Registration No. 33-45178
File No. 811-6533
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. 4 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 6 / X /
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
(Address of Principal Executive Offices)
1-303-671-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation - Suite 3400
Two World Trade Center, New York, New York 10048-0203
(Names and Addresses 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 January 27, 1995, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ________________ pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On ________________, pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1994, was filed on November 29, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Heading in Prospectus
- --------- ---------------------
1 Front Cover Page
2 Expenses; Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed - Organization and
History; Investment Objective and Policies
5 How the Fund is Managed; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History; The
Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objective and Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy Shares;
How to Exchange Shares; Special Investor Services; Class A
Service Plan; Class B Distribution and Service Plan; How to
Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
- --------- ----------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 Financial Statements
______________
* Not applicable or negative answer.
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
Prospectus dated January 27, 1995
Oppenheimer Strategic Short-Term Income Fund (the Fund") is a
mutual fund with the investment objective of seeking as high a level of
current income, consistent with stability of principal, as is available
from a portfolio of investment grade debt securities having a remaining
maturity of not more than three years. To seek its objective, the Fund
normally invests primarily in: (i) investment grade domestic bonds, (ii)
U.S. government securities, (iii) money market instruments and (iv)
foreign corporate and government debt securities denominated in U.S.
dollars and selected foreign currencies. The Fund may also use certain
hedging instruments to try to reduce the risks of market fluctuations that
affect the value of the securities the Fund holds. The securities the
Fund invests in are described more completely in "Investment Objective and
Policies." That section of the Prospectus also explains some of the risks
of those investments.
The Fund offers two classes of shares: (1) Class A shares, which
are sold at a public offering price that includes a front-end sales
charge, and (2) Class B shares, which are sold without a front-end sales
charge, although you may pay a sales charge when you redeem your shares,
depending on how long you hold them. Class B shares are also subject to
an annual "asset-based sales charge." Each class of shares bears
different expenses. In deciding which class of shares to buy, you should
consider how much you plan to purchase, how long you plan to keep your
shares, and other factors discussed in "How to Buy Shares" starting on
page __.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the January 27, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
Page
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reimbursement Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
CheckWriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages ____ through ____, for an explanation of how and when these charges
apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.50% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 4%(2)
Exchange Fee $5.00(3) $5.00(3)
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within five years of the end of the calendar month
of their purchase, subject to certain exceptions. That charge is imposed
as a percentage of net asset value at the time of purchase or redemption,
whichever is less, and declines from 4.0% in the first year that shares
are held, to 3.0% in the second year, 2.0% in the third and fourth years,
1.0% in the fifth year and eliminated thereafter. There is no charge on
Class B shares held for more than five years. See "How To Buy Shares -
Class B Contingent Deferred Sales Charge."
(3) Fee is waived for automated exchanges, as described in "How to
Exchange Shares."
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Distribution Plan Fees for
Class A shares are Service Plan Fees. The service fee is a maximum of
0.25% of average annual net assets of the class and the asset-based sales
charge is 0.75%. These plans are described in greater detail in "How to
Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares.
Class A Shares Class B Shares
-------------- --------------
Management Fees .65% .65%
12b-1 Distribution Plan Fees .22% 1.00%
Other Expenses .30% .32%
Total Fund Operating Expenses 1.17% 1.97%
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Class A Shares $ 47 $ 71 $ 97 $ 172
Class B Shares $ 60 $ 82 $ 116 $ 190
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $ 47 $ 71 $ 97 $ 172
Class B Shares $ 20 $ 62 $ 106 $ 190
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek as high a level of current income consistent with the
stability of principal, as is available from a portfolio of investment
grade debt securities having a remaining maturity of not more than three
years.
- What Does the Fund Invest In? To seek its objective, the Fund
primarily invests in investment grade domestic bonds, U.S. government
securities, money market instruments, and foreign corporate and government
debt securities dominated in U.S. dollars and selected foreign currencies.
The Fund may also write covered calls and use derivative investments to
enhance income, and may use hedging instruments and some derivative
investments to try to manage investment risks. These investments are more
fully explained in "Investment Objective and Policies," starting on page
___.
- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio managers, who are primarily responsible for the selection
of the Fund's securities, are Arthur P. Steinmetz and David Negri. The
Manager is paid an advisory fee by the Fund, based on its assets. The
Fund's Board of Trustees, elected by shareholders, oversees the investment
advisor and the portfolio manager. Please refer to "How the Fund is
Managed," starting on page ___ for more information about the Manager and
its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in bonds and other fixed-income securities
are subject to changes in their value from a number of factors such as
changes in general bond market movements, the change in value of
particular bonds because of an event affecting the issuer, or changes in
interest rates. These changes affect the value of the Fund's investments
and its price per share. In the OppenheimerFunds spectrum, the Fund is
generally more conservative than high yield bond funds, but more
aggressive than money market funds. While the Manager tries to reduce
risks by diversifying investments, by carefully researching securities
before they are purchased for the portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving the
Fund's objective and your shares may be worth more or less than their
original cost when you redeem them. Please refer to "Investment Objective
and Policies" starting on page ___ for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes
of shares. Class A shares are offered with a front-end sales charge,
starting at 3.50%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge (starting at 4% and declining as shares
are held longer) if redeemed within 5 years of purchase. There is also
an annual asset-based sales charge on Class B shares. Please review "How
To Buy Shares" starting on page ___ for more details, including a
discussion about which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance by
quoting its yield, average annual total return and cumulative total
return, which measure historical performance. Those yields and returns
can be compared to the yields and returns (over similar periods) of other
funds. Of course, other funds may have different objectives, investments,
and levels of risk. The Fund's performance can also be compared to broad
market indices, which we have done on page ___. Please remember that past
performance does not guarantee future results.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
Deloitte & Touche LLP, the Fund's independent auditors, whose report on
the Fund's financial statements for the fiscal year ended September 30,
1994 is included in the Statement of Additional Information.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------------ ------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992(2) 1994 1993(1)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.84 $4.93 $5.00 $4.84 $4.75
-----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .33 .05 .34 .22
Net realized and unrealized gain (loss)
on investments and foreign currencies (.30) (.11) (.07) (.36) .08
------ ------ ------ ------ ------
Total income (loss) from investment
operations .03 .22 (.02) (.02) .30
-----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.20) (.31) (.05) (.16) (.21)
Dividends in excess of investment income (.01) -- -- (.01) --
Distributions in excess of net realized gain
on investments (.01) -- -- (.01) --
Tax return of capital (.09) -- -- (.09) --
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.31) (.31) (.05) (.27) (.21)
-----------------------------------------------------------------------------------------------------
Net asset value, end of period $4.56 $4.84 $4.93 $4.55 $4.84
------ ------ ------ ------ ------
------ ------ ------ ------ ------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3) .61% 4.58% (.27)% (.39)% 6.48%
-----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $27,850 $25,314 $12,670 $7,626 $3,421
-----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $28,284 $20,663 $8,643 $6,020 $1,428
-----------------------------------------------------------------------------------------------------
Number of shares outstanding at end of
period (in thousands) 6,112 5,231 2,572 1,675 707
-----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.11% 6.83% 6.38%(4) 5.46% 5.88%(4)
-----------------------------------------------------------------------------------------------------
Expenses, before voluntary reimbursement
by the Manager 1.17% 1.38% 1.87%(4) 1.97% 2.22%(4)
-----------------------------------------------------------------------------------------------------
Expenses, net of voluntary reimbursement
by the Manager -- 1.21% .92%(4) -- 2.21%(4)
-----------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 57.8% 104.0% 11.2% 57.8% 104.0%
<FN>
1. For the period from November 30, 1992 (inception of offering) to
September 30, 1993.
2. For the period from August 4, 1992 (commencement of operations) to
September 30, 1992.
3. 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.
4. Annualized.
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 September 30, 1994 were $28,239,652 and $16,278,532, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek as high a level of
current income, consistent with stability of principal, as is available
from a portfolio of investment grade debt securities having a remaining
maturity of not more than three years.
Investment Policies and Strategies. The Fund seeks its objective
principally by investing in: (i) domestic bonds, notes and debentures of
investment grade, that is, rated "Baa" or better by Moody's Investors
Service, Inc. ("Moody's") or "BBB" or better by Standard & Poor's
Corporation ("Standard & Poor's") or, if unrated, determined by the Fund's
investment adviser, Oppenheimer Management Corporation (the "Manager"),
to be comparable to securities meeting those rating requirements; (ii)
U.S. Government Securities; (iii) money market instruments and (iv)
investment grade foreign corporate and government debt securities
denominated in U.S. dollars or in selected foreign currencies.
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in investment grade debt securities in the respective
sectors described above. The remaining assets may be invested in other
securities, including domestic and foreign equity securities (described
below in "Other Investments").
The Manager will not rely solely on the ratings assigned by rating
services and may invest, without limitation, in unrated securities that
offer, in the opinion of the Manager, comparable yields and risks as those
rated securities in which the Fund may invest. Although the Fund is not
obligated to dispose of securities that fall below the above-stated
ratings subsequent to purchase, no more than 35% of the value of the
Fund's total assets will be invested in securities rated below "Baa" by
Moody's or "BBB" by Standard & Poor's as a result of downgrades of the
issues' ratings. If the ratings of securities held by the Fund fall below
those listed above, the Manager will determine what action, if any, is
appropriate. As of September 30, 1994, the Fund's portfolio contained
domestic and foreign corporate bonds in the following rating categories
of Standard & Poor's (the percentages relate to the weighted average value
of the bonds in each rating category as a percentage of the Fund's total
assets): AAA, 1.05%, A, 3.05%; BBB, 8.38%; Not rated, 3.63%.
Under normal circumstances, the Fund will maintain a dollar-weighted
average portfolio maturity of not more than three years. In calculating
maturity, the Fund will consider various factors, including anticipated
payments of principal. The Fund may hold securities with maturities of
more than three years if, under normal circumstances, it maintains a
dollar-weighted average maturity of not more than three years. See
"Investment Objective and Policies" in the Statement of Additional
Information for more information on the Fund's calculation of portfolio
maturity.
In the future, the Fund may invest in instruments that are not
presently contemplated but which may be developed, if such investments are
consistent with the Fund's investment objective and their use is
disclosed. The allocation of the Fund's assets among the respective
sectors will vary according to the Manager's assessment of various market
conditions. The Fund's distributable income will fluctuate as the Fund
shifts its assets among the four sectors. There can be no assurance that
the Fund will achieve its investment objective.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are those
that cannot be changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
- Investment Grade Bonds and Debentures. The Fund's investments in
investment grade domestic fixed-income securities may include those issued
by domestic corporations in any industry (for example, industrial,
financial or utility) which may be denominated in U.S. dollars or in non-
U.S. currencies. There is no requirement that the issuer be of a
particular size, although it is expected that, for the most part, the Fund
will invest in securities of issuers that have total assets in excess of
$100 million. These investments may include debt obligations such as
bonds, debentures (i.e., unsecured bonds) and notes (including variable
and floating rate instruments), as well as sinking fund and callable
bonds. The Fund may also invest in municipal obligations issued by or on
behalf of states, territories, possessions or districts of the U.S. or
their political subdivisions, agencies, instrumentalities or authorities.
- U.S. Government Securities. The Fund may invest in debt
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities ("U.S. Government Securities"). Although U.S.
Government Securities are considered among the most creditworthy of fixed-
income investments, the values of U.S. Government Securities (and of most
fixed-income securities generally) will vary inversely to changes in
prevailing domestic interest rates. Yields on U.S. Government securities
are generally lower than the yields on corporate debt securities.
