibility to
assure that only its authorized persons use the Terminal Link on its
behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on behalf of the other party by unauthorized persons of
such other party.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses,
damages, injuries, claims, costs or expenses arising as a result of a
delay, omission or error in the transmission of a Certificate or notice
by use of the Terminal Link except for money damages for those suffered
as the result of the negligence, bad faith or willful misconduct of such
party or its officers, employees or agents in an amount not exceeding for
any incident $100,000; provided, however, that a party shall have no
liability under this Section 9 if the other party fails to comply with the
provisions of Section 11.
10. Without limiting the generality of the foregoing, in no event
shall either party or any manufacturer or supplier of its computer
equipment, software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or consequential damages
which the other party may incur or experience by reason of its use of the
Terminal Link even if such party, manufacturer or supplier has been
advised of the possibility of such damages, nor with respect to the use
of the Terminal Link shall either party or any such manufacturer or
supplier be liable for acts of God, or with respect to the following to
the extent beyond such person's reasonable control: machine or computer
breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as
promptly as practicable, and in any event within 24 hours after the
earliest of (i) discovery thereof, and (ii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error,
it being agreed that discovery and receipt of notice may only occur on a
business day. The Custodian shall promptly advise the Fund whenever the
Custodian learns of any errors, omissions or interruption in, or delay or
unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt of
a Certificate or a notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate
or notice, and in the absence of such verification the party to which the
Certificate or notice is sent shall not be liable for any failure to act
in accordance with such Certificate or notice and the sending party may
not claim that such Certificate or notice was received by the other party.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of
the present Officers of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event
that any such present Authorized Person ceases to be an Authorized Person
or in the event that other or additional Authorized Persons are elected
or appointed. Until such new Certificate shall be received, the Custodian
shall be entitled to rely and to act upon Oral Instructions, Written
Instructions, or signatures of the present Authorized Persons as set forth
in the last delivered Certificate to the extent provided by this
Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of
the present Officers of the Fund under its seal, setting forth the names
and the signatures of the present Officers of the Fund. The Fund agrees
to furnish to the Custodian a new Certificate in similar form in the event
any such present officer ceases to be an officer of the Fund, or in the
event that other or additional officers are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be entitled
to rely and to act upon the signatures of the officers as set forth in the
last delivered Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, other than any
Certificate or Written Instructions, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices
at 90 Washington Street, New York, New York 10286, or at such other place
as the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or rehired
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the
address for the Fund first above written, or at such other place as the
Fund may from time to time designate in writing.
5. This Agreement constitutes the entire agreement between the
parties, replaces all prior agreements and may not be amended or modified
in any manner except by a written agreement executed by both parties with
the same formality as this Agreement and approved by a resolution of the
Board of Trustees of the Fund, except that Appendices A and B may be
amended unilaterally by the Fund without such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the Custodian or The Bank of
New York without the written consent of the Fund, authorized or approved
by a resolution of the Fund's Board of Trustees. For purposes of this
paragraph, no merger, consolidation, or amalgamation of the Custodian, The
Bank of New York, or the Fund shall be deemed to constitute an assignment
of this Agreement.
7. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of a
state or federal court situated in New York City, New York in connection
with any dispute arising hereunder and hereby waives its right to trial
by jury.
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
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.
MAIN STREET FUNDS, INC.
By: /s/ Robert G. Galli
-------------------------------
Robert G. Galli, Vice President
(SEAL)
Attest:
/s/ Robert G. Zack
- -----------------------------------
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
(SEAL) By /s/ George Ramos
-----------------------
Attest:
___________________________________
<PAGE>
APPENDIX A
I, George C. Bowen, Treasurer, and I, Robert G. Zack, Assistant
Secretary, of Main Street Funds, Inc., a Maryland Corporation (the "Fund")
do hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Articles of
Incorporation and By-Laws to give Oral Instructions and Written
Instructions on behalf of the Fund, except that those persons designated
as being an "Officer of OSS" shall be an Authorized Person only for
purposes of Articles XII and XIII. The signatures set forth opposite
their respective names are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
Robert G. Galli Vice President /s/ Robert G. Galli
George C. Bowen Treasurer /s/ George C. Bowen
Andrew J. Donohue Senior Vice President /s/ Andrew J. Donohue
Robert G. Zack Assistant Secretary /s/ Robert G. Zack
Scott Farrar Controller OMC /s/ Scott Farrar
Cindy Antonson Controller OMC /s/ Cindy Antonson
Lynn Coluccy Assistant Treasurer /s/ Lynn Coluccy
Mitchell J. Lindauer Vice President OMC /s/ Mitchell J. Lindauer
Katherine P. Feld Vice President OMC /s/ Katherine P. Feld
Barbara J. Anderson Vice Presidend OMC /s/ Barbara J. Anderson
Kurt Braitberg Controller OMC /s/ Kurt Braitberg
David Mabry Controller OMC /s/ David Mabry
Sharon Deines Controller OMC /s/ Sharon Deines
Robert Bishop Controller OMC /s/ Robert Bishop
Debra Lyons Controller OMC /s/ Debra Lyons
Thomas A. Hejl Controller OMC /s/ Thomas A. Hejl
Brian White Supervisor OMC /s/ Brian White
Mark Binning Fund Accounting OMC /s/ Mark Binning
Janette Aprilante Executive Secretary OMC /s/ Janette Aprilante
</TABLE>
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Main Street
Funds, Inc. as of the 5th day of August 1992.
/s/ George C. Bowen
-------------------------------------
George C. Bowen, Treasurer
/s/ Robert G. Zack
----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX B
I, George C. Bowen, Treasurer, and I, Robert G. Zack, Assistant
Secretary, of Main Street Funds, Inc., a Maryland Corporation (the
"Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of
OSS" is specified serve in the following positions with the Fund and each
has been duly elected or appointed by the Board of Directors of the Fund
to each such position and qualified therefor in conformity with the Fund's
Articles of Incorporaton and By-Laws. With respect to the following
individuals for whom a position of "Officer of OSS" is specified, each
such individual has been designated by a resolution of the Board of
Trustees of the Fund to be an Officer for purposes of the Fund's Custody
Agreement with The Bank of New York, but only for purposes of Articles XII
and XIII thereof and a certified copy of such resolution is attached
hereto. The signatures of each individual below set forth opposite their
respective names are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
Robert G. Galli Vice President /s/ Robert G. Galli
George C. Bowen Treasurer /s/ George C. Bowen
Andrew J. Donohue Senior Vice President /s/ Andrew J. Donohue
Robert G. Zack Assistant Secretary /s/ Robert G. Zack
Scott Farrar Controller OMC /s/ Scott Farrar
Cindy Antonson Controller OMC /s/ Cindy Antonson
Lynn Coluccy Assistant Treasurer /s/ Lynn Coluccy
Mitchell J. Lindauer Vice President OMC /s/ Mitchell J. Lindauer
Katherine P. Feld Vice President OMC /s/ Katherine P. Feld
Barbara J. Anderson Vice Presidend OMC /s/ Barbara J. Anderson
Kurt Braitberg Controller OMC /s/ Kurt Braitberg
David Mabry Controller OMC /s/ David Mabry
Sharon Deines Controller OMC /s/ Sharon Deines
Robert Bishop Controller OMC /s/ Robert Bishop
Debra Lyons Controller OMC /s/ Debra Lyons
Thomas A. Hejl Controller OMC /s/ Thomas A. Hejl
Brian White Supervisor OMC /s/ Brian White
Mark Binning Fund Accounting OMC /s/ Mark Binning
Janette Aprilante Executive Secretary OMC /s/ Janette Aprilante
</TABLE>
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Main Street
Funds, Inc. as of the 5th day of August 1992.
/s/ George C. Bowen
-------------------------------------
George C. Bowen, Treasurer
/s/ Robert G. Zack
----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
APPENDIX C
The undersigned, George C. Bowen, hereby certifies that he or she is
the duly elected and acting Treasurer of Main Street Funds, Inc. (the
"Fund"), further certifies that the following resolutions were adopted by
the Board of Directors of the Fund at a meeting duly held on June 23,
1992, at which a quorum at all times present and that such resolutions
have not been modified or rescinded and are in full force an effect as of
the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated
as of August 5, 1992 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to act in accordance
with, and to rely on instructions by the Fund to the Custodian
communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to officers of the Fund as defined in the
Custody Agreement, and shall establish internal safekeeping procedures
to safeguard and protect the confidentiality and availability of such
access codes.
RESOLVED, that Officers of the Fund as defined in the Custody
Agreement shall, following the establishment of such access codes and
such internal safekeeping procedures, advise the Custodian that the
same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of Main Street
Funds, Inc., as of the 5th day of August, 1992.