Certain U.S. Government Securities, including U.S. Treasury notes and
bonds, and mortgage-backed securities guaranteed by Government National
Mortgage Association ("Ginnie Maes"), are supported by the full faith and
credit of the United States. Certain other U.S. Government Securities,
issued or guaranteed by Federal agencies or government-sponsored
enterprises, are not supported by the full faith and credit of the United
States. These latter securities may include obligations supported by the
ability of the issuer to borrow from the U.S. Treasury (which is not under
a legal obligation to make such loans), such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs"), and obligations supported by the
credit of the instrumentality, such as Federal National Mortgage
Association bonds ("Fannie Maes"). Among other U.S. Government Securities
in which the Fund may invest are zero coupon U.S. Treasury securities,
mortgage-backed securities and money market instruments.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury. In general, zero coupon U.S.
Treasury securities include (1) U.S. Treasury notes or bonds that have
been "stripped" of their interest coupons, (2) U.S. Treasury bills issued
without interest coupons, or (3) certificates representing an interest in
stripped securities. A zero coupon Treasury security pays no current
interest and trades at a deep discount from its face value. It will be
subject to greater market fluctuations from changes in interest rates than
interest-paying securities. The Fund accrues interest on zero coupon
securities without receiving the actual cash. As a result of holding
these securities, the Fund could possibly be forced to sell portfolio
securities to pay cash dividends or meet redemptions.
Mortgage-Backed Securities and CMOs. The Fund's investments may
include securities that represent participation interests in pools of
residential mortgage loans, including collateralized mortgage-backed
obligations ("CMOs"), which may be issued or guaranteed by (i) agencies
or instrumentalities of the U.S. Government (e.g. Ginnie Maes, Freddie
Macs and Fannie Maes), or (ii) private issuers. Such securities differ
from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semi-annually) with principal payments
at maturity or specified call dates. Mortgage-backed securities provide
monthly payments that are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. The issuer's obligation to make interest
and principal payments is secured by the underlying portfolio of mortgages
or mortgage-backed securities. Mortgage-backed securities created by
private issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance,
and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers. There can be no assurance that
private issuers of such securities will be able to meet their obligations.
The Fund may invest in CMOs that are "stripped"; that is, the security is
divided into two parts, one of which receives some or all of the principal
payments and the other which receives some or all of the interest.
Stripped securities that receive interest only are subject to increased
volatility due to interest rate changes, and have the additional risk that
if the principal underlying the CMO is prepaid, which is more likely to
happen if interest rates fall, the Fund will lose the anticipated cash
flow from the interest on the mortgages that were prepaid. See "Mortgage-
backed Securities" in the Statement of Additional Information for more
details.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease, as do the values of other debt securities,
but when prevailing interest rates decline, the values of pass-through
securities may not be as likely to rise to the same degree as the values
of other debt securities because of the pre-payment feature of pass-
through securities.
The Fund may also enter into "forward roll" transactions with banks
with respect to the mortgage-backed securities in which it can invest.
These require the Fund to secure its obligation in the transaction by
segregating assets with its custodian bank equal in amount to its
obligation under the roll. As new types of mortgage-related securities
are developed and offered to investors, the Manager will, subject to the
direction of the Fund's Board of Trustees and consistent with the Fund's
investment objective and policies, consider making investment in such new
types of mortgage-related securities.
- Foreign Securities. The Fund may invest in equity or debt
obligations (which may be denominated in U.S. dollars or in non-U.S.
currencies) issued or guaranteed by foreign corporations, certain
supranational entities (such as the World Bank) and foreign governments
(including their political subdivisions having taxing authority) or their
agencies or instrumentalities, and debt obligations issued by U.S.
corporations denominated in non-U.S. currencies. These investments may
include debt obligations such as bonds (including sinking fund and
callable bonds), debentures and notes (including variable and floating
rate instruments). The Manager will consider an issuer's relationship
with a foreign government as one of the factors in determining what
foreign securities to purchase. See "Other Investments," below, and
"Investment Objective and Policies" in the Statement of Additional
Information for further details about these investments.
The Fund's portfolio of foreign securities may include those of a
number of foreign countries or, depending upon market conditions, those
of a single foreign country. No more than 25% of the Fund's total assets
will be invested in government securities of any one foreign country or
in securities issued by companies organized under the laws of any one
foreign country. The percentage of the Fund's assets that will be
allocated to foreign securities will vary, depending on, among other
things, the relative yields of foreign and U.S. securities, the economies
of foreign countries, the condition of such countries' financial markets,
the interest rate climates of such countries and the relationship of such
countries' currencies to the U.S. dollar. The Manager evaluates
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies)
as well as technical and political data.
Other than as set forth above, the Fund has no other restrictions on
the amount of its assets that may be invested in foreign securities and
may purchase securities issued in any country, developed or
underdeveloped. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
highly speculative. Securities of foreign issuers that are represented
by American Depositary Receipts, or that are listed on a U.S. securities
exchange, or are traded in the U.S. over-the-counter market are not
considered "foreign securities" because they are not subject to many of
the special considerations and risks (discussed below and in the Statement
of Additional Information) that apply to foreign securities traded and
held abroad. If the Fund's securities are held abroad, the countries in
which such securities may be held and the sub-custodians holding them, in
most cases, must be approved by the Fund's Board of Trustees under
applicable SEC rules.
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. If foreign securities are not registered
under the Securities Act of 1933, the issuer may not have to comply with
the disclosure requirements of the Securities Exchange Act of 1934. The
values of foreign securities investments may be affected by changes in
currency rates, exchange control regulations, expropriation or
nationalization of 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. Foreign currency
losses incurred by the Fund after it has distributed income in a
particular period may result in the Fund having distributed more income
than was available from investment income, which could result in a return
of capital to shareholders. Additional costs may be incurred in
connection with investments in foreign securities because of generally
higher foreign brokerage commissions and the additional custodial costs
associated with holding foreign securities. More information about the
risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
- Special Risks of Lower-Rated Securities. The Manager may select
high-yield, "lower-grade" debt securities (or high-yielding unrated
securities) for investment, subject to the limits described above, because
they generally offer higher income potential than investment grade
securities. "Lower-grade" securities are those rated below "investment
grade," which means they have a rating below "BBB" by Standard & Poor's
Corporation or "Baa" by Moody's Investors Service, Inc. or similar ratings
by other rating organizations. "Lower-grade" debt securities the Fund may
invest in also include securities that are not rated by a nationally-
recognized rating organization like Standard & Poor's or Moody's, but
which the Manager judges to be comparable to lower-rated securities. For
a description of these securities ratings, please refer to the Appendix
in the Prospectus.
High yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss of
income and principal than lower yielding, investment grade securities.
There may be less of a market for them and therefore they may be harder
to sell at an acceptable price. There is a relatively greater possibility
that the issuer's earnings may be insufficient to make the payments of
interest due on the bonds. The issuer's low creditworthiness may increase
the potential for its insolvency.
These risks mean that the Fund may not achieve the expected income
from lower-grade securities, and that the Fund's net asset value per share
may be affected by declines in value of these securities. However, the
Fund's limitations on investments in these types of securities may reduce
some of the risk, as will the Fund's policy of diversifying its
investments.
- Money Market Instruments. The Fund may invest in the following
types of money market instruments (which are debt obligations generally
having a maturity of one year or less):
U.S. Government Securities. Obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
Bank Obligations. Certificates of deposit, bankers' acceptances,
time deposits, and letters of credit if they are payable in the United
States or London, England, and are issued or guaranteed by a domestic or
foreign bank having total assets in excess of $1 billion and which the
Manager has determined to be creditworthy, considering, among other
factors, ratings assigned to such securities by one or more "nationally-
recognized statistical rating organizations" ("NRSROs"), as such term is
defined in Rule 2a-7 under the Investment Company Act of 1940 (the
"Investment Company Act"), if rated.
Commercial Paper. Commercial paper is short-term, unsecured
promissory notes of a domestic or foreign company. The Fund's purchase
of commercial paper is limited to obligations rated by at least one Rating
Organization in one of the two highest rating categories for short-term
debt securities, or if unrated, issued by a corporation having an existing
debt security that meets such rating requirement or that is judged by the
Manager to be of comparable quality to obligations so rated.
Corporate Obligations. Corporate debt obligations (including master
demand notes and obligations other than commercial paper) if they are
issued by domestic corporations and are rated at least "A" by Standard &
Poor's or Moody's, or unrated securities that are of comparable quality
as determined by the Manager.
Other Obligations. Money market instruments other than those listed
above, if they are (a) subject to repurchase agreements or (b) guaranteed
as to principal and interest by a domestic or foreign bank having total
assets in excess of $1 billion, by a corporation whose commercial paper
may be purchased by the Fund, or by a foreign government having an
existing debt security rated at least "A" by a NRSRO.
Board-Approved Instruments. Other short-term investments of a type
that the Fund's Board of Trustees, or the Manager under guidelines
established by the Board, determines present minimal credit risks and that
are of "high quality" as determined by any NRSRO or, in the case of an
instrument that is not rated, of comparable quality as determined by the
Board, or by the Manager under guidelines established by the Board.
- Other Investments. The Fund may invest up to 35% of its assets
that are not invested in the four sectors described above in the following
types of securities:
Common and Preferred Stocks. The Fund may invest in common and
preferred stock issued by domestic or foreign corporations. Common stock
represents an equity interest in a corporation and may pay dividends.
Preferred stock, unlike common stock, generally offers a stated dividend
rate payable from the corporation's earnings. Preferred stock dividends
may be cumulative or non-cumulative, fixed, participating, auction rate
or other. If interest rates rise, a fixed dividend on preferred stocks
may be less attractive, causing the price of preferred stocks to decline
either absolutely or relative to alternative investments. Preferred stock
may have mandatory sinking fund provisions, as well as provisions for call
or redemption prior to maturity, generally a negative feature when
interest rates decline. The rights to payment of dividends on preferred
stocks are generally subordinate to rights associated with a corporation's
debt securities. No more than 25% of the Fund's assets, will be invested
in debt securities and in common and preferred stock of companies
organized under the laws of any one foreign country.
Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan and
are acquired from banks or brokers that have made the loan or are members
of the lending syndicate. No more than 5% of the Fund's net assets can
be invested in participation interest of the same issuer. The Manager
has set certain creditworthiness standards for issuers of loan
participations, and monitors their creditworthiness. The value of loan
participation interests depends primarily upon the creditworthiness of the
borrower, and its ability to pay interest and principal. Borrowers may
have difficulty making payments. If a borrower fails to make scheduled
interest or principal payments, the Fund could experience a decline in the
net asset value of its shares. Some borrowers may have senior securities
rated as low as "C" by Moody's or "D" by Standard & Poor's, but may be
deemed acceptable credit risks. Participation interests are subject to
the Fund's limitations on investments in illiquid securities. See
"Illiquid and Restricted Securities".
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by corporations or private issuers. These zero coupon
securities are: (i) notes or debentures that do not pay current interest
and are issued at substantial discounts from par value, or (ii) notes or
debentures that pay no current interest until a stated date one or more
years into the future, after which the issuer is obligated to pay interest
until maturity, usually at a higher rate than if interest were payable
from the date of issuance. Investment in zero coupon securities helps the
Fund in seeking its objective of current income because the Fund accrues
interest income on such securities from the date of settlement. Such zero
coupon securities are subject to certain risks, in addition to the risks
identified above under "U.S. Government Securities - Zero Coupon
Securities," such as the risk of the issuer's failure to pay interest and
repay principal in accordance with the terms of the obligation.
Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities described below. They are issued by trusts
and special purpose corporations. They are backed by a pool of assets,
such as credit card or auto loan receivables, which are the obligations
of a number of different parties. The income from the underlying pool is
passed through to holders, such as the Fund. These securities are
frequently supported by a credit enhancement, such as a letter of credit,
a guarantee or a preference right. However, the extent of the credit
enhancement may be different for different securities and generally
applies to only a fraction of the security's value. These securities
present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in
the related collateral.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." Because the Fund will actively trade
its portfolio to benefit from short-term yield disparities among different
issues of fixed-income securities or otherwise to increase its income, the
Fund may be subject to a greater degree of portfolio turnover than might
be expected from investment companies that invest substantially all of
their assets on a long-term basis. The portfolio turnover rate cannot be
predicted, but it is anticipated that its annual turnover rate generally
will not exceed 200% (excluding turnover of securities having a maturity
of one year or less).
Portfolio turnover affects brokerage costs, as well as a fund's
ability to qualify as a "regulated investment company" under the Internal
Revenue Code for tax deductions for dividends and capital gains
distributions the Fund pays to shareholders. The Fund qualified in its
last fiscal year and intends to do so in the coming year, although it
reserves the right not to qualify.
During periods of falling interest rates, the values of outstanding
fixed-income securities generally rise. Conversely, during periods of
rising interest rates, the value of such securities generally decline.
The magnitude of these fluctuations will generally be greater for
securities with longer maturities.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and broadly-based bond indices, or enter
into interest rate swap agreements. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them, described below. 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 buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Forward
contracts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Fund for liquidity purposes or defensive reasons, or to raise cash to
distribute to shareholders.
Futures. The Fund may buy and sell futures contracts that relate to
(1) interest rates (these are referred to as Interest Rate Futures), and
(2) other fixed-income securities indices (these are referred to as
Financial Futures). These types of Futures are described in "Hedging With
Options and Futures Contracts" in the Statement of Additional Information.
Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based bond
indices, foreign currencies, Financial Futures and Interest Rate Futures,
or to terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options. When the Fund writes
a call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to (1) securities that the Fund owns, (2) Financial Futures, (3) Interest
Rate Futures, (4)broadly-based bond indices or (5) foreign currencies.
The Fund can buy a put on a Future whether or not the Fund owns the
particular Future in its portfolio. The Fund may sell a put other than
a put that it previously purchased on debt securities or Futures but only
if as a result of the escrow requirements described below, less than 50%
of the Fund's net assets would be required to be segregated liquid assets.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls; (2) calls the Fund buys or
sells must be listed on a national or foreign securities or commodities
exchange, or quoted on the Automated Quotation System of the National
Association of Securities Dealers, Inc. (NASDAQ) or, in the case of calls
on debt securities, traded in the national or foreign over-the-counter
markets; (3) in the case of puts and calls on foreign currency, they must
be traded on a securities or commodities exchange, or in the over-the-
counter market, or are quoted by recognized dealers in those options; (4)
each call or put the Fund writes must be "covered" while it is
outstanding: that means the Fund must own the investment on which the
call was written or it must own other securities that are acceptable for
the escrow arrangements required for calls or puts; (5) the Fund may write
calls on Futures contracts it owns but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to enable
it to satisfy its obligations if the call is exercised; (6) a call or put
option 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.
Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to "lock-in" the U.S.
dollar price of a security dominated in a foreign currency that the Fund
has bought or sold, or to protect against losses from changes in the
relative values of the U.S. dollar and a foreign currency. The Fund may
also use "cross hedging," where the Fund hedges against changes in
currencies other than the currency in which a security it holds is
denominated.
Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest
on a security. For example, they may swap a right to receive floating
rate payments for fixed rate payments. The Fund enters into swaps only
on securities it owns. The Fund may not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will segregate liquid
assets (such as cash or U.S. Government securities or other appropriate
high grade debt obligations) to cover any amounts it could owe under swaps
that exceed the amounts it is entitled to receive, and it will adjust that
amount daily, as needed.
Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on a
security that has increased in value, the Fund will be required to sell
the security at the call price and will not be able to realize any profit
if the security has increased in value above the call price. For example,
the use of forward contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a
foreign currency. To limit its exposure in foreign currency exchange
contracts, the Fund limits its exposure to the amount of its assets
denominated in the foreign currency. Interest rate swaps are subject to
credit risks (if the other party fails to meet its obligations) and also
to interest rate risks. The Fund
could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. These risks are
described in greater detail in the Statement of Additional Information.
- Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." The Fund may use some types
of derivatives for hedging purposes, and may invest in others because they
offer the potential for increased income and principal value. In general,
a "derivative investment" is a specially-designed investment whose
performance is linked to the performance of another investment or
security, such as an option, future, index or currency. In the broadest
sense, derivative investments include exchange-traded options and futures
contracts (please refer to "Writing Covered Calls" and "Hedging with
Options and Futures Contracts," above).
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the Manager expected it to perform.
The performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks can mean
that the Fund will realize less income than expected from its investments,
or that it can lose part of the value of its investments, which will
affect the Fund's share price. Certain derivative investments held by the
Fund may trade in the over-the-counter markets and may be illiquid. If
that is the case, the Fund's investment in them will be limited, as
discussed in "Illiquid and Restricted Securities," above.
Another type of derivative the Fund may invest in is an "index-
linked" note. On the maturity of this type of debt security, payment is
made based on the performance of an underlying index, rather than based
on a set principal amount for a typical note. Another derivative
investment the Fund may invest in is a currency-indexed security. These
are typically short-term or intermediate-term debt securities. Their
value at maturity or the interest rates at which they pay income are
determined by the change in value of the U.S. dollar against one or more
foreign currencies or an index. In some cases, these securities may pay
an amount at maturity based on a multiple of the amount of the relative
currency movements. This variety of index security offers the potential
for greater income but at a greater risk of loss.
Other derivative investments the Fund may invest in include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the price
of the issuer's common stock at the time of maturity. In either case
there is a risk that the amount payable at maturity will be less than the
principal amount of the debt (because the price of the issuer's common
stock is not as high as was expected).
- Special Risks - Borrowing for Leverage. The Fund may borrow
money from banks to buy securities. "Forward roll" transactions,
discussed under "Mortgage-Backed Securities and CMOs" are also considered
to be a form of borrowing by the Fund subject to that asset coverage
requirement. The Fund will borrow only if it can do so without putting
up assets as security for a loan. This is a speculative investment method
known as "leverage." This investing technique may subject the Fund to
greater risks and costs than funds that do not borrow. These risks may
include the possibility that the Fund's net asset value per share will
fluctuate more than funds that don't borrow, since the Fund pays interest
on borrowings and interest expense affects the Fund's share price.
Borrowing for leverage is subject to limits under the Investment Company
Act, described in more detail in "Borrowing for Leverage" in the Statement
of Additional Information.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of
the Fund's net assets and are subject to other conditions described in the
Statement of Additional Information. The Fund presently does not intend
to lend its portfolio securities, but if it does, the value of securities
loaned is not expected to exceed 5% of the value of its total assets.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date.
- Short Sales "Against-the-Box." In a short sale, the seller does
not own the security that is sold, but normally borrows the security to
fulfill its delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Fund may not
sell securities short except in collateralized transactions referred to
as short sales "against-the-box," where the Fund owns an equivalent amount
of the securities sold short. This technique is primarily used for tax
purposes. No more than 15% of the Fund's net assets will be held as
collateral for short sales at any one time.
Other Investment Restrictions. The Fund has other investment
restrictions
which are fundamental policies. Under these fundamental policies, the
Fund cannot do any of the following: (1) purchase securities issued or
guaranteed by any one issuer (except the U.S. Government or its agencies
or instrumentalities), if, with respect to 75% of its total assets, more
than 5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would then own more than 10% of that issuer's voting
securities; (2) concentrate investments to the extent that 25% or more of
the value of its total assets is invested in securities of issuers in the
same industry (excluding the U.S. Government, its agencies and
instrumentalities); for purposes of this limitation, utilities will be
divided according to their services; for example, gas, gas transmission,
electric and telephone each will be considered a separate industry; (3)
make loans, except by purchasing debt obligations in accordance with its
investment objectives and policies, or by entering into repurchase
agreements, or as described in "Loans of Portfolio Securities"; (4) buy
securities of an issuer which, together with any predecessor, has been in
operation for less than three years, if as a result, the aggregate of such
investments would exceed 5% of the value of the Fund's total assets; or
(5) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or by virtue of ownership of other securities has the right,
without payment of any further consideration, to obtain an equal amount
of securities sold short ("short sales against-the-box").
All of the percentage restrictions described above and elsewhere in
the Prospectus (other than those described under "Borrowing for Leverage")
apply only at the time of investment and require no action by the Fund as
a result of subsequent changes in value of the investment or the size of
the Fund. There are other fundamental policies discussed in the Statement
of Additional Information.
How the Fund is Managed.
Organization and History. The Fund was organized in 1991 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class B. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote together on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of September 30, 1994, and with more than 1.8 million shareholder
accounts. The Manager is
owned by Oppenheimer Acquisition Corp., a holding company that is owned
in part by senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company, a mutual life insurance company.
- Portfolio Manager. The Portfolio Managers of the Fund are Arthur
P. Steinmetz, a Senior Vice President of the Manager, and David P. Negri,
a Vice President of the Manager. Each serves as a Portfolio Manager and
as Vice President of the Fund. They have been the persons principally
responsible for the day-to-day management of the Fund's portfolio since
the Fund's inception in November, 1992. During the past five years,
Messrs. Steinmetz and Negri have also served as officers and portfolio
managers for other OppenheimerFunds.
- 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 $500 million of
aggregate net assets, 0.62% of the next $500 million, 0.59% of the next
$500 million, and 0.50% of net assets in excess of $1.5 billion. The
Fund's management fee for its last fiscal year was 0.65% of average annual
net assets for both its Class A and Class B shares, which may be higher
than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about
the investment advisory agreement and the other expenses paid by the Fund
is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return," "average annual 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.
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 September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the past fiscal
year, the Fund's performance was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board, which caused a
decline in the overall price of municipal securities. The Manager added
to the Fund's holdings in corporate bonds issued by larger industrial
companies, notably in chemicals, mining, metals, and forest products
sectors. As interest rates rose off-shore and the dollar weakened against
major currency, the Manager added to the Fund's holdings of European
government bonds and larger European industrial companies.
Positions were reduced in U.S. Government securities as well as in
corporate bonds issued by consumer durable and financial service
companies, whose earnings are often sensitive to interest rate changes.
- Comparing the Fund's Performance of the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1994. In the case of Class
A shares, performance is measured from the commencement of operations on
August 4, 1992, and in the case of Class B shares, from the inception of
the Class on November 30, 1992, with all dividends and capital gains
distributions reinvested in additional shares. The graph reflects the
deduction of the 3.5% maximum initial sales charge on Class A shares and
the maximum 4.0% contingent deferred sales charge on Class B shares.
The Fund's performance is compared to the performance of the Lehman
Aggregate Bond Index and the Lehman Intermediate Government/Corporate Bond
Index. The Lehman Aggregate Bond Index is an unmanaged index of
investment grade debt securities with a maturity of at least one year,
consisting of treasury securities, agency issues, corporate bond issues
and mortgage-backed securities, and is widely regarded as a measure of the
performance of the general fixed-rate investment grade debt market. The
Lehman Intermediate Government/Corporate Bond Index includes the
government and corporate bond indices, including U.S. government treasury
and agency securities, corporate and yankee bonds. 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 index data does not reflect any assessment of the risk of the
investments included in the indexes.