/s/ George C. Bowen
-------------------------
George C. Bowen
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF NEW
YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared
and maintained by the Custodian and shall be the property of the Fund:
None
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that he is the duly
elected and acting Assistant Secretary of Main Street Funds, Inc., a
Maryland Corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at
a meeting duly held on June 23, 1992, 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 August 5, 1992 (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis
to deposit in the Book-Entry System, as defined in the
Custody Agreement, all Securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System
to the extent possible in connection with its performance
thereunder, including, without limitation, In connection
with settlements of purchases and sales of Securities, loans
of Securities, and deliveries and returns of Securities col-
lateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of Main Street Funds, Inc., as of the 5th day of August, 1992.
/s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned Robert G. Zack, hereby certifies that he is the duly
elected and acting Assistant Secretary of Main Street Funds, Inc., a
Maryland Corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at
a meeting duly held on June 23, 1992, 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 August 5, 1992 (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in
the Custody Agreement, to the contrary to deposit in The
Depository Trust Company ("DTC") as a "Depository" as
defined in the Custody Agreement, all Securities eligible
for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize DTC to the
extent possible in connection with its performance there-
under, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Main
Street Funds, Inc., as of the 5th day of August, 1992.
/s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that he is the duly
elected and acting Assistant Secreary of Main Street Funds, Inc., a
Maryland Corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at
a meeting duly held on June 23, 1992, 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 August 5, 1992, (the "Custody Agreement")
is authorized and instructed on a continuous and ongoing
basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit
in the Participants Trust Company as a Depository, as
defined in the Custody Agreement, all Securities eligible
for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in
connection with its performance thereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Main
Street Funds, Inc., as of the 5th day of August, 1992.
/s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Robert G. Zack, hereby certifies that he is the duly
elected and acting Assistant Secretary of Main Street Funds, Inc., a
Maryland Corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at
a meeting duly held on June 23, 1992, 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 August 5, 1992 (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 Mem-
ber confirmations for Options and transaction in Options,
regardless of the Series to which the same are specifically
allocated, as such terms are defined in the Custody Agreement, as
provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Main Street Funds, Inc., as of the 5th day of August, 1992.
/s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
<PAGE>
Appendix A
Article XIX.1 49
Appendix B
Article XIX.2 50
Exhibit A
Article III.1 7
Exhibit B
Article III.1 8
Exhibit C
Article III.1 8
<PAGE>
Exhibit 24(b)(6)(ii)
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270, DENVER, COLORADO 80217-5270
From: DEALER AGREEMENT
for the OPPENHEIMERFUNDS
To: OPPENHEIMER FUNDS DISTRIBUTOR, INC.
P.O. BOX 5270
DENVER, CO 80217-5270
Gentlemen:
We desire to enter into an agreement with you whereby we will act as
principal for the sale, distribution and resale of the shares of each of
the open-end investment companies of which you are, or may become,
Distributor or Sub-Distributor (hereinafter collectively referred to as
the "Funds" and individually as a "Fund") and whose shares are offered to
the public at an offering price which may or may not include a sales
charge (hereinafter referred to as "Shares"). Upon acceptance of this
Agreement by you, we understand that we may offer and sell Shares,
subject, however, to all of the following terms and conditions and to your
right, without notice, to suspend or terminate the sale of the Shares of
any one or more of the Funds:
1. Shares will be offered and sold at the current offering price in
effect at the time the order for such Shares is confirmed and accepted by
you at your office in Denver, Colorado. All purchase orders, resale
orders and applications submitted by us are subject to acceptance or
rejection in your sole discretion and, if accepted, each purchase or
resale order will be deemed to have been consummated at your office in
Denver, Colorado.
2. We represent and warrant to you: (a) that we are a member of the
National Association of Securities Dealers, Inc. ("NASD"), that such
membership has not been suspended, and that we agree to maintain
membership in the NASD, or (b) in the alternative, that we are a foreign
dealer not eligible for membership in the NASD, and are fully licensed and
legally empowered to act as a securities broker-dealer under the laws of
each jurisdiction in which we conduct such business. In either case, we
agree to abide by the provisions of the Investment Company Act of 1940,
as amended (the "1940 Act"), the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and all the rules and
regulations of the Securities and Exchange Commission and the NASD which
are binding upon underwriters and dealers in the distribution of the
securities of open-end investment companies, including without limitation,
the NASD Rules of Fair Practice. We further agree to comply with all
other state and Federal laws and the rules and regulations of authorized
regulatory agencies applicable to the sale of Shares. We agree that we
will not sell or offer for sale Shares in any state or other jurisdiction
where they have not been qualified for sale or if you have not advised us
in advance that such sale is exempt from such qualification requirements.
We are responsible under this Agreement for inquiring of you as to the
jurisdictions in which such Shares have been qualified for sale.
3. We will offer and sell Shares of any Fund only in accordance with
the terms and conditions of its then current Prospectus and Statement of
Additional Information (collectively referred to as the "Prospectus") and
we will make no representations about such Shares not included in said
Prospectus or in any authorized supplemental material supplied or
authorized by you. We will not use any other offering materials for the
Funds without your written consent. We will use our best efforts in the
development and promotion of sales of Shares and agree to be responsible
for the proper instruction and training of all sales personnel employed
by us, in order that the Shares will be offered and sold in accordance
with the terms and conditions of this Agreement and all applicable laws,
rules and regulations. We agree to hold harmless and indemnify you, the
Funds, and your and their respective officers, directors, trustees and
employees in the event that we, or any of our current or former
representatives, should violate any law, rule or regulation, or any
provisions of this Agreement, which violation may result in any loss or
liability to you, your affiliates or any Fund. If you determine to refund
any amounts paid by any investor by reason of any such violation on our
part, we shall promptly return to you on demand any commissions previously
paid or discounts allowed by you to us with respect to the transaction for
which the refund is made. Furthermore, we agree to indemnify you, your
affiliates and the Funds against any and all claims, demands,
controversies, actions, losses, damages, liabilities, expenses,
arbitrations, complaints or investigations, including without limitation,
reasonable attorneys' fees and court costs that are the result of or arise
directly or indirectly, in whole or in part, from you, your affiliates or
the Funds acting upon instructions for the purchase, exchange or resale
of uncertificated book shares received through your manual or automated
phone system or the Fund/SERV program of National Securities Clearing
Corporation; provided such loss, liability or damages are not the result
of the gross negligence, recklessness or intentional misconduct of you,
your affiliates or the Funds. All expenses which we incur in connection
with our activities under this Agreement shall be borne by us.
Termination or cancellation of this Agreement shall not relieve us from
the requirements of this paragraph as to transactions or occurrences
arising prior to such termination.
4. Any applicable sales charge and dealer commission relative to any
sales of Shares made by us will only be at a rate or rates set forth in
the then current Prospectus of such Fund.
5. The rate(s) of any commission for sales of such Shares are
subject to change by you from time to time, and any decreases in such
commissions shall be made upon 30 days' written notice, and any orders
placed after the effective date of such change, will be subject to the
rate(s) in effect at the time of receipt of the payment by you. Such
notice requirement shall not apply to any changes in the asset-based sales
charges or service fees paid for such shares.
6. Payments for the purchase of Shares made by us by telephone or
wire order (including purchase orders received through your manual or
automated phone system, or via the Fund/SERV program of National
Securities Clearing Corporation), and all necessary account information
required by you to establish an account or to settle a resale order,
including, without limitation, the tax identification number of the
purchaser, certified either by the purchaser or by us, shall be provided
to you and received by you within five business days after your acceptance
of our order or such shorter time as may be required by law. If such
payment or other settlement information are not timely received by you,
we understand that you reserve the right, without notice, to cancel the
purchase or resale order, or, at your option in the case of a purchase
order, to sell the Shares ordered by us back to the Fund, and in either
case we shall promptly reimburse you for any loss to you or the Fund,
including without limitation loss of your profit, suffered by you
resulting from our failure to make the aforesaid timely payment or
settlement. If sales of any Fund's Shares are contingent upon the Fund's
receipt of Federal Funds in payment therefor, we will forward promptly to
you any purchase orders and/or payments received by us for such Shares
from our customers. With respect to purchase orders of uncertificated
book shares placed via Fund/SERV, we shall retain in our files all
applications and other documents required by you to establish an account
or to settle a resale order. We will provide you with the original of
such documents at your request.
7. We agree to purchase Shares only from you or from our customers.
If we purchase Shares from you, we agree that all such purchases shall be
made only to cover orders received by us from our customers, or for our
own bona fide investment. If we purchase Shares from our
customers, we agree to pay such customers not less than the applicable
redemption or repurchase price then quoted by the Fund.
8. You may consider any order we place for Fund shares to be the
total holding of Shares by the investor, and you may assume that the
investor is not entitled to any reduction in sales price beyond that
accorded to the amount of that purchase order as determined by the
schedule set forth in the then current Prospectus, unless we advise you
otherwise when we place the order.
9. We may place resale orders with you for Shares owned by our
customers, but only in accordance with the terms of the applicable Fund
Prospectus. We understand and agree that by placing a resale order with
you by wire or telephone (including resale orders for uncertificated book
shares placed via your manual or automated phone system or via the
Fund/SERV program of National Securities Clearing Corporation) we
represent to you that a request for the redemption of the shares covered
by the resale order has been delivered to us by the registered owner(s)
of such shares, and that such request has been executed in the manner and
with the signature(s) of such registered owner(s) guaranteed as required
by the then-current Prospectus of the applicable Fund. Such resale orders
shall be subject to the following additional conditions:
(a) We shall furnish you with the exact registration, account
number and Class of Shares to be redeemed at the time we place
a resale order by wire or telephone. Other than for resale
orders of uncertificated book shares placed via Fund/SERV, we
shall tender to you, within 5 business days of our placing such
resale order: (i) a stock power or letter, duly signed by the
registered owner(s) of the Shares which are the subject of the
order, duly guaranteed, (ii) any Share certificates required for
such redemption, and (iii) any additional documents which may
be required by the applicable Fund or its transfer agent, in
accordance with the terms of the then-current Prospectus of the
applicable Fund and the policies of the transfer agent. With
respect to resale orders of uncertificated book shares placed
via Fund/SERV, we shall retain in our files all documents
required by you to effect such transaction. We will provide you
with the original of such documents at your request.
(b) The resale price will be the next net asset value per share
of the Shares computed after your receipt, prior to the close
of the New York Stock Exchange ("NYSE"), of an order placed by
us to resell such Shares, except that orders placed by us after
the close of the NYSE on a business day will be based on the
Fund's net asset value per share determined that day, but only
if such orders were received by us from our customer prior to
the close of business of the NYSE that day and if we placed our
resale order with you prior to your normal close of business
that day.
(c) In connection with a resale order we have placed, if we
fail to make delivery of all required certificates and documents
in a timely manner as stated above (other than for resale orders
placed via Fund/SERV), or if the registered owner of the Shares
subject to the resale order redeems such Shares prior to our
settlement of the order, you have the right to cancel our resale
order. If any cancellation of a resale order or if any error
in the timing of the acceptance of a resale order placed by us
shall
result in a loss to you or the applicable Fund, we shall
promptly reimburse you for such loss.
10. If any Shares sold by us under the terms of this Agreement are
redeemed by any of the Funds (including without limitation redemptions
resulting from an exchange for Shares of another Fund) or are repurchased
by you as agent for the Fund or are tendered to a Fund for redemption
within seven business days after your confirmation to us of our original
purchase order for such Shares, we shall promptly repay you the full
amount of the commission (including any supplemental commission) allowed
to us on the original sale, provided you notify us of such repurchase or
redemption. Termination, amendment or cancellation of this Agreement
shall not relieve us from the requirements of this paragraph.
11. We will comply with, and conform our selling practices to, any
and all written compliance standards and policies and procedures that you
may from time to time provide to us.
12. Your obligations to us under this Agreement are subject to the
provisions of any distributorship agreements entered into between you and
the Funds and any plans adopted by the Funds under Rule 12b-1 under the
1940 Act. If we are paid a service fee by you or by any of the Funds, we
agree to provide, at the request of you or such Funds, verification that
such payments were used for personal services and/or the maintenance of
personal accounts, related to the Shares held by your customers. We
understand and agree that you are in no way responsible for the manner of
our performance of, or for any of our acts or omissions in connection
with, the services we provide under this Agreement. Nothing in this
Agreement shall be construed to constitute us or any of our agents,
employees or representatives as the agent or employee of you or any of the
Funds.
13. We may terminate this Agreement by written notice to you, which
termination shall become effective ten days after the date of our mailing
such notice to you. We agree that you have and reserve the right, in your
sole discretion without notice to us, to suspend sales of Shares of any
of the Funds, or to withdraw entirely the offering of Shares of any of the
Funds, at any time, or, in your sole discretion, to modify, amend or
cancel this Agreement upon written notice to us of such modification,
amendment or cancellation, which shall be effective on the date stated in
such notice. Without limiting the foregoing, you may terminate this
Agreement if we violate any of the provisions of this Agreement, said
termination to become effective on the date you mail such notice to us.
Without limiting the foregoing, and any provision hereof to the contrary
notwithstanding, our expulsion from the NASD will automatically terminate
this Agreement without notice; our suspension from the NASD, the
initiation of customer protection proceedings by the Securities Investor
Protection Corporation (or its successor), the appointment of a trustee
for all or substantially all of our business assets, or our violation of
applicable state, Federal or foreign laws or rules and regulations of
authorized regulatory agencies will terminate this Agreement effective
upon the date you mail notice to us of such termination. Your failure to
terminate this Agreement for a particular cause shall not constitute a
waiver of your right to terminate this Agreement at a later date for the
same or any other cause. All notices hereunder shall be to the respective
parties at the addresses listed hereon, unless such address is changed by
written notice sent to the last address of the other party provided under
this Agreement.
14. This Agreement shall become effective as of the date when it is
executed and dated by you below and shall be in substitution of any prior
agreement between you and us covering any of the Funds. This Agreement
and all the rights and obligations of the parties hereunder shall be
governed by and construed under the laws of the State of New York
applicable to agreements to be performed in New York, without giving
effect to choice of law rules. This Agreement is not assignable or
transferable, except that you may without notice or consent from us,
assign or transfer this Agreement to any successor firm or corporation
which becomes the Distributor or Sub-Distributor of the Funds or assign
any of your duties under this Agreement to any entity under common control
with you.
15. By signing this Agreement, we represent and warrant to you that
this Agreement has been duly authorized by us by all necessary action,
corporate or otherwise, and is signed on our behalf by our duly authorized
officer or principal.
__________________________________________________
(Name of Dealer)
__________________________________________________
(Address of Dealer)
By: ______________________________________________
(Authorized Signature of Dealer)
__________________________________________________
(Name) (Title)
Accepted:
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:_______________________________
Date:_____________________________
<PAGE>
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF MULTI-CLASS OPPENHEIMERFUNDS
As certain OppenheimerFunds (the "Multi-Class OppenheimerFunds")
offer one or more of the following classes of shares -- shares subject to
a front-end sales charge ("Class A Shares"), shares subject to an asset
based sales charge and a long-term declining contingent deferred sales
charge ("Class B Shares") or shares subject to an asset based sales charge
and a 12 month contingent deferred sales charge ("Class C Shares") -- it
is important for investors not only to choose an OppenheimerFund
appropriate for their investment objectives, but also to choose the
appropriate distribution arrangement, based on a variety of factors
including the amount invested and the expected duration of the investment.
To assist investors in these decisions, we are instituting the following
policy.
1. Purchase order(s) by a "single purchaser" in any one day
for $100,000 or more of Class B shares of OppenheimerFunds described in
their respective prospectuses as "Eligible Funds" but less than $1 million
must be reviewed by [Dealer's appropriate supervisor], who must approve
the purchase order ticket in light of the relevant facts and
circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of the time the investor expects the
investment will be held; and
(c) any other relevant circumstances, such as the
availability of a reduced sales charge for purchasing
Class A Shares under rights of accumulation or a
letter of intent, and anticipated changes in the
fund's per share net asset value.
2. Purchase order(s) by a "single purchaser" in any one day
for $1 million or more of either Class B or Class C shares of one or more
OppenheimerFunds described in their
respective prospectuses as "Eligible Funds" will not be permitted.
The instances in which one distribution arrangement may be more
appropriate than the other include the following. Investors who would
qualify for a reduced front-end sales charge on Class A Shares may
determine that payment of such a reduced front-end sales charge is
preferable to payment of a higher ongoing asset based sales charge in
another Class. On the other hand, investors whose orders would not
qualify for a Class A reduced sales charge may wish to defer the sales
charge and have their entire investment applied to purchase Class B or
Class C Shares. However, if such an investor anticipates redeeming Class
B Shares within a short period of time, such as within one year, that
investor may, depending on the amount purchased, bear higher distribution
expenses than if Class A Shares had been purchased instead. In addition,
investors who intend to hold their shares for a significantly long time
may not wish to bear the higher ongoing asset based sales charges of Class
B or Class C Shares irrespective of the fact that the contingent deferred
sales charge that would apply to a redemption of Class B shares is reduced
over time and is ultimately eliminated, or that the contingent deferred
sales charge that would apply to a redemption of Class C shares is
relatively small in duration and amount. Investors may be affected by
differences in account features (such as check-writing) that may not be
available or not be advisable for Class B or Class C shareholders. It is
important that investors understand that the purpose of the Class B and
Class C contingent deferred sales charges is the same as the purpose of
the front-end sales charge on Class A shares: to compensate Oppenheimer
Funds Distributor, Inc. for commissions it pays to dealers and financial
institutions for sales of shares.