Oppenheimer Strategic Short-Term Income Fund
Comparison of Change in Value
of $10,000 Hypothetical Investments to the
The Lehman Aggregate Bond Index and
The Lehman Intermediate Government/Corporate Bond Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer Strategic Short-Term Income Fund
Average Annual Total Returns
of the Fund at 9/30/94
A Shares 1-Year Life(1) B Shares 1-Year Life(2)
(2.91)% 0.54% (4.15)% 1.96%
_____________________
(1) Inception date of the Fund (Class A shares) was 8/4/92.
(2) Class B shares were first publicly offered on 11/30/92.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested. Sales charges are described below.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within five
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares. It is described below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to Class A and B, considering the effect of
the annual asset-based sales charge on Class B expenses (which, like all
expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
the investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class of
shares, and which class you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term investment. While future financial needs cannot
be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a
substantial amount over the long term, the reduced sales charges available
for larger purchases of Class A shares may offset the effect of paying an
initial sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher expenses on Class B, for which no initial sales
charge is paid. Additionally, dividends payable to Class B shareholders
will be reduced by the additional expenses borne solely by Class B, such
as the asset-based sales charge described below.
In general, if you expect shares to be substantially higher in value
at the time of redemption, Class B shares may be more advantageous than
Class A shares. However, if you plan to invest more than $100,000 (not
only in the Fund, but possibly in other OppenheimerFunds as well), then
Class A shares generally will be more advantageous than Class B, because
of the effect of the reduction of initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $1 million or more, in most cases Class
A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B shares
from a single investor.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumptions stated above. Therefore, these examples
should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features (such as CheckWriting) may not be available
to Class B shareholders, or other features (such as Automatic Withdrawal
Plans) might not be advisable (because of the effect of contingent
deferred sales charge) in non-retirement accounts for Class B
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Also,
because not all OppenheimerFunds currently offer Class B shares, and
because exchanges are permitted only to the same class of shares in other
OppenheimerFunds, you should consider how important the exchange privilege
is likely to be for you.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class than another class. It is important that investors understand that
the purpose of the Class B contingent deferred sales charge and asset-
based sales charge is the same as the purpose of the front-end sales
charge on sales of Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling
shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (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 the close of The New York Stock Exchange, on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be the net asset value. In some cases,
reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers
are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Percentage as
Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ------------------ ------------- -------------- -----------
<S> <C> <C> <C>
Less than $100,000 3.50% 3.63% 3.00%
$100,000 or more but
less than $250,000 3.00% 3.09% 2.50%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.50%
- ---------------
<FN>
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.
</TABLE>
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to the
Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A shares you purchase for your individual
accounts, or jointly, or on behalf of your children who are minors, under
trust or custodial accounts. A fiduciary can count all shares purchased
for a trust, estate or other fiduciary account (including one or more
employee benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the total amount
of the intended purchases. This can include purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares of defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) retirement distributions
or loans to participants or beneficiaries from qualified retirement plans,
deferred compensation plans or other employee benefit plans ("Retirement
Plans"), (2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, (4) involuntary redemptions of
shares by operation of law or under the procedures set forth in the Fund's
Declaration of Trust or adopted by the Board of Trustees, and (5) if, at
the time an order is placed for Class A shares that would otherwise be
subject to the Class A contingent deferred sales charge, the dealer agrees
to accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (with no further
commission payable if the shares are redeemed within 18 months of
purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. 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 5 years of the end of the calendar month 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 5 years, and (3) shares held the longest during the
5-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to
Charge)
- --------------------------------- --------------------------------
0 - 1 4.0%
1 - 2 3.0%
2 - 3 2.0%
3 - 4 2.0%
4 - 5 1.0%
5 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (the disability must have occurred after the account was
established and you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans, and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
591/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 591/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with other requirements for
such distributions under the Internal Revenue Code and may not exceed 10%
of the account value annually, measured from the date the Transfer Agent
receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 2.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September 30, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $274,471 (equal to 3.60% of the Fund's net assets represented by Class
B shares on that date), which have been carried over into the present Plan
year. If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for expenses it incurred before the Plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will send the
proceeds directly to your AccountLink bank account. Please refer to "How
to Sell Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund
shares, you have up to 6 months to reinvest all or part of the redemption
proceeds in Class A shares of the Fund or other OppenheimerFunds without
paying a sales charge. This privilege applies to Fund shares that you
purchased with an initial sales charge. It also applies to shares on
which you paid a contingent deferred sales charge when you redeemed them.
You must be sure to ask the Distributor for this privilege when you send
your payment.
Please consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- A redemption check is not payable to all shareholders listed on
the account statement
- A redemption check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as
an Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing on behalf of a corporation, partnership or other business,
or as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
When sending by Express Mail or Courier:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption
price on a regular business day, your call must be received by the
Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not
redeem shares held in an OppenheimerFunds retirement plan or under a share
certificate by telephone.
- To redeem shares through a service representative, call 1-800-
852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
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 10 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.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from
the other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request that is in
proper form by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. However, either
fund may delay the purchase of shares of the fund you are exchanging into
if it determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange
requests from a dealer in a "market-timing" strategy might require the
disposition of portfolio securities at a time or price disadvantageous to
the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the offering
may be suspended by the Board of Trustees at any time the Board believes
it is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 10 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same surname and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income on each regular business day, and pays
such dividends to shareholders monthly on or about the fourth Wednesday
of each month, but the Board of Trustees can change that date. In
addition, distributions may be made monthly out of any net short-term
capital gains realized from the sale of securities. 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.
Daily dividends on newly purchased shares will not be declared or
paid until such time as Federal Funds (funds credited to a member bank's
account at the Federal Reserve Bank) are available from the purchase
payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day.
Dividends will be declared on shares repurchased by a dealer or broker for
four business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
During the Fund's fiscal year ended September 30, 1994, the Fund
sought to pay dividends on its Class A shares at a constant level. That
was done keeping in mind the amount of net investment income and other
distributable income available from the Fund's portfolio investments.
However, the amount of each dividend can change from time to time (or
there might not be a dividend at all on either class) depending on market
conditions, the Fund's expenses, and the composition of the Fund's
portfolio. Attempting to pay dividends at a constant level required the
Manager to monitor the Fund's income stream from its investments to
maintain income at the required level. This practice did not affect the
net asset values of either class of shares. The Board of Trustees may
change or end the Fund's targeted dividend level for Class A shares at any
time. There is no targeted dividend level for Class B shares.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or loss
is the difference between the price you paid for the shares and the price
you received when you sold them.
- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
A non-taxable return of capital may reduce your tax basis in your Fund
shares.
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 STRATEGIC SHORT-TERM INCOME FUND
Graphic material included in Prospectus of Oppenheimer Strategic
Short-Term Income Fund: "Comparison of Total Return of Oppenheimer
Strategic Short-Term Income Fund with The Lehman Aggregate Bond Index and
The Lehman Intermediate Government/Corporate Bond Index - Change in Value
of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Strategic Short-Term Income Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical $10,000
investment in the Fund. In the case of the Fund's Class A shares, that
graph will cover the period from commencement of operations (August 4,
1992) through 9/30/94 and in the case of the Fund's Class B shares will
cover the period from the inception of the class (November 30, 1992)
through 9/30/94. The graph will compare such values with hypothetical
$10,000 investments over the same time periods in The Lehman Aggregate
Bond Index and The Lehman Intermediate Government/Corporate 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 Aggregate Bond Index and The Lehman
Intermediate Government/Corporate Bond Index, is set forth in the
Prospectus under "How Has the Fund Performed - Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Oppenheimer Lehman
Strategic Lehman Intermediate
Fiscal Year Short-Term Aggregate Government/Corporate
(Period) Ended Income A Bond Index Bond Index
<S> <C> <C> <C>
08/4/92 $9,650 $10,000 $10,000
09/30/92 $9,603 $10,119 $10,127
11/30/92 $9,316 $9,998 $9,931
09/30/93 $10,043 $11,128 $11,181
09/30/94 $10,121 $10,770 $10,926
Oppenheimer Lehman
Strategic Lehman Intermediate
Fiscal Year Short-Term Aggregate Government/Corporate
(Period) Ended Income B Bond Index Bond Index
11/30/92 $10,000 $10,000 $10,000
9/30/93 $10,681 $11,141 $11,259
9/30/94 $10,366 $10,782 $11,002
</TABLE>
<PAGE>
Appendix
Description of Ratings
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.
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.
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent OPPENHEIMER
Oppenheimer Shareholder Services Strategic Short-Term Income Fund
P.O. Box 5270 Prospectus
Denver, Colorado 80217 Effective January 27, 1995
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 & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representation must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in
any state to any person to whom it is unlawful to make such offer in such
state.
PR295.0195.N* Printed on recycled paper
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated January 27, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 27, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF 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
Trustees and Officers of the Fund
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
Appendix A A-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are discussed 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 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 in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment manager, Oppenheimer Management Corporation (the "Manager"),
evaluates the investment merits of fixed-income securities primarily
through the exercise of its own investment analysis. This may include,
among other things, consideration of the financial strength of an issuer,
including its historic and current financial condition, the trading
activity in its securities, present and anticipated cash flow, estimated
current value of its assets in relation to their historical cost, the
issuer's experience and managerial expertise, responsiveness to changes
in interest rates and business conditions, debt maturity schedules,
current and future borrowing requirements, and any change in the financial
condition of an issuer and the issuer's continuing ability to meet its
future obligations. The Manager also may consider anticipated changes in
business conditions, levels of interest rates of bonds as contrasted with
levels of cash dividends, industry and regional prospects, the
availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and
the world.
- Investment Risks of Fixed-Income Securities. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Generally,
higher yielding lower-grade bonds are subject to credit risk to a greater
extent than lower yielding higher quality bonds. Interest rate risk
refers to the fluctuations in value of fixed-income securities resulting
solely from the inverse relationship between price and yield of fixed-
income securities. An increase in prevailing interest rates will
generally reduce the market value of outstanding fixed-income investments,
and a decline in interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in
the market value of fixed-income securities after the Fund buys them will
not affect the interest payable on those securities, and thus the cash
income received by the Fund from such securities. However, those price
fluctuations will be reflected in the valuations of those securities used
to compute the Fund's net asset value.
As stated in the Prospectus, the Fund will not invest in debt
securities rated lower than "Baa" by Moody's or "BBB" by Standard &
Poors. If the ratings of securities held by the Fund fall below those
ratings described above, and if the Fund retains those securities, it may
be subject to greater risks. Obligations rated as low as "C" by Moody's
or "D" by Standard & Poor's indicate that the obligations are speculative
in a high degree and may be in default. Risks of high yield securities
may include: (i) limited liquidity and secondary market support, (ii)
substantial market price volatility resulting from changes in prevailing
interest rates, (iii) subordination to the prior claims of banks and other
senior lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates
whereby the Fund may be able to reinvest the premature redemption proceeds
of those securities only in lower-yielding securities, (v) the possibility
that earnings of the issuer may be insufficient to meet its debt service,
and (vi) the issuer's low creditworthiness and potential for insolvency
during periods of rising interest rates and economic downturn.