[Dealer's appropriate supervisor] must ensure that all employees
receiving investor inquiries about the purchase of shares of Multi-Class
OppenheimerFunds advise the investor of the alternative distribution
methods offered, and the impact of choosing one method over another. It
may be appropriate for [Dealer's appropriate supervisor] to discuss
specific purchases of the types described above with the investor.
This policy is effective immediately with respect to any order
for the purchase of shares of all Multi-Class OppenheimerFunds. Questions
relating to this policy should be directed to [Dealer's appropriate senior
management personnel], who may obtain further information from Oppenheimer
Funds Distributor, Inc.'s Dealer Services, Department at 1-800-525-7040.
10/94
<PAGE>
Exhibit 24(b)(13)(i)
December 22, 1988
The Board of Trustees
Main Street Funds, Inc.
3410 S. Galena Street
Denver, CO 80231
To the Board of Trustees:
Oppenheimer Management Corporation ("OMC") herewith purchases 954.198
shares of Tax-Free Income Fund [such "Fund" being a series of Main Street
Funds, Inc. (the "Corporation)] for an aggregate purchase price of
$10,000.
In connection with such purchase, OMC represents that such purchase
is made for investment purposes by OMC without any present intention of
redeeming or selling such shares; and furthermore that OMC agrees to
advance the organizational and start-up expenses of the Corporation and
in that regard agrees that such advance for such start-up expenses shall
be reimbursed to OMC by the Corporation when the Corporation's total
assets exceeds $10 million. In the event that all or part of the initial
shares of the Fund purchased by OMC are redeemed during the five year
period commencing on the effective date of the Corporation's initial
prospectus, OMC will reimburse the Corporation for any unamortized
organization expenses in the same proportion as the number of shares
redeemed bears to the number of initial shares outstanding at the time of
such redemption.
Very truly yours,
OPPENHEIMER MANAGEMENT CORPORATION
By: /s/ Robert G. Galli
-------------------------
Robert G. Galli,
Executive Vice President
<PAGE>
Exhibit 24(b)(5)(i)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 22nd day of October, 1990, by and between MAIN STREET
FUNDS, INC. (hereinafter referred to as the "Corporation"), and
OPPENHEIMER MANAGEMENT CORPORATION (hereinafter referred to as "OMC").
WHEREAS, the Corporation is an open-end, non-diversified series management
investment company registered as such with the Securities and Exchange
Commission (the "Commission") pursuant to the Investment Company Act of
1940 (the "Investment Company Act"), and OMC is a registered investment
adviser; and
WHEREAS, INCOME & GROWTH FUND (the "Fund") is a series of the Corporation
having a separate portfolio, investment policies and investment
restrictions;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as
follows:
1. General Provision.
The Corporation hereby employs OMC and OMC hereby undertakes to act
as the investment adviser of the Fund and to perform for the Fund such
other duties and functions as are hereinafter set forth. OMC shall, in
all matters, give to the Fund and the Corporation's Board of Directors the
benefit of its best judgment, effort, advice and recommendations and
shall, at all times conform to, and use its best efforts to enable the
Fund to conform to: (i) the provisions of the Investment Company Act and
any rules or regulations thereunder; (ii) any other applicable provisions
of state or federal law; (iii) the provisions of the Articles of
Incorporation and By-Laws of the Corporation as amended from time to time;
(iv) policies and determinations of the Board of Directors of the
Corporation; (v) the fundamental policies and investment restrictions of
the Fund as reflected in the Corporation's registration statement under
the Investment Company Act or as such policies may, from time to time, be
amended by the Fund's shareholders; and (vi) the Prospectus and Statement
of Additional Information of the Corporation in effect from time to time.
The appropriate officers and employees of OMC shall be available upon
reasonable notice for consultation with any of the Directors and officers
of the Corporation with respect to any matters dealing with the business
and affairs of the Corporation including the valuation of portfolio
securities of the Fund which securities are either not registered for
public sale or not traded on any securities market.
2. Investment Management.
(a) OMC shall, subject to the direction and control by the
Corporation's Board of Directors, (i) regularly provide investment advice
and recommendations to the Fund with respect to its investments,
investment policies and the purchase and sale of securities; (ii)
supervise continuously the investment program of the Fund and the
composition of its portfolio and determine what securities shall be
purchased or sold by the Fund; and (iii) arrange, subject to the
provisions of paragraph 7 hereof, for the purchase of securities and other
investments for the Fund and the sale of securities and other investments
held in the portfolio of the Fund.
(b) Provided that the Corporation shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 7 hereof, OMC may obtain investment
information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect OMC from
willful misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard of its obligations and duties under this
Agreement, OMC shall not be liable for any loss sustained by reason of
good faith errors or omissions in connection with any matters to which
this Agreement relates.
(d) Nothing in this Agreement shall prevent OMC or any officer
thereof from acting as investment adviser for any other person, firm or
corporation and shall not in any way limit or restrict OMC or any of its
directors, officers, stockholders or employees from buying, selling or
trading any securities for its or their own account or for the account of
others for whom it or they may be acting, provided that such activities
will not adversely affect or otherwise impair the performance by OMC of
its duties and obligations under this Agreement.
3. Other Duties of OMC.
OMC shall, at its own expense, provide and supervise the activities
of all administrative and clerical personnel as shall be required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of such records with respect to its operations
as may reasonably be required; the preparation and filing of such reports
with respect thereto as shall be required by the Commission; composition
of periodic reports with respect to operations of the Fund for its
shareholders; composition of proxy materials for meetings of the Fund's
shareholders; and the composition of such registration statements as may
be required by Federal and state securities laws for continuous public
sale of shares of the Fund. OMC shall, at its own cost and expense, also
provide the Fund with adequate office space, facilities and equipment.
OMC shall, at its own expense, provide such officers for the Corporation
as the Corporation's Board may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed by OMC
under this Agreement, or to be paid by the General Distributor of the
shares of the Fund, shall be paid by the Corporation, including, but not
limited to: (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums for fidelity and other coverage requisite to its
operations; (iv) compensation and expenses of its directors other than
those associated or affiliated with OMC; (v) legal and audit expenses;
(vi) custodian and transfer agent fees and expenses; (vii) expenses
incident to the redemption of its shares; (viii) expenses incident to the
issuance of its shares against payment therefor by or on behalf of the
subscribers thereto; (ix) fees and expenses, other than as hereinabove
provided, incident to the registration under Federal and state securities
laws of shares of the Fund for public sale; (x) expenses of printing and
mailing reports, notices and proxy materials to shareholders of the Fund;
(xi) except as noted above, all other expenses incidental to holding
meetings of the Fund's shareholders; and (xii) such extraordinary non-
recurring expenses as may arise, including litigation, affecting the Fund
and any legal obligation which the Corporation may have (on behalf of the
Fund) to indemnify its officers and directors with respect thereto. Any
officers or employees of OMC or any entity controlling, controlled by or
under common control with OMC, who may also serve as officers, directors
or employees of the Corporation shall not receive any compensation from
the Corporation for their services. The expenses with respect to any two
or more series of the Corporation shall be allocated in proportion to the
net assets of the respective series except where allocations of direct
expenses can be made.
5. Compensation of OMC.
The Corporation agrees to pay OMC on behalf of the Fund and OMC
agrees to accept as full compensation for the performance of all functions
and duties on its part to be performed pursuant to the provisions hereof,
a fee computed on the aggregate net asset value of the Fund as of the
close of each business day and payable monthly at the annual rate of .65%
of the first $200 million of net assets, .60% of the next $150 million,
.55% of the next $150 million and .45% of net assets in excess of $500
million.
6. Use of Name "Main Street."
OMC hereby grants to the Corporation a royalty-free, non-exclusive
license to use the name "Main Street" in the name of the Corporation and
the Fund for the duration of this Agreement and any extensions or renewals
thereof. To the extent necessary to protect OMC's rights to the name
"Main Street" under applicable law, such license shall allow OMC to
inspect and, subject to control by the Corporation's Board, control the
nature and quality of services offered by the Corporation under such name.