As stated in the Prospectus, under normal circumstances the Fund
will maintain a dollar-weighted average portfolio maturity of not more
than three years. The Manager will in good faith determine the maturity
of debt obligations purchased by the Fund and will consider various
factors applicable to each type of debt obligation, including those set
forth below. With respect to corporate debt obligations, the Manager will
consider sinking fund and call provisions as well as the current price of
the obligation and the relationship between the price and estimated
likelihood that the obligation will be called. In determining the
maturity of mortgage-backed securities, the Manager reviews the prepayment
history of the obligation and similar securities, current interest rates
and median estimates of maturity for the obligation available from
dealers. With respect to hedging instruments, the Manager looks at the
term of both the hedging instrument and the underlying security and the
relationship between the instruments. Subject to the requirement that the
dollar weighted average portfolio maturity will not exceed three years,
the Fund may invest in individual debt obligations of any maturity,
including obligations with a remaining stated maturity of more than three
years.
- Domestic Securities. The Fund's investments in investment grade
fixed-income securities and other securities issued by domestic
corporations may include, among others, debt obligations (bonds,
debentures and notes), money market instruments, common stocks and
preferred stocks.
Preferred Stocks. Dividends on some preferred stocks may be
"cumulative," requiring all or a portion of prior unpaid dividends to be
paid. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation
of the corporation, and may be "participating," which means that it may
be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on distribution of a corporation's assets
in the event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.
Participation Interests. The Fund may invest in participation
interests, subject to the limit, described in "Restricted and Illiquid
Securities" in the Prospectus, that no more than 10% of the Fund's net
assets may be held in illiquid investments. Participation interests
represent an undivided interest in or assignment of a loan made by the
issuing financial institution. Participation interests are primarily
dependent upon the financial strength of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the net asset value of its shares. In the event
of a failure by the financial institution to perform its obligation in
connection with the participation agreement, the Fund might incur certain
costs and delays in realizing payment or may suffer a loss of principal
and/or interest. The Manager has set certain creditworthiness standards
for issuers of loan participation and monitors their creditworthiness.
- Collateralized Mortgage-Backed Obligations ("CMO's"). CMO's are
fully-collateralized bonds which are general obligations of the issuer
thereof, either a private issuer, the U.S. Government or a U.S. Government
instrumentality. See "Investment Objective and Policies - U.S. Government
Securities" immediately below for further details.
- Asset-Backed Securities. These securities, issued by trusts and
special purpose corporations, are backed by pools of assets, primarily
automobile and credit-card receivables and home equity loans, which pass
through the payments on the underlying obligations to the security holders
(less servicing fees paid to the originator or fees for any credit
enhancement). The value of an asset-backed security is affected by
changes in the market's perception of the asset backing the security, the
creditworthiness of the servicing agent for the loan pool, the originator
of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been
exhausted. Payments of principal and interest passed through to holders
of asset-backed securities are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee
by another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally
applies to only a fraction of the asset-backed security's par value until
exhausted. If the credit enhancement of an asset-backed security held by
the Fund has been exhausted, and if any required payments of principal and
interest are not made with respect to the underlying loans, the Fund may
experience losses or delays in receiving payment. The risks of investing
in asset-backed securities are ultimately dependent upon payment of
consumer loans by the individual borrowers. As a purchaser of an asset-
backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments, which shorten the weighted
average life of asset-backed securities and may lower their return, in the
same manner as described above for prepayments of a pool of mortgage loans
underlying mortgage-backed securities. However, asset-backed securities
do not have the benefit of the same security interest in the underlying
collateral as do mortgage backed securities.
- Municipal Securities. Because municipal securities are
generally exempt from federal income taxation, they generally yield less
than taxable fixed-income securities of the same rating. The Fund does
not invest in municipal securities for tax-exempt income, as any income
earned by the Fund on such securities is treated as taxable income when
distributed to shareholders. Rather, the Fund seeks to take advantage of
yield differentials with other debt securities, which may be reflected in
bond prices, and thus reflect potential for capital appreciation.
- U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities, mortgage-backed securities and money market instruments.
- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans which may
or may not be guaranteed by agencies or instrumentalities of the U.S.
Government. Such securities differ from conventional debt securities
which generally provide for periodic payment of interest in fixed or
determinable amounts (usually semi-annually) with principal payments at
maturity or specified call dates. The mortgage-backed securities in which
the Fund may invest may be backed by the full faith and credit of the U.S.
Treasury (e.g., direct pass-through certificates of Government National
Mortgage Association); some are supported by the right of the issuer to
borrow from the U.S. Government (e.g., obligations of Federal Home Loan
Mortgage Corporation); and some are backed by only the credit of the
issuer itself. Any such guarantees do not extend to the value or yield
of the mortgage-backed securities themselves or to the net asset value of
the Fund's shares. Any of those government agencies may also issue
collateralized mortgage-backed obligations ("CMO's"), discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security may not be as likely to rise to the extent that the values of
other debt securities rise, because of the prepayment feature of pass-
through securities. The Fund's reinvestment of scheduled principal
payments and unscheduled prepayments it receives may occur at higher or
lower rates than the original investment, thus affecting the yield of the
Fund. Monthly interest payments received by the Fund have a compounding
effect which may increase the yield to the Fund more than debt obligations
that pay interest semi-annually. Because of those factors, mortgage-
backed securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest rates.
The Fund may purchase mortgage-backed securities at par or at a premium
or a discount. Accelerated prepayments adversely affect yields for pass-
through securities purchased at a premium (i.e., at a price in excess of
their principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the
time the obligation is repaid. The opposite is true for pass-through
securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-
only" or "IO" class), while the other class will receive all of the
principal (the "principal-only" or "PO" class). Interest only securities
are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. An increase in principal
payments or prepayments will reduce the income available to the IO
security. In other types of CMOs, the underlying principal payments may
apply to various classes in a particular order, and therefore the value
of certain classes or "tranches" of such securities may be more volatile
than the value of the pool as a whole, and losses may be more severe than
on other classes.
- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater
part of principal investment long before the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of
the GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues mortgage
pass-through certificates ("PCs"). PCs resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FHLMC guarantees timely monthly
payment of interest on Freddie Macs and the ultimate payment of principal.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
government.
- Zero Coupon Securities. Because the Fund accrues taxable income
from zero coupon securities issued by either the U.S. Treasury or
corporations without receiving cash, the Fund may be required to sell
portfolio securities in order to pay a dividend that includes such accrued
income, depending, among other things, upon the number of shareholders who
elect to receive dividends in cash rather than reinvesting dividends in
additional shares of the Fund. The Fund might also sell portfolio
securities to maintain portfolio liquidity.
- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality,
or a private issuer. Such bonds generally are secured by an assignment
to a trustee (under the indenture pursuant to which the bonds are issued)
of collateral consisting of a pool of mortgages. Payments with respect
to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages
are not passed through to the holders of the CMOs as such (i.e., the
character of payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such
payments are dedicated to payment of interest on and repayment of
principal of the CMOs. CMOs often are issued in two or more classes with
different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the
class of CMO first to mature generally will be paid down. Therefore,
although in most cases the issuer of CMOs will not supply additional
collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
- Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions with respect to mortgage-backed securities
issued by GNMA, FNMA or FHLMC. In a forward roll transaction, which is
considered to be a borrowing by the Fund, the Fund will sell a mortgage
security to a bank or other permitted entity and simultaneously agree to
repurchase a similar security from the institution at a later date at an
agreed upon price. The mortgage-backed securities that are repurchased
will bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different prepayment
histories than those sold. Risks of mortgage-backed security rolls
include: (i) the risk of prepayment prior to maturity, (ii) the
possibility that the Fund may not be entitled to receive interest and
principal payments on the securities sold and that the proceeds of the
sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the roll,
and (iii) the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to
purchase the securities. Upon entering into a mortgage-backed security
roll, the Fund will be required to place cash, U.S. Government Securities
or other high-grade debt securities in a segregated account with its
Custodian in an amount equal to its obligation under the roll.
- Foreign Securities. As noted in the Prospectus, the Fund may
invest in debt obligations and other securities (which may be denominated
in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in debt
obligations and other securities issued by U.S. corporations denominated
in non-U.S. currencies. The types of foreign debt obligations and other
securities in which the Fund may invest are the same types of debt
obligations and other securities identified under "Domestic Securities,"
above.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net income.
There is no assurance that foreign governments will be able or willing to
honor their commitments.
The Fund may invest in U.S. dollar-denominated foreign debt
obligations known as "Brady Bonds," which are issued for the exchange of
existing commercial bank loans to foreign entities for new obligations and
are generally collateralized in full as to principal due at maturity by
U.S. Treasury zero coupon obligations that have the same maturity. Brady
Bonds are often viewed as having three or four valuation components: (i)
the collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the
event of a default with respect to collateralized Brady Bonds as a result
of which the payment obligations of the issuer are accelerated, the zero
coupon Treasury securities held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be sold
and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds,
which will continue to be outstanding, at which time the face amount of
the collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In addition, in light
of the residual risk of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
to be viewed as speculative.
Investing in foreign securities offers potential benefits not
available from investments 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 bond or
other markets that do not move in a manner parallel to U.S. markets.
Investments in foreign securities present 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.
Money Market Instruments. The money market instruments in which the
Fund may invest include the following:
- Bank Obligations and Instruments Secured Thereby. These include
time deposits, certificates of deposit and bankers' acceptances if they
are: (i) obligations of a domestic bank with total assets of at least $1
billion or (ii) U.S. dollar-denominated obligations of a foreign bank with
total assets of at least U.S. $1 billion. The Fund may also invest in
instruments secured by such obligations (e.g., debt which is guaranteed
by the bank). For purposes of this section, the term "bank" includes
commercial banks, savings banks, and savings and loan associations which
may or may not be members of the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate, whether or not subject to
withdrawal penalties. However, such deposits which are subject to
withdrawal penalties, other than those maturing in seven days or less, are
subject to the 15% limitation on the Fund's net assets that may be
invested in illiquid investments, set forth in the Prospectus under
"Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit instruments
used to finance the import, export, transfer or storage of goods. They
are deemed "accepted" when a bank guarantees their payment at maturity.
- Commercial Paper. The Fund's commercial paper investments in
addition to those described in the Prospectus include the following.
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts
by the Fund at varying rates of interest pursuant to direct arrangements
between the Fund, as lender, and the borrower. They permit daily changes
in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to
the full amount of the note without penalty. These notes may or may not
be backed by bank letters of credit. Because these notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem is dependent upon the ability of
the borrower to pay principal and interest on demand. The Fund has no
limitations on the type of issuer from whom these notes will be purchased.
The Manager will consider the earning power, cash flow and other liquidity
ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made
demand simultaneously. Investments in bank time deposits and master
demand notes are subject to the 15% of total assets limitation on illiquid
securities.
Floating Rate/Variable Rate Notes. Some of the notes the Fund
may purchase may have variable or floating interest rates. Variable rates
are adjustable 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.
Other Investment Techniques and Strategies
- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable bonds, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of deliverable securities or liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice as to a Future put the Fund in a short futures
position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Futures,
(ii) buy puts or such Futures or securities, or (iii) write calls on
securities held by it or on Futures. When hedging to protect against the
possibility that portfolio securities are not fully included in a rise on
value of the debt securities market, the Fund may: (i) buy Futures, or
(ii) buy calls on such Futures or on securities. When hedging to protect
against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) buy puts on that foreign currency and on
foreign currency Futures, (b) write calls on that currency or on such
Futures, or (c) enter into Forward Contracts at a higher or lower rate
than the spot ("cash") rate.
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.
- Financial Futures and Interest Rate Futures. The Fund may buy
and sell futures contracts relating to a securities index ("Financial
Futures"). Financial futures are contracts based on the future value of
the basket of securities that comprise the underlying index. The
contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transaction or to enter into an offsetting contract.
No physical delivery of the securities underlying the index is made on
settling the futures obligation. No monetary amount is paid or received
by the Fund on the purchase or sale of a Financial Future.
The Fund may also buy Futures relating to debt securities
("Interest Rate Futures"). An Interest Rate Future obligates the seller
to deliver and the purchaser to take a specific type of debt security at
a specific future date for a fixed price to settle the futures
transaction, or to enter into an offsetting contract. As with Financial
Futures, no monetary amount is paid or received by the Fund on the
purchase of an Interest Rate Future.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment, in cash or U.S. Treasury bills, with
the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As
the Future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may
elect to close out its position by taking an opposite position, at which
time a final determination of variation margin is made and additional cash
is required to be paid by or released to the Fund. Any gain or loss is
then realized by the Fund on the Future for tax purposes. Although
Financial Futures by their terms call for settlement by the delivery of
cash, and Interest Rate Futures call for the delivery of a specific debt
security, in most cases the settlement obligation is fulfilled without
such delivery by entering into an offsetting transaction. All Futures
transactions are effected through a clearing house associated with the
exchange on which the contracts are traded.
- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put lapses
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price,
which will usually exceed the market value of the investment at that time.
In that case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation
to pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
- Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When the Fund
purchases a call, it pays a premium (other than in a closing purchase
transaction) and, except as to calls on indices or Financial Futures, has
the right to buy the underlying investment from a seller of a
corresponding call on the same investment during the call period at a
fixed exercise price. In purchasing a call, the Fund benefits only if the
call is sold at a profit or if, during the call period, the market price
of the underlying investment is above the sum of the call price,
transaction costs, and the premium paid, and the call is exercised. If
the call is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When the
Fund purchases a call on an Index or Financial Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period
at a fixed exercise price. Buying a put on an investment the Fund owns
(a "protective put") enables the Fund to attempt to protect itself during
the put period against a decline in the value of the underlying investment
below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
Buying a put on an investment it does not own, either a put or an
index or a put on a Future not held by the Fund, permits the Fund either
to resell the put or buy the underlying investment and sell it at the
exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price, and as a result the put is not
exercised, the put will become worthless on the expiration date. In the
event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of
its loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value
of the underlying investments and, consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
- Options on Foreign Currency. The Fund intends to write and
purchase calls on foreign currencies. The Fund may purchase and write
puts and calls on foreign currencies that are traded on a securities or
commodities exchange or over-the-counter markets or are quoted by major
recognized dealers in such options. It does so to protect against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If the Manager
anticipates a rise in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing puts on
that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of
currency rate fluctuations adverse to the Fund's position, it would lose
the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain
that would otherwise result from a change in the relationship between the
U.S. dollar and a foreign currency. To attempt to limit its exposure to
loss under Forward Contracts in a particular currency, the Fund limits its
use of these contracts to the amount of its net assets denominated in that
currency or denominated in a closely-correlated foreign currency. Forward
contracts include standardized foreign currency futures contracts which
are traded on exchanges and are subject to procedures and regulations
applicable to other Futures. The Fund may also enter into a forward
contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign
currency of the forward contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. This technique is referred to as
"cross hedging." The success of cross hedging is dependent on many
factors, including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S. dollar.
To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty
in the level of future exchange rates. The use of Forward Contracts does
not eliminate fluctuations in the prices of the underlying securities the
Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. In addition, although Forward Contracts limit the risk of loss
due to a decline in the value of the hedged currencies, at the same time
they limit any potential gain that might result should the value of the
currencies increase.
There is no limitation as to the percentage of the Fund's assets
that may be committed to foreign currency exchange contracts. The Fund
does not enter into such forward contracts or maintain a net exposure in
such contracts to the extent that the Fund would be obligated to deliver
an amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts to cover its short positions. If the
value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than the
forward contract price, or the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the forward contract
price. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such
contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one part, the measure of that part's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also
must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months, whether
or not they were purchased on the exercise of a call held by the Fund;
(ii) purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts written or
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a
position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Options and Futures. An option position
may be closed out only on a market that provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. In addition to the
risks associated with hedging that are discussed in the Prospectus and
above, there is a risk in using short hedging by selling Futures to
protect against declines in the value of the Fund's portfolio securities
(due to an increase in interest rates). The risk is that the prices of
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
portfolio securities being hedged if the historical volatility of the
prices of the portfolio securities being hedged is more than the
historical volatility of the applicable index. It is also possible that
if the Fund has used hedging instruments in a short hedge, the market may
advance and the value of equity securities held in the Fund's portfolio
may decline. If that occurred, the Fund would lose money on the hedging
instruments and also experience a decline in value in its portfolio
securities. However, while this could occur for a very brief period or
to a very small degree, over time the value of a diversified portfolio of
equity securities will tend to move in the same direction as the indices
upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual
debt securities (long hedging) by buying Futures and/or calls on such
Futures or on debt securities, it is possible that the market may decline.
If the Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the debt securities purchased.
- Repurchase Agreements. The Fund may acquire securities subject
to repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board
of Trustees from time to time. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant
to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- 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 market 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.
- Borrowing for Leverage. From time to time, the Fund may borrow
from banks on an unsecured basis to invest the borrowed funds in portfolio
securities. Borrowing is subject to the restrictions stated in the
Prospectus. Pursuant to the requirements of the Investment Company Act
of 1940 (the "Investment Company Act"), any borrowing for this purpose
will only be made if the value of the Fund's assets, less its liabilities
other than borrowings, is equal to at least 300% of all borrowings
including the proposed borrowing. If the value of the Fund's assets, when
computed in that manner, should fail to meet the 300% asset coverage
requirement, the Fund is required to reduce its bank debt within three
days to the extent necessary to meet that coverage requirement. To do so,
the Fund may have to sell a portion of its investments at a time when it
would otherwise not want to sell the securities. Interest on money the
Fund borrows is an expense the Fund would not otherwise incur, so that
during periods of substantial borrowings, its expenses may increase more
than the expenses of funds that do not borrow.
- 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.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will maintain a segregated
account with its Custodian, consisting of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments provide the Fund
a technique to use against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward
commitment basis to attempt to limit its exposure to anticipated falling
prices. In periods of falling interest rates and rising prices, the Fund
might sell portfolio securities and purchase the same or similar
securities on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher cash yields.
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 (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) buy or
sell real estate, or commodities or commodity contracts, including futures
contracts; however, the Fund may invest in debt securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein and
the Fund may buy and sell any of the Hedging Instruments which it may use
as approved by the Fund's Board, whether or not such Hedging Instrument
is considered to be a commodity or commodity contract; (2) buy securities
on margin, except that the Fund may make margin deposits in connection
with any of the Hedging Instruments which it may use; (3) underwrite
securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter for purposes of the Securities Act of 1933;
(4) buy and retain securities of any issuer if those officers, Trustees
or Directors of the Fund or the Manager who beneficially own more than .5%
of the securities of such issuer together own more than 5% of the
securities of such issuer; (5) invest in oil, gas, or other mineral
exploration or development programs; or (6) buy the securities of any
company for the purpose of exercising management control.
For purposes of the Fund's policy not to concentrate described
under investment restriction number 2 of the Prospectus, the Fund has
adopted the Industry Classifications set forth in Appendix A to this
Statement of Additional Information.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Integrity Funds, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Bond
Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt
Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade
Bond Fund, and Oppenheimer Variable Account Funds; as well as the
following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (all of the
foregoing funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver-based OppenheimerFunds. As of December 30, 1994, the Trustees
and officers of the Fund as a group owned of record or beneficially less
than 1% of each class of shares of the Fund. The foregoing statement does
not reflect ownership of shares held of record by an employee benefit plan
for employees of the Manager (for which plan, two of the officers listed
above, Messrs. Fossel and Donohue, are trustees), other than the shares
beneficially owned under that plan by the officers of the Fund listed
above.
Robert G. Avis, Trustee; Age 63.*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 80.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 64.
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly associated
with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee; Age 52.*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee; Age 65.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age 73.
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age 73.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 79.
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
James C. Swain, Chairman and Trustee; Age 61.*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age 44.
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), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age 58.
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
David P. Negri, Vice President and Portfolio Manager; Age 36.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 40.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Robert G. Zack, Assistant Secretary; Age 46.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer; Age 36.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an
Accountant for Resolution Trust Corporation and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a broker-dealer.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Scott Farrar, Assistant Treasurer; Age 29.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Messrs. Fossel and Swain, who are both
officers and Trustees) receive no salary or fee from the Fund. The
Trustees of the Fund (excluding Messrs. Fossel and Swain) received the
total amounts shown below from all 22 of the Denver-based OppenheimerFunds
(including the Fund) listed in the first paragraph of this section, for
services in the positions shown:
<TABLE>
<CAPTION>
Total Compensation From All
Name Position Denver-based
OppenheimerFunds1
<S> <C> <C>
Robert G. Avis Trustee $53,000.00
William A. Baker Study and Audit Committee $73,257.01
Chairman and Trustee
Charles Conrad, Jr. Study and Audit Committee $68,293.67
Member and Trustee
Raymond J. Kalinowski Trustee $53,000.00
C. Howard Kast Trustee $53,000.00
Robert M. Kirchner Study and Audit Committee $68,293.67
Member and Trustee
Ned M. Steel Trustee $53,000.00
<FN>
______________________
1 For the 1994 calendar year.
</TABLE>
- Major Shareholders. As of December 30, 1994, Oppenheimer Funds
Distributor, Inc., P.O. Box 5061, Denver, Colorado 80217, beneficially
owned 505,050.505 Class A shares of 10.4% of the Class A shares of the
Fund. As of December 30, 1994, no person owned of record or was known by
the Fund to own beneficially 5% or more of the Class B shares of the Fund
or of the Fund as a whole.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Fossel and Mr. Swain)
serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. The Fund also pays its organizational and start-up
expenses. For the fiscal years ended September 30, 1994 and 1993, and for
the fiscal period from August 4, 1992 (commencement of operations) through
September 30, 1992, the management fees payable by the Fund to the Manager
were $222,890, $142,053 and $8,903, respectively. Because of the $12,964
of Fund expenses assumed by the Manager during the fiscal period ended
September 30, 1992 under a voluntary expense reimbursement undertaking
similar to that described below, no management fees were effectively paid
to the Manager for that period. During the year ended September 30, 1993,
the Manager assumed $34,955 of Fund Expenses.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that 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 the 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% of the next
$70 million of average net assets and 1.5% of average net assets in excess
of $100 million. The Manager reserves the right to amend or terminate
that undertaking at any time. Until December 1, 1993, the Manager had
also undertaken to assume the Fund's expenses (other than extraordinary
non-recurring expenses) to enable the Fund to pay a dividend of $.3036 per
share per annum, with the limitation that the dividend could not exceed
the Fund's annual gross earnings per share. That undertaking terminated
December 1, 1993.
The Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and
duties under the Agreement, the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection with
any matters to which the Agreement relates. The Agreement permits the
Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager or one of its affiliates shall no longer act
as investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A and Class B shares but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales, (excluding payments under the Distribution and
Service Plans but including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing
shareholders), are borne by the Distributor. During the fiscal period
from August 4, 1992 (commencement of operations) through September 30,
1992, the aggregate amount of sales charges on sales of the Fund's Class
A shares were $114,661, of which the Distributor and an affiliated broker-
dealer retained in the aggregate $19,878. During the Fund's fiscal years
ended September 30, 1993 and 1994, the aggregate sales charges on sales
of the Fund's Class A shares were $466,995 and $448,316, respectively, of
which the Distributor and an affiliated broker-dealer retained in the
aggregate $153,037 and $154,348 in those respective years. During the
Fund's fiscal period ended September 30, 1993 and during the fiscal year
ended September 30, 1994, the contingent deferred sales charges collected
on the Fund's Class B shares totalled $5,424 and $21,256, respectively,
all of which the Distributor retained. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above.