Such license may, upon termination of this Agreement, be terminated by
OMC, in which event the Corporation shall promptly take whatever action
may be necessary to change its name and the name of the Fund and
discontinue any further use of the name "Main Street" in the name of the
Corporation or the Fund or otherwise. The name "Main Street" may be used
or licensed by OMC in connection with any of its activities, or licensed
by OMC to any other party.
7. Portfolio Transactions and Brokerage.
(a) OMC is authorized, in arranging the purchase and sale of the
Fund's portfolio securities, to employ or deal with such members of
securities or commodities exchanges, brokers or dealers (hereinafter
"broker-dealers"), including "affiliated" broker-dealers (as that term is
defined in the Investment Company Act), as may, in its best judgment,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
security price obtainable) of the Fund's portfolio transactions as well
as to obtain, consistent with the provisions of subparagraph (c) of this
paragraph 7, the benefit of such investment information or research as
will be of significant assistance to the performance by OMC of its
investment management functions.
(b) OMC shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities
of a broker-dealer to obtain best execution of particular portfolio
transaction(s) will be judged by OMC on the basis of all relevant factors
and considerations including, insofar as feasible, the execution
capabilities required by the transaction or transactions; the ability and
willingness of the broker-dealer to facilitate the Fund's portfolio
transactions by participating therein for its own account; the importance
to the Fund of speed, efficiency or confidentiality; the broker-dealer's
apparent familiarity with sources from or to whom particular securities
might be purchased or sold; as well as any other matters relevant to the
selection of a broker-dealer for particular and related transactions of
the Fund.
(c) OMC shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers,
other than an affiliated broker-dealer, qualified to obtain best execution
of such transactions who provide brokerage and/or research services (as
such services are defined in Section 28(e)(3) of the Securities Exchange
Act of 1934) for the Fund and/or other accounts for which OMC or its
affiliates exercise "investment discretion" (as that term is defined in
Section 3(a)(35) of the Securities Exchange Act of 1934) and to cause the
Corporation to pay such broker-dealers a commission for effecting a
portfolio transaction for the Fund that is in excess of the amount of
commission another broker-dealer adequately qualified to effect such
transaction would have charged for effecting that transaction, if OMC
determines, in good faith, that such commission is reasonable in relation
to the value of the brokerage and/or research services provided by such
broker-dealer, viewed in terms of either that particular transaction or
the overall responsibilities of OMC or its affiliates with respect to the
accounts as to which they exercise investment discretion. In reaching
such determination, OMC will not be required to place or attempt to place
a specific dollar value on the brokerage and/or research services provided
or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OMC shall be prepared to show that
all commissions were allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Corporation over a
representative period selected by the Corporation's directors were
reasonable in relation to the benefits to the Fund.
(d) OMC shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any
particular portfolio transactions or to select any broker-dealer on the
basis of its purported or "posted" commission rate but will, to the best
of its ability, endeavor to be aware of the current level of the charges
of eligible broker-dealers and to minimize the expense incurred by the
Fund for effecting its portfolio transactions to the extent consistent
with the interests and policies of the Fund as established by the
determinations of the Board of Directors of the Corporation and the
provisions of this paragraph 7.
(e) The Corporation recognizes that an affiliated broker-dealer: (i)
may act as one of the Fund's regular brokers so long as it is lawful for
it so to act; (ii) may be a major recipient of brokerage commissions paid
by the Corporation; and (iii) may effect portfolio transactions for the
Fund only if the commissions, fees or other remuneration received or to
be received by it are determined in accordance with procedures
contemplated by any rule, regulation or order adopted under the Investment
Company Act for determining the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 7, OMC may
also consider sales of shares of the Fund and the other funds advised by
OMC and its affiliates as a factor in the selection of broker-dealers for
its portfolio transactions.
8. Duration.
This Agreement will take effect on the date first set forth above,
and shall supersede any and all prior investment advisory agreements for
the Fund. Unless earlier terminated pursuant to paragraph 9 hereof, this
Agreement shall continue in effect until December 31, 1991, and thereafter
will continue in effect from year to year, so long as such continuance
shall be approved at least annually by the Corporation's Board of
Directors, including the vote of the majority of the directors of the
Corporation who are not parties to this Agreement or "interested persons"
(as defined in the Investment Company Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, or
by the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding voting securities of the Fund and by such a vote of the
Corporation's Board of Directors.
9. Termination.
This Agreement may be terminated: (i) by OMC at any time without
penalty upon sixty days' written notice to the Corporation (which notice
may be waived by the Corporation); or (ii) by the Corporation at any time
without penalty upon sixty days' written notice to OMC (which notice may
be waived by OMC) provided that such termination by the Corporation shall
be directed or approved by the vote of a majority of all of the directors
of the Corporation then in office or by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund (as defined
in the Investment Company Act).
10. Assignment or Amendment.
This Agreement may not be amended or the rights of OMC hereunder
sold, transferred, pledged or otherwise in any manner encumbered without
the affirmative vote or written consent of the holders of the "majority"
of the outstanding voting securities of the Fund. This Agreement shall
automatically and immediately terminate in the event of its "assignment,"
as defined in the Investment Company Act.
11. Definitions.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
MAIN STREET FUNDS, INC.
Attest:
/s/ Sara L. Badler By: /s/ Robert G. Galli
- ------------------ -------------------------------
Sara L. Badler Robert G. Galli, Vice President
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
/s/ Sara L. Badler By: /s/ Katherine P. Feld
- ------------------ -----------------------------------
Sara L. Badler Katherine P. Feld
Vice President & Secretary
<PAGE>
Exhibit 24(b)(10)(ii)
HAMILTON, MYER, SWANSON, FAATZ & CLARK
ATTORNEYS AT LAW
THE COLORADO STATE BANK BUILDING
1600 BROADWAY, SUITE 600
DENVER, COLORADO 80202-4988
TELEPHONE (303) 830-0500
FACSIMILE (303) 860-7855
January 20, 1989
Main Street Funds, Inc.
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the proposed public offering of shares of the Tax-Free
Income Fund Series (the "Fund") of Main Street Funds, Inc., we have
examined such records and documents as we deem necessary for the purpose
of this opinion.
The Fund is a duly organized and validly existing Series of Main Street
Funds, Inc., a Massachusetts corporation. As of the date of this letter,
it is our opinion that the indefinite number of shares of the Fund covered
by the Registration Statement of Main Street Funds, Inc. on Form N-1A,
when issued and paid for in accordance with the terms of the offering, as
set forth in the Prospectus and Statement of Additional Information
forming a part of the Registration Statement, will be, when such
Registration Statement shall have become effective, legally issued, fully
paid and non-assessable by the Fund.
You have also asked us to render our opinion regarding the change of name
of the Capital Preservation Fund Series to Asset Allocation Fund. Please
be advised that all proper action has been taken by the Corporation, the
Series and the shareholders thereof to change the Series' name to Asset
Allocation Fund.
We hereby consent to the filing of this opinion as an Exhibit to such
Registration Statement and to the reference to Counsel in such Prospectus
and/or Statement of Additional Information. We also consent to the filing
of this opinion with the authorities administering the securities laws of
any jurisdiction in connection with the registration or qualification
under such laws of Main Street Funds, Inc. and its shares.
Very truly yours,
HAMILTON, MYER, SWANSON
FAATZ & CLARK
By /s/ Allan B. Adams
--------------------------
Allan B. Adams, Partner
<PAGE>
Exhibit 24(b)(10)(i)
HAMILTON, MYER, SWANSON, FAATZ & CLARK
ATTORNEYS AT LAW
THE COLORADO STATE BANK BUILDING
1600 BROADWAY, SUITE 600
DENVER, COLORADO 80202-4988
TELEPHONE (303) 830-0500
FACSIMILE (303) 860-7855
February 1, 1988
Main Street Funds, Inc.
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the proposed public offering of shares of capital stock
of Government Securities Fund, Income and Growth Fund and Capital
Preservation Fund (collectively, the "Funds"), each being a series of Main
Street Funds, Inc. (the "Corporation"), we have examined such records and
documents as we deem necessary for the purpose of this opinion.
The Corporation is a corporation duly organized and validly existing under
the laws of the State of Maryland. As of the date of this letter, it is
our opinion that the shares of each Fund covered by the Corporation's
Registration Statement on Form N-1A (SEC Reg. No. 33-17850), when issued
and paid for in accordance with the terms of the offering, as set forth
in the Prospectus and Statement of Additional Information forming a part
of the Registration Statement, will be, when such Registration Statement
shall have become effective, legally issued, fully paid and non-assessable
by the Corporation.
We hereby consent to the filing of this opinion as an Exhibit to such
Registration Statement and to the reference to Counsel in such Prospectus
and/or Statement of Additional Information. We also consent to the filing
of this opinion with the authorities administering the securities laws of
any jurisdiction in connection with the registration or qualification
under such laws of the Corporation and/or a Fund's shares.
Very truly yours,
HAMILTON, MYER, SWANSON
FAATZ & CLARK
By /s/ Allan B. Adams
--------------------------
Allan B. Adams, Partner
<PAGE>
Exhibit 24(b)(10)(iii)
HAMILTON, MYER, SWANSON & FAATZ, P.C.
ATTORNEYS AT LAW
THE COLORADO STATE BANK BUILDING
1600 BROADWAY, SUITE 600
DENVER, COLORADO 80202-4988
TELEPHONE (303) 830-0500
FACSIMILE (303) 860-7855
April 23, 1990
Main Street Funds, Inc.
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the proposed public offering of shares of shares of the
Main Street California Tax-Exempt Fund Series (the "Fund") of Main Street
Funds, Inc., we have examined such records and documents as we deem
necessary for the purpose of this opinion.
The Fund is a duly organized and validly existing Series of Main Street
Funds, Inc., a Maryland corporation. As of the date of this letter, it is
our opinion that the indefinite number of shares of the Fund covered by
the Registration Statement for the Fund on Form N-1A, when issued and paid
for in accordance with the terms of the offering, as set forth in the
Prospectus and Statement of Additional Information forming a part of the
Registration Statement, will be, when such Registration Statement shall
have become effective, legally issued, fully paid and non-assessable by
the Fund.
We hereby consent to the filing of this opinion as an Exhibit to such
Registration Statement and to the reference to Counsel in such Prospectus
and/or Statement of Additional Information. We also consent to the filing
of this opinion with the authorities administering the securities laws of
any jurisdiction in connection with the registration or qualification
under such laws of Main Street Funds, Inc. and its shares.
Very truly yours,
HAMILTON, MYER, SWANSON
FAATZ & CLARK
By /s/ Allan B. Adams
------------------------
Allan B. Adams
<PAGE>
Exhibit 24(b)(4)(ii)
OPPENHEIMER MAIN STREET FUNDS, INC.
Series: Oppenheimer Main Street Income & Growth Fund
Class B Share Certificate (8-1/2" x 12-5/8")
I. FRONT OF CERTIFICATE (All text and other matter lies within 7-1/4"
x 11-1/4" decorative border)
(upper left) box with heading: NUMBER (OF SHARES)
(upper right) box with heading: CLASS B SHARES
(centered
below boxes) Oppenheimer Main Street Funds, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
SERIES: OPPENHEIMER MAIN STREET INCOME &
GROWTH FUND
(at left) THIS IS TO CERTIFY (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
box with CUSIP number
CUSIP 6838OD 801
(at left) is the owner of
(centered) FULLY PAID AND NON-ASSESSABLE CLASS B SHARES OF
CAPITAL STOCK WITH THE PAR VALUE OF $.01 EACH OF
--OPPENHEIMER MAIN STREET INCOME & GROWTH FUND--
A series of Oppenheimer Main Street Funds, Inc.
(hereinafter called the "Corporation") transferable only
on the books of the Corporation by the holder hereof in
person or by duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate and
the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of
Incorporation of the Corporation to all of which the
holder by acceptance hereof assents. This certificate is
not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the
signatures of its duly authorized officers.
(at left Dated: (at right
of seal) of seal)
(signature) (signature)
/s/ George C. Bowen /s/ Jon S. Fossel
------------------------ ------------------
SECRETARY PRESIDENT
Exhibit 24(b)(4)(ii)
Page 2
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER MAIN STREET FUNDS, INC.
SEAL
1987
MARYLAND
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT CORPORATION)
Denver (Colo.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 12-5/8"
dimension)
The following abbreviations when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
Exhibit 24(b)(4)(ii)
Page 3
For Value Received ................ hereby sell(s), assign(s) and
transfer(s) unto
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________CLASS B Shares of
beneficial interest represented by the within certificate, and do
hereby irrevocably constitute and appoint ___________________________
Attorney to transfer the said shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
Guaranteed Name of Guarantor
By: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Corporation.
Exhibit 24(b)(4)(ii)
Page 4
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of redemption of the
stock of each class which the Corporation is authorized to issue.
PLEASE NOTE: This document OppenheimerFunds
contains a watermark when "four-hand" logo type
viewed at an angle. It is
invalid without this
watermark:
_______________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
OPPENHEIMER MAIN STREET FUNDS, INC.
EXHIBIT 24(b)(16) TO FORM N-1A
PERFORMANCE DATA COMPUTATION SCHEDULE
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions, for the past
10 years which are as follows:
Distribution Amount from Amount from
Reinvestment Ordinary Long and Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
- ------------ ----------- ------------------- ------------
Income & Growth Fund - Class A Shares:
06/24/88 $0.0400 $0.0000 $10.100
09/23/88 0.0400 0.0000 9.970
12/23/88 0.0450 0.1330 10.030
03/23/89 0.0500 0.0000 10.690
06/23/89 0.0500 0.0000 11.860
09/22/89 0.0500 0.0000 12.410
12/22/89 0.0500 0.1500 12.080
03/23/90 0.0400 0.0000 12.270
06/22/90 0.0500 1.0200 12.330
09/21/90 0.0500 0.0300 11.410
12/21/90 0.2600 0.0500 11.120
03/22/91 0.0500 0.0500 12.860
06/21/91 0.0500 1.8400 13.480
09/20/91 0.0500 0.0000 15.860
12/20/91 0.0700 2.5100 14.220
03/27/92 0.0500 0.0100 16.540
06/26/92 0.0500 0.0000 15.020
09/25/92 0.0500 0.0000 15.790
12/29/92 0.0420 2.2020 17.410
03/26/93 0.0500 0.0000 19.000
06/25/93 0.0500 0.0000 19.480
09/24/93 0.0800 0.0000 22.250
11/29/93 0.0600 1.9890 20.670
03/25/94 0.0800 0.0000 22.680
06/24/94 0.1000 0.0000 20.170
Income & Growth Fund - Class C Shares:
03/25/94 0.0640 0.0000 22.610
06/24/94 0.0720 0.0000 20.100
California Tax-Exempt Fund - Class A Shares:
06/14/90 0.0600 0.0000 $11.570
07/12/90 0.0620 0.0000 11.580
08/09/90 0.0620 0.4660 11.570
09/06/90 0.0620 0.0000 11.380
10/04/90 0.0620 0.4495 11.350
11/01/90 0.0620 0.0000 11.460
11/29/90 0.0620 0.0000 11.580
12/31/90 0.0709 0.4495 11.580
01/24/91 0.0639 0.0000 11.610
02/21/91 0.0650 0.0000 11.680
03/21/91 0.0637 0.0000 11.580
04/18/91 0.0635 0.0000 11.680
05/16/91 0.0661 0.0000 11.670
06/13/91 0.0639 0.0000 11.560
07/11/91 0.0646 0.0000 11.650
08/08/91 0.0624 0.0000 11.750
09/05/91 0.0629 0.0000 11.770
10/03/91 0.0629 0.0000 11.840
10/31/91 0.0613 0.0000 11.830
11/27/91 0.0646 0.0000 11.820
12/31/91 0.0751 0.0053 12.000
01/23/92 0.0530 0.0000 12.010
02/20/92 0.0608 0.0000 11.880
03/19/92 0.0589 0.0000 11.840
04/16/92 0.0686 0.0000 11.940
05/14/92 0.0564 0.0000 11.940
06/11/92 0.0624 0.0000 11.960
07/09/92 0.0621 0.0000 12.180
08/06/92 0.0584 0.0000 12.310
09/03/92 0.0606 0.0000 12.190
10/01/92 0.0643 0.0000 12.160
10/29/92 0.0647 0.0000 11.920
11/25/92 0.0622 0.0000 12.090
12/31/92 0.0777 0.0181 12.140
01/28/93 0.0621 0.0000 12.200
02/25/93 0.0624 0.0000 12.560
03/25/93 0.0623 0.0000 12.480
04/22/93 0.0610 0.0000 12.530
05/20/93 0.0612 0.0000 12.500
06/17/93 0.0604 0.0000 12.560
07/09/93 0.0655 0.0000 12.670
08/10/93 0.0655 0.0000 12.700
09/10/93 0.0655 0.0000 12.960
10/08/93 0.0655 0.0000 12.950
11/10/93 0.0631 0.0000 12.720
12/10/93 0.0611 0.0000 12.820
01/10/94 0.0611 0.0000 12.860
02/10/94 0.0611 0.0000 12.830
03/10/94 0.0611 0.0000 12.230
04/08/94 0.0611 0.0000 11.850
05/10/94 0.0611 0.0000 11.790
06/10/94 0.0611 0.0000 12.120
California Tax-Exempt Fund - Class B Shares:
01/10/94 0.0488 0.0000 12.850
02/10/94 0.0479 0.0000 12.810