Regardless, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed
for each account.
Most purchases of money market instruments and debt obligations
are principal transactions at net prices. Instead of using a broker for
those transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained using a broker. Purchases of these
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 prices. The Fund seeks to obtain prompt
execution of such orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
During the Fund's fiscal year ended September 30, 1994, total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $54, all
of which was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was $16,576.
The transactions giving rise to those commissions were allocated in
accordance with the Manager's internal allocation procedures.
Performance of the Fund
As described in the Prospectus, from time to time the
"standardized yield," "dividend yield," "average annual total return,"
"total return" and "total return at net asset value" of an investment in
each class of Fund shares may be advertised. An explanation of how
standardized 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.
- 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 September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 6.16% and 5.61%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A 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 September 30, 1994 were 6.42% and 6.66% when
calculated at maximum offering price and net asset value, respectively.
The dividend yield on Class B shares for the 30-day period ended September
30, 1994 was 5.91% 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:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total return" on an investment in Class A and
Class B shares of the Fund for the one year period ended September 30,
1994 was (2.91)% and (4.15)%, respectively.
- 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 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
contingent deferred sales charge of 4.0% in the first year, 3.0% in the
second year, 2.0% in the third and fourth years, 1.0% in the fifth 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 fiscal year ended September 30,
1994, was 1.18%. The cumulative total return on Class B shares for the
period from November 30, 1993 (inception of the class) through September
30, 1994 was 3.63%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote 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 and Class B shares for the one-year period ended
September 30, 1994 was 0.61% and (.39)%, respectively.
- 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 funds, other
than money market funds, and (ii) all other general 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.
The total return on an investment made in shares of the Fund may be
compared with the performance for the same period of one or more of the
following indices: the Consumer Price Index, the Salomon Brothers World
Government Bond Index, the Salomon Brothers High Grade Corporate Bond
Index, the Lehman Aggregate Bond Index, the Lehman Government/Corporate
Bond Index and the J.P. Morgan Government Bond Index. The Consumer Price
Index is generally considered to be a measure of inflation. The Salomon
Brothers World Government Bond Index generally represents the performance
of government debt securities of various markets throughout the world,
including the United States. The Salomon Brothers High Grade Corporate
Bond Index generally represents the performance of high grade long-term
corporate bonds, the Lehman Aggregate Bond Index generally represents the
performance of investment grade debt securities with a maturity of at
least one year and the Lehman Government/Corporate Bond Index generally
represents the performance of intermediate and long-term government and
investment grade corporate debt securities. The J.P. Morgan Government
Bond Index generally represents the performance of government bonds issued
by various countries including the United States. The foregoing bond
indices are unmanaged, do not reflect reinvestment of capital gains or
take sales charges into consideration, as these items are not applicable
to indices.
Investors may also wish to compare the Fund's Class A or Class B
yields and returns to the yields and 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 Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plan for Class B shares, that vote was cast by
the Manager as the sole initial holder of Class B shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report for the Class B Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained in
the Prospectus and below. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate and set no requirement for a minimum amount of
the assets.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totalled $61,864, all of which was paid by the Distributor
to Recipients, including $13,353 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may not be
recovered in subsequent years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charge, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of .25% of the average daily net asset
value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B shares are redeemed
during the first year that the shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of the advance payment for those
shares to the Distributor. Payments made under the Class B Plan during the
fiscal year ended September 30, 1994 totalled $60,156, all paid by the
Distributor to Recipients, including $191 paid to a dealer affiliated with
the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's
payments to the Distributor under the Class B Plan and recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of the
close of business of the New York Stock Exchange on each day that the
Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The NYSE's most recent
annual announcement (which is subject to change) states that it will close
on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. The Fund may invest a substantial portion of
its assets in debt securities and foreign securities at times which the
NYSE is closed (including weekends and holidays or after 4:00 P.M., New
York time, on a regular business day). Because the Fund's net asset value
will not be calculated on those days, the Fund's net asset values per
share may be significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sale
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) unlisted debt securities having
a maturity in excess of 60 days are valued at the mean between the bid and
asked prices determined by a portfolio pricing service approved by the
Board or obtained from active market makers on the basis of reasonable
inquiry; (iv) short-term debt securities having a remaining maturity of
60 days or less are valued at cost, adjusted for amortization of premiums
and accretion of discounts; (v) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; and (vi) securities traded on
foreign exchanges or foreign over-the-counter markets are valued at the
closing or last sales prices reported on a principal exchange, or, if
none, at the mean between closing bid and asked prices and reflect
prevailing rates of exchange taken from the closing price on the London
foreign exchange market that day.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in stock markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The
values of securities denominated in foreign currency will be converted to
U.S. dollars at the prevailing rates of exchange at the time of valuation.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign securities, and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i),
above. Forward currency contracts are valued at the closing price on the
London foreign exchange market. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is "marked-to-market" to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call written by the
Fund is exercised, the proceeds are increased by the premium received.
If a call or put written by the Fund expires, the Fund has a gain in the
amount of the premium; if the Fund enters into a closing purchase
transaction, it will have a gain or loss depending on whether the premium
was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for such purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If the Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under the
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and
Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if such order was received by the dealer or broker
from its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be made
within seven days after the Distributor's receipt of the required
redemption documents, with signature(s) guaranteed as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B shareholders should not establish withdrawal
plans that would require the redemption of shares purchased subject to a
contingent deferred sales charge and held less than 6 years, because of
the imposition of the Class B contingent deferred sales charge on such
withdrawals (except where the Class B contingent deferred sales charge is
waived as described in the Prospectus under "Class B Contingent Deferred
Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund),
but only the following other OppenheimerFunds currently offer Class B
shares:
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Equity Income Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction. It is expected that for the most part, the Fund's
dividends will not qualify, because of the nature of the investments held
by the Fund in its portfolio.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year 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. Accordingly, when the Fund holds zero coupon
securities, the Fund may be required to pay out as an income distribution
each year an amount which is greater than the total amount of interest the
Fund actually received in cash. 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.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. To elect this option, a shareholder must notify the Transfer
Agent in writing and either have an existing account in the fund selected
for reinvestment or must obtain a prospectus for that fund and an
application from the Distributor to establish an account. The investment
will be made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution. Dividends
and/or distributions from shares of other OppenheimerFunds may be invested
in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
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INDEPENDENT AUDITORS' REPORT
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- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
Strategic Short-Term Income Fund:
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of
Oppenheimer Strategic Short-Term Income Fund as of
September 30, 1994, the related statement of operations
for the year then ended, the statements of changes in net
assets for the years ended September 30, 1994 and 1993 and
the financial highlights for the period August 4, 1992
(commencement of operations) to September 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures
included confirmation of securities owned at September 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 Strategic
Short-Term Income Fund at September 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 LLP
Denver, Colorado
October 21, 1994
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<TABLE>
<CAPTION>
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STATEMENT OF INVESTMENTS September 30, 1994
FACE MARKET VALUE
AMOUNT SEE NOTE 1
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<S> <C> <C> <C>
REPURCHASE AGREEMENTS--9.0%
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Repurchase agreement with First Chicago Capital Markets, 4.95%,
dated 9/30/94, to be repurchased at $3,201,320 on 10/3/94,
collateralized by U.S. Treasury Nts., 4.25%--8.50%, 4/15/95--
7/15/98, with a value of $1,809,492 and U.S. Treasury Bills, 0%,
3/16/95--3/23/95, with a value of $1,457,477 (Cost $3,200,000) $ 3,200,000 $ 3,200,000
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GOVERNMENT OBLIGATIONS--50.0%
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SHORT-TERM GOVERNMENT OBLIGATIONS--3.1%
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Bonos de la Tesoreria de la Federacion:
0%, 12/08/94 125,000 123,403
0%, 1/12/95 1,000,000 980,179
-----------
1,103,582
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LONG-TERM GOVERNMENT OBLIGATIONS--46.9%
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Czechoslovakia National Bank Bonds, 7%, 4/16/96(3) 500,000 498,750
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Denmark (Kingdom of) Bonds:
9%, 11/15/98 1,980,000(1) 328,194
6%, 12/10/99 1,300,000(1) 189,849
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Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98(3) 450,000 431,167
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First Australia National Mortgage Acceptance Corp. Ltd.
Bonds, Series 22, 11.40%, 12/15/01 437,340 329,109
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Indonesia (Republic of) CD, Bank Negara, 0%, 4/24/95 1,500,000,000(1) 632,333
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Italy (Republic of) Treasury Bonds, Buoni Poliennali del Tes:
12%, 1/1/96 50,000,000(1) 32,452
12%, 5/1/97 350,000,000(1) 227,388
12.50%, 6/16/97 350,000,000(1) 229,766
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Small Business Administration, 8.125%--9.375%, 8/25/01--11/25/06(2) 2,589,138 2,589,138
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South Australia Government Finance Authority Bonds, 10%, 1/15/03 350,000(1) 248,501
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Spain (Kingdom of) Bonds, 11.45%, 8/30/98 74,500,000(1) 586,671
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Treasury Corp. of Victoria Gtd. Bonds:
12%, 10/22/98 350,000(1) 278,164
8.25%, 10/15/03 620,000(1) 394,827
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United Kingdom Treasury Nts.:
12%, 11/20/98 195,000(1) 340,957
12.25%, 3/26/99 200,000(1) 354,530
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U.S. Treasury Bonds, 6.25%, 8/15/23(5) 600,000 487,312
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U.S. Treasury Nts.:
4.375%, 8/15/96 5,000,000 4,814,059
5.125%, 2/28/96 300,000 283,031
8.50%, 5/15/19 3,200,000 3,328,998
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16,605,196
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Total Government Obligations (Cost $18,285,809) 17,708,778
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<CAPTION>
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STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
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<S> <C> <C> <C>
MORTGAGE/ASSET-BACKED OBLIGATIONS--19.7%
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Federal Home Loan Mortgage Corp., 7%, Series 1548, Cl. C, 4/15/21 $3,000,000 $2,625,930
------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Interest-Only Stripped Mtg.-
Backed Security, Trust 240, Class 2, 7%, 9/25/23(4) 1,977,811 747,860
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First Boston Corp. Mtg. Securities,
7.06%, Series 1993-AFC-1, 10/25/02 741,071 682,944
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Government National Mortgage Assn.:
10.50%, 12/15/17 324,386 353,789
10.50%, 7/15/19 15,353 16,753
10.50%, 10/15/20 51,963 56,711
10.50%, 1/15/21 66,281 72,351
10.50%, 3/15/21 39,289 42,886
10.50%, 7/15/21 448,609 489,684
10.50%, 10/15/21 48,544 52,989
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Resolution Trust Corp. Commercial Mtg. Pass-Through Certificates:
9%, Series 1991--M5, Cl. A, 3/25/17 746,789 750,290
8.75%, Series 1993--C1, Cl. B, 5/25/24 600,000 594,000
10.6403%, Series 1992--16, Cl. B3, 5/25/24(2) 500,000 506,562
-----------
Total Mortgage/Asset-Backed Obligations (Cost $7,379,412) 6,992,749
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MUNICIPAL BONDS AND NOTES--2.4%
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Connecticut State Taxable General Obligation
Bonds, 6.625%, 12/15/97 350,000 347,669
New York State Environmental Facilities Corp.