03/10/94 0.0495 0.0000 12.220
04/08/94 0.0480 0.0000 11.830
05/10/94 0.0505 0.0000 11.770
06/10/94 0.0496 0.0000 12.100
07/08/94 0.0510 0.0000 11.770
<PAGE>
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 06/30/94:
The formula for calculating average annual total return is as
follows:
1 ERV n
--------- = n (--------) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial investment of $1,000
Income & Growth Fund - Class A Shares:
Examples, assuming a maximum sales charge of 5.75%:
One Year:
$1,077.62 1
(---------) - 1 = 7.76%
$1,000.00
Five Year:
$2,654.01 0.20
(--------) -1= 21.56%
$1,000.00
Inception:
$3,339.26 0.1560
(--------) -1= 20.70%
$1,000.00
Income & Growth Fund - Class C Shares:
Examples, assuming a maximum contingent deferred sales charge of 1.00% for
the first year:
Inception:
$980.44 1.7136
(------) -1 = -3.33%
$1,000.00
Examples at NAV:
Income & Growth Fund - Class A Shares:
One Year:
$1,143.37 1
(--------) -1 = 14.34%
$1,000.00
Five Year:
$2,815.92 0.20
(--------) -1 = 23.01%
$1,000.00
Inception:
$3,542.98 0.1560
(--------) -1 = 21.82%
$1,000.00
Income & Growth Fund - Class C Shares:
Inception:
$990.35 1.7136
(------) -1 = -1.65%
$1,000.00
California Tax-Exempt Fund - Class A Shares:
Examples, assuming a maximum sales charge of 4.75%:
One Year:
$946.76 1
(------) - 1 = -5.32%
$1,000.00
Inception:
$1,303.71 .24295
(--------) -1 = 6.66%
$1,000.00
California Tax-Exempt Fund - Class B Shares:
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
Inception:
$898.51 1.4935
(------) -1 = -14.77%
$1,000.00
Examples at NAV:
California Tax-Exempt Fund - Class A Shares:
One Year:
$993.98 1
(------) - 1 = -0.60%
$1,000.00
Inception:
$1,368.72 .24295
(--------) -1 = 7.92%
$1,000.00
California Tax-Exempt Fund - Class B Shares:
Inception:
$945.80 1.4935
(------) - 1 = -7.99%
$1,000.00
<PAGE>
2. CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 06/30/94:
The formula for calculating cumulative total return is as follows:
ERV - P
- ------- = Cumulative Total Return
P
Income & Growth Fund - Class A Shares:
Examples, assuming a maximum sales charge of 5.75%:
One Year:
$1,077.62 - 1,000
- ----------------- = 7.76%
$1,000
Five Year:
$2,654.01 - 1,000
- ----------------- = 165.40%
$1,000
Inception:
$3,339.26 - 1,000
- ----------------- = 233.93%
$1,000
Income & Growth Fund - Class C Shares:
Examples assuming a maximum contingent deferred sales charge of 1.00% for
the first year:
Inception:
$980.44 - 1,000
- --------------- = -1.96%
$1,000
Examples at NAV:
Income & Growth Fund - Class A Shares:
One Year:
$1,143.37 - 1,000
- ----------------- = 14.34%
$1,000
Five Year:
$2,815.92 - 1,000
- ----------------- = 181.59%
$1,000
Inception:
$3,542.98 - 1,000
- ----------------- = 254.30%
$1,000
Income & Growth Fund - Class C Shares:
Inception:
$990.35 - 1,000
- --------------- = -0.97%
$1,000
California Tax-Exempt Fund - Class A Shares:
Examples, assuming a maximum sales charge of 4.75%:
One Year:
$946.76 - 1,000
- --------------- = -5.32%
$1,000
Inception:
$1,303.71 - 1,000
- ----------------- = 30.37%
$1,000
California Tax-Exempt Fund - Class B Shares:
Examples, assuming a maximum contingent deferred sales charge of 5.00% for
the first year:
One Year:
$898.51 - 1,000
- --------------- = -10.15%
$1,000
Examples at NAV:
California Tax-Exempt Fund - Class A Shares:
One Year:
$993.98 - 1,000
- --------------- = -0.60%
$1,000
Inception:
$1,368.72 - 1,000
- ----------------- = 36.87%
$1,000
California Tax-Exempt Fund - Class B Shares:
Inception:
$945.80 - 1,000
- --------------- = -5.42%
$1,000
<PAGE>
3. STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED 06/30/94:
The Fund's standardized yield is calculated using the following formula
set forth in the SEC rules:
a - b 6
Standardized Yield = 2 ((------------ + 1) - 1)
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period
b = Expenses accrued for the period (net of any expense reimbursements)
c = Average daily number of Fund shares outstanding during the 30-day
period that were entitled to receive dividends
d = The Fund's maximum offering price (including sales charge) per share
on the last day of the period
e = The Fund's net asset value (excluding contingent deferred sales
charge) per share on the last day of the period
California Tax-Exempt Fund - Class A Shares:
Example, assuming a maximum sales charge of 4.75%:
$411,642.30 - $35,966.91 6
2 ((--------------------------- + 1) - 1 ) = 5.47%
6,721,128 * $12.41 =====
California Tax-Exempt Fund - Class B Shares:
Examples at NAV:
$5,627.05 - $1,501.44 6
2 ((--------------------------- + 1) - 1 ) = 4.60%
91,998 * $11.80 =====
<PAGE>
4. TAX-EQUIVALENT YIELD FOR THE 30-DAY PERIOD ENDED 06/30/94:
The Fund's tax-equivalent yield is calculated using the following formula:
( a / ( 1 - c) ) + b = Tax-Equivalent Yield
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio
b = 30-day SEC yield of taxable security positions in the portfolio
c = Combined stated tax rate (e.g., Federal and California State income
tax rates for an individual in the 46.24% federal tax bracket filing
singly)
California Tax-Exempt Fund - Class A Shares:
Example, assuming a maximum sales charge of 4.75%:
( 0.0547 / (1 - .4624 ) ) + b = 10.17%
======
California Tax-Exempt Fund - Class B Shares:
Example at NAV:
( 0.0460 / (1 - .4624 ) ) + b = 8.56%
=====
Combined Stated Tax Rate Formula:
1 - ( ( 1 - d) * ( 1 - e) ) = Combined Stated Tax Rate
The symbols above represent the following factors:
d = State federal tax rate (e.g., federal income tax rate for an
individal in the 39.6% federal tax bracket filing singly)
e = Stated California State tax rate (e.g., for an individual in the
39.6% federal and 11% state tax bracket filing singly)
Example: 1 - ( ( 1 - .3960 ) * (1 - .1100) ) = 46.24%
======
<PAGE>
5. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 06/30/94:
The Fund's dividend yields are calculated using the following formula:
( a * 12 ) / b or c = Dividend Yield
The symbols above represent the following factors:
a = The dividend earned during the period
b = The Fund's maximum offering price (including sales charge) per share
on the last day of the period
c = The Fund's net asset value (excluding sales charge) per share on the
last day of the period
Examples:
California Tax-Exempt Fund - Class A Shares:
Dividend Yield at Maximum Offer:
( 0.0611000 * 12 ) / $12.41 = 5.91%
=====
Dividend Yield at Net Asset Value:
( 0.0611000 * 12 ) / $11.52 = 6.36%
=====
California Tax-Exempt Fund - Class B Shares:
Dividend Yield at Net Asset Value:
( 0.0509988 * 12 ) / $11.80 = 5.19%
=====
<PAGE>
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Main Street Funds, Inc.:
We consent to the use in this Post-Effective Amendment No. 14 to
Registration Statement No. 33-17850 of our report dated July 22, 1994 on
the financial statements of Oppenheimer Main Street Income & Growth Fund
and Oppenheimer Main Street California Tax-Exempt Fund appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial
Highlights" appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/ Deloitte & Touche
- -----------------------
DELOITTE & TOUCHE
Denver, Colorado
September 30, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NET-CHANGE-FROM-OPS> (41651580)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 815401
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8563107
<NUMBER-OF-SHARES-REDEEMED> 221934
<SHARES-REINVESTED> 35985
<NET-CHANGE-IN-ASSETS> 851638443
<ACCUMULATED-NII-PRIOR> 31753
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
Exhibit 24(b)(1)(xi)
OPPENHEIMER MAIN STREET FUNDS, INC.
ARTICLES SUPPLEMENTARY
Oppenheimer Main Street Funds, Inc., a open-end investment company
registered under the Investment Company Act of 1940, as amended, organized
as a Maryland corporation having its principal office in the State of
Maryland in Baltimore City (hereinafter called the "Corporation"), hereby
certifies that:
FIRST: Pursuant to authority contained in the Corporation's Articles
of Incorporation and pursuant to Sections 2-105(c) and 2-208.1 of the
Maryland General Corporation Law, the Board of Directors of the
Corporation has increased the total number of shares of stock which the
Corporation shall be authorized to issue from one hundred fifty-five
million (155,000,000) shares, aggregate par value $1,550,000, to two
hundred million (200,000,000) shares, aggregate par value $2,000,000, each
said share having a par value of one cent ($.01) per share.
SECOND: Pursuant to the authority contained in Article FOURTH of the
Articles of Incorporation of the Corporation, as amended, forty five
million (45,000,000) shares of authorized but unissued shares of the
Corporation have been duly classified by the Board of Directors as
authorized but unissued Class B shares of the Oppenheimer Main Street
Income & Growth Fund, a series of the Corporation, each with a par value
of one cent ($.01) per share.
These Articles Supplementary do not increase the number of authorized
shares of any other series or class of shares, and both as of immediately
before and after said increase and classification of shares, the total
number of shares of stock of all classes that the Corporation has
authority to issue, the number of shares of stock of each class, the par
value of the shares of stock of each class, and the aggregate par value
of all the shares of all classes are:
The total number of shares of stock of all classes that the
Corporation has authority to issue:
Before: 155,000,000 After: 200,000,000
The number of shares of stock of each class and their respective par
value:
Oppenheimer Main Street Income & Growth Fund series
Before: Class A 76,250,000 Par value: $762,500
Class C 26,250,000 Par value: 262,500
After: Class A 76,250,000 Par value: $762,500
Class B 45,000,000 Par value: 450,000
Class C 26,250,000 Par value: 262,500
Oppenheimer Main Street California Tax-Exempt Fund series
Before: Class A 26,250,000 Par value: $262,500
Class B 26,250,000 Par value: 262,500
After: Class A 26,250,000 Par value: $262,500
Class B 26,250,000 Par value: 262,500
The aggregate par value of all the shares of all classes:
Before: $1,550,000 After: $2,000,000
THIRD: Acting pursuant to Article FOURTH (A) and (B) of the Articles
of Incorporation, the Board of Directors has set the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of Class B shares (hereinafter the "Class B shares") of
Oppenheimer Main Street Income & Growth Fund (hereinafter the "Fund")
together with those set forth in other provisions of the Articles of
Incorporation relating to stock of the Fund.
(1) As more fully set forth hereinafter, the liabilities and the
expenses of the Class B shares shall be determined separately from those
of the Class A shares and the Class C shares and from those of any other
class of the Fund's stock and, accordingly, the net asset value, the
dividends and distributions payable to holders, and the amounts
distributable in the event of liquidation of the Corporation to holders
of shares of the Fund stock may vary from class to class. The other
provisions of the Articles of Incorporation shall be construed in such
manner as to reflect the provisions of the immediately prior sentence and
of these Articles Supplementary generally. Except for these differences
and certain other differences hereinafter set forth, the Class B shares
shall have the same preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of, and rights to require redemption of the Class A
shares and the Class C shares, and any other class of the Fund's stock
that represents an interest in the same portfolio of investments as the
Class B shares.
(2) The Class B shares shall represent interests in the same
portfolio of investments as the Class A shares and the Class C shares.
(3) The dividends and distributions of investment income and capital
gains to holders of the Class B shares shall be in such amounts as may be
declared from time to time by the Board of Directors, and such dividends
and distributions may vary from the dividends and distributions of
investment income and capital gains to holders of the Class A shares and
the Class C shares and any other class of the Fund's stock to reflect
differing allocations of the liabilities and expenses of the Fund among
the classes of shares and any resultant differences among the net asset
values per share of the classes of shares, to such extent and for such
purposes as the Board of Directors may deem appropriate. The allocation
of investment income, capital gains, expenses and liabilities of the Fund
among the Class A shares, the Class B shares, and the Class C shares and
any other class of the Fund's stock that represents an interest in the
same portfolio of investments as the Class B shares shall be determined
by the Board of Directors in a manner that is consistent with the order
dated 11/23/93 (Investment Company Act of 1940 Release No. 19894) issued
by the Securities and Exchange Commission in connection with the
application for exemption filed by Oppenheimer Management Corporation, et
al., and any existing or future amendment to such order or any order, rule
or interpretation under the Investment Company Act of 1940 or its
successor that modifies or supersedes such order.
(4) Except as may otherwise be required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of the Class B shares of
the Fund shall have exclusive voting rights with respect to any matter
submitted to a vote of stockholders that affects only holders of the Class
B shares of the Fund and no voting rights with respect to any matter
submitted to a vote of stockholders that does not affect holders of the
Class B shares of the Fund.
(5) (a) Each Class B share of the Fund shall be converted
automatically and without any action or choice on the part of the holder
thereof, into Class A shares of the Fund at the close of business on the
Conversion Date thereof, established as provided in the next following
sentence. The Conversion Date for Class B shares of the Fund shall be
determined by the Board of Directors in a manner and pursuant to terms and
conditions consistent with the Order dated 11/23/93 (Investment Company
Act of 1940 Rel. No. 19894) issued by the Securities and Exchange
Commission in connection with the application for exemption filed by
Oppenheimer Management Corporation, et al., and any existing or future
amendment to such Order or any order, rule or interpretation under the
Investment Company Act of 1940 or its successor that modifies or
supersedes such Order and which Conversion Date is described, from time
to time, in the Fund's then current prospectus.
(b) The number of Class A shares of the Fund into which a Class
B share of the Fund is converted pursuant to paragraph (5)(a) hereof shall
equal the number (including for this purpose fractions of a share)
obtained by dividing the net asset value per share of the Class B shares
for purposes of sales and redemption thereof on the Conversion Date by the
net asset value per share of the Class A shares for purposes of sales and
redemption thereof on the Conversion Date.
(c) On the Conversion Date, the Class B shares converted into
Class A shares will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to
receive the number of Class A shares into which the Class B shares have
been converted and declared but unpaid dividends to the Conversion Date)
will cease. Certificates representing Class A shares resulting from the
conversion need not be issued until certificates representing the Class
B shares converted, if issued, have been received by the Corporation or
its agent duly endorsed for transfer.
(d) The automatic conversion of the Class B shares of the Fund
into Class A shares of the Fund as set forth in paragraph (5)(a) shall be
suspended at any time that the Board of Directors determines (i) that
there is not available a private letter ruling from the Internal Revenue
Service or a reasonably satisfactory opinion of counsel to the effect that
the conversion of the Class B shares does not constitute a taxable event
under federal income tax law, or that (ii) any other condition to
conversion set forth in the Fund's prospectus, as such prospectus may be
amended from time to time, is not satisfied.
(e) The automatic conversion of the Class B shares into Class
A shares as set forth in paragraph (5)(a) may also be suspended by action
of the Board of Directors at any time that the Board of Directors
determines such suspension to be appropriate in order to comply with, or
satisfy the requirements of, the Investment Company Act of 1940, as
amended, and in effect from time to time, or any rule, regulation or
order issued thereunder relating to voting by the holders of the Class B
shares on any plan with respect to the Class A shares proposed under Rule
12b-1 of the Investment Company Act of 1940, as amended, and in effect
from time to time, and in connection with, or in lieu of, any such
suspension, the Board of Directors may provide holders of the Class B
shares with alternative conversion or exchange rights into other classes
of stock of the Fund in a manner consistent with the law, rule, regulation
or order giving rise to the possible suspension of the conversion right.
FOURTH: The Class B shares of the Oppenheimer Main Street Income
& Growth Fund Series have been duly classified by the Corporation's Board
of Directors pursuant to authority and power contained in the Articles of
Incorporation.
FIFTH: These Articles Supplementary of the Corporation have been
duly authorized and approved by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, Oppenheimer Main Street Funds, Inc. has caused
these Articles Supplementary to be executed by its Vice President and
witnessed by its Assistant Secretary on this 30th day of September, 1994.
The undersigned Vice President of the Corporation acknowledges them to be
the act of the Corporation and verifies and states under the penalties of
perjury that, to the best of his knowledge, information and belief, the
matters and facts set forth herein with respect to authorization and
approval hereof are true in all material respects.
Oppenheimer Main Street Funds, Inc.
By: /s/ Andrew J. Donohue
------------------------------------
Andrew J. Donohue, Vice President
WITNESS:
/s/ Robert G. Zack
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Robert G. Zack, Assistant Secretary