State Service Contract Taxable Revenue Bonds, Series B, 7.30%, 3/15/97 500,000 499,312
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Total Municipal Bonds and Notes (Cost $848,691) 846,981
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LONG-TERM CORPORATE BONDS AND NOTES--14.5%
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BASIC MATERIALS--1.3%
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CHEMICALS--1.3%
Quantum Chemical Corp., 10.375% Fst. Mtg. Nts., 6/1/03 400,000 443,863
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Consumer Cyclicals--2.7%
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Consumer Goods and
Services--0.8%
Mattel, Inc., 6.875% Sr. Nts., 8/1/97 300,000 294,746
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HOTELS/LODGING--0.8%
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Host Marriott Hospitality, Inc., 10.625% Sr. Nts., Series B, 2/1/00 265,000 266,987
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Retail--1.1%
Sears Canada, Inc., 11.70% Debs., 7/10/00 500,000(1) 403,513
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CONSUMER NON-CYCLICALS--2.1%
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Food--2.1%
RJR Nabisco, Inc., 10.50% Sr. Nts., 4/15/98 700,000 740,899
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ENERGY--0.7%
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Atlantic Richfield Co., 10.375% Nts., 7/15/95 250,000 257,508
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FINANCIAL--6.0%
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BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 100,000 100,806
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Corporacion Andina de Formento Nts., 7.25%, 4/30/98(3) 750,000 714,844
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First Chicago Corp., 9% Sub. Nts., 6/15/99 150,000 156,604
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General Motors Acceptance Corp., 8% Nts., 10/1/96 200,000 202,664
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Heller Financial, Inc., 7.75% Nts., 5/15/97 225,000 227,566
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International Bank for Reconstruction and Development Bonds,
12.50%, 7/25/97 580,000(1) 377,441
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Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 350,000 353,546
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2,133,471
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<CAPTION>
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STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
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<S> <C> <C> <C>
TECHNOLOGY--1.1%
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Cable Television--1.1%
Time Warner, Inc., 7.45% Nts., 2/1/98 $400,000 $393,500
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Utilities--0.6%
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Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 217,551
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Total Long-Term Corporate Bonds and Notes (Cost $5,367,845) 5,152,038
<CAPTION>
DATE/PRICE
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<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0%
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European OTC Deutsche Mark/U.S. Dollar Put Nov. 2/1.60 DEM 2,006,202(1) 4,138
European OTC Deutsche Mark/U.S. Dollar Put Nov. 4/1.60 DEM 1,003,101(1) 2,263
European OTC Deutsche Mark/U.S. Dollar Put Nov. 8/1.60 DEM 1,003,101(1) 2,635
-----------
Total Put Options Purchased (Cost $43,719) 9,036
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STRUCTURED INSTRUMENTS--2.5%
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Citibank 10.50%--16% CD, 5/3/95--8/17/95 126,153,140(1) 455,638
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Goldman Sachs International Limited, 5.10%, 2/28/95 80,000 77,808
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Swiss Bank Corp. Investment Banking, Inc.,
10% CD Sterling Rate Linked Nts., 7/3/95 370,000 364,968
----------- -----------
Total Structured Instruments (Cost $900,298) 898,414
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TOTAL INVESTMENTS, AT VALUE (COST $36,025,774) 98.1%
34,807,996
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OTHER ASSETS NET OF LIABILITIES 1.9 667,646
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NET ASSETS 100.0% $35,475,642
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----- -----------
<FN>
1. Face amount is reported in foreign currency.
2. Represents the current interest rate for a
variable rate security.
3. Restricted security-See Note 6 of Notes to
Financial Statements.
4. Interest-Only Strips represent the right to
receive the monthly interest payments on an
underlying pool of mortgage loans. These securities
typically decline in price as interest rates
decline. Most other fixed- income securities
increase in price when interest rates decline. The
principal amount of the underlying pool represents
the notional amount on which current interest is
calculated. The price of these securities is
typically more sensitive to changes in prepayment
rates than traditional mortgage backed securities
(for example, GNMA pass-throughs).
5. Securities with an aggregate market value of
$103,148 are held in escrow to cover outstanding
call options, as follows:
FACE EXPIRATION EXERCISE PREMIUM MARKET
VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE
1
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- ----------------------------------------------------------------------------------------------------------------------------------
European OTC Deutsche Mark/U.S. Dollar 875,537 11/02/94 1.50 DEM $ 4,067 $
2,309
European OTC Deutsche Mark/U.S. Dollar 393,357 11/02/94 1.60 DEM 10,260
13,109
European OTC Deutsche Mark/U.S. Dollar 437,768 11/04/94 1.50 DEM 2,107 1,293
European OTC Deutsche Mark/U.S. Dollar 196,679 11/04/94 1.60 DEM 5,168 6,496
European OTC Deutsche Mark/U.S. Dollar 437,768 11/08/94 1.54 DEM 5,223 5,382
European OTC Deutsche Mark/U.S. Dollar 196,679 11/08/94 1.60 DEM 5,348 6,729
-------- --------
$32,173 $35,318
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
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STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
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<S> <C> <C>
ASSETS Investments, at value (cost $36,025,774)--see accompanying statement $34,807,996
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Cash 270,078
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Receivables:
Interest 599,315
Investments sold 113,526
Shares of beneficial interest sold 106,156
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Deferred organization costs 4,827
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Other 3,338
-----------
Total assets 35,905,236
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LIABILITIES Options written, at value (premiums received $32,173)--Note 4 35,318
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Payables and other liabilities:
Shares of beneficial interest redeemed 229,533
Investments purchased 63,418
Distribution and service plan fees--Note 5 21,588
Dividends 47,899
Other 31,838
-----------
Total liabilities 429,594
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NET ASSETS $35,475,642
-----------
-----------
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COMPOSITION OF Paid-in capital $37,179,293
NET ASSETS ------------------------------------------------------------------------------------------------------
Overdistributed net investment income (254,041)
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Accumulated net realized loss from investment, written option and foreign
currency transactions (229,651)
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Net unrealized depreciation on investments, options written and translation of assets
and liabilities denominated in foreign currencies (1,219,959)
-----------
Net assets $35,475,642
-----------
-----------
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NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets of
$27,849,628 and 6,111,573 shares of beneficial interest outstanding) $4.56
Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price) $4.73
------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $7,626,014 and 1,675,212 shares of beneficial interest outstanding) $4.55
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
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STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
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<S> <C> <C>
INVESTMENT INCOME Interest (net of withholding taxes of $13,941) $2,507,029
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EXPENSES Management fees--Note 5 222,890
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Distribution and service plan fees:
Class A--Note 5 61,864
Class B--Note 5 60,156
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Transfer and shareholder servicing agent fees--Note 5 33,947
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Shareholder reports 29,847
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Custodian fees and expenses 12,727
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Legal and auditing fees 9,524
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Registration and filing fees:
Class A 1,667
Class B 1,508
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Trustees' fees and expenses 1,963
-----------
Other 13,957
-----------
Total expenses 450,050
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NET INVESTMENT INCOME 2,056,979
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- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain (loss) from:
GAIN (LOSS) ON INVESTMENTS, Investments and options written (526,738)
OPTIONS WRITTEN AND Expiration and closing of option contracts written--Note 4 3,047
FOREIGN CURRENCY Foreign currency transactions (110,362)
TRANSACTIONS -----------
Net realized loss (634,053)
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written (1,591,568)
Translation of assets and liabilities denominated in foreign currencies 229,322
-----------
Net change (1,362,246)
-----------
Net realized and unrealized loss on investments, options written
and foreign currency transactions (1,996,299)
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- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$60,680
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
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STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
1994 1993
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<S> <C> <C> <C>
OPERATIONS Net investment income $2,056,979 $1,481,320
------------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and foreign
currency transactions (634,053) (511,099)
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated in
foreign currencies (1,362,246) 238,294
----------- -----------
Net increase in net assets resulting from operations 60,680 1,208,515
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DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.205 and $.305 per share, respectively) (1,087,188)
(1,297,637)
SHAREHOLDERS Class B ($.167 and $.212 per share, respectively) (297,053) (61,188)
------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.012 per share) (73,587)
Class B ($.012 per share) (20,106)
------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments
and foreign currency transactions:
Class A ($.005 and $.0007 per share, respectively) (29,391) (3,024)
Class B ($.005 and $.0007 per share, respectively) (8,031) (36)
------------------------------------------------------------------------------------------------------
Tax return of capital:
Class A ($.088 per share) (540,571) --
Class B ($.088 per share) (147,701) --
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BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 4,289,799 12,801,641
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 4,593,588 3,416,849
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NET ASSETS Total increase 6,740,439 16,065,120
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Beginning of year 28,735,203 12,670,083
----------- -----------
End of year (including undistributed (overdistributed) net investment
income of ($254,041) and $122,495, respectively) $35,475,642 $28,735,203
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------------ ------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992(2) 1994 1993(1)
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<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.84 $4.93 $5.00 $4.84 $4.75
-----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .33 .05 .34 .22
Net realized and unrealized gain (loss)
on investments and foreign currencies (.30) (.11) (.07) (.36) .08
------ ------ ------ ------ ------
Total income (loss) from investment
operations .03 .22 (.02) (.02) .30
-----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.20) (.31) (.05) (.16) (.21)
Dividends in excess of investment income (.01) -- -- (.01) --
Distributions in excess of net realized gain
on investments (.01) -- -- (.01) --
Tax return of capital (.09) -- -- (.09) --
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.31) (.31) (.05) (.27) (.21)
-----------------------------------------------------------------------------------------------------
Net asset value, end of period $4.56 $4.84 $4.93 $4.55 $4.84
------ ------ ------ ------ ------
------ ------ ------ ------ ------
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Total Return, at Net Asset Value(3) .61% 4.58% (.27)% (.39)% 6.48%
-----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $27,850 $25,314 $12,670 $7,626 $3,421
-----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $28,284 $20,663 $8,643 $6,020 $1,428
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Number of shares outstanding at end of
period (in thousands) 6,112 5,231 2,572 1,675 707
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Ratios to average net assets:
Net investment income 6.11% 6.83% 6.38%(4) 5.46% 5.88%(4)
-----------------------------------------------------------------------------------------------------
Expenses, before voluntary reimbursement
by the Manager 1.17% 1.38% 1.87%(4) 1.97% 2.22%(4)
-----------------------------------------------------------------------------------------------------
Expenses, net of voluntary reimbursement
by the Manager -- 1.21% .92%(4) -- 2.21%(4)
-----------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 57.8% 104.0% 11.2% 57.8% 104.0%
<FN>
1. For the period from November 30, 1992 (inception of offering) to
September 30, 1993.
2. For the period from August 4, 1992 (commencement of operations) to
September 30, 1992.
3. 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.
4. Annualized.
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 September 30, 1994 were $28,239,652 and $16,278,532, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
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- --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Strategic Short-Term Income Fund (the Fund) is
ACCOUNTING POLICIES registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment
company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers both
Class A and Class B shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares
have identical rights to earnings, assets and voting
privileges, except that each class has its own
distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting
rights with respect to matters affecting a single class.
Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following
is a summary of significant accounting policies
consistently followed by the Fund.
----------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at
4:00 p.m. (New York time) on each trading day. Listed and
unlisted securities for which such information is
regularly reported are valued at the last sale price of
the day or, in the absence of sales, at values based on
the closing bid or asked price or the last sale price on
the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot
be valued by the approved portfolio pricing service are
valued by averaging the mean between the bid and asked
prices obtained from two active market makers in such
securities. Short-term debt securities having a remaining
maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which
market quotes are not readily available are valued under
procedures established by the Board of Trustees to
determine fair value in good faith.
----------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of
the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of
securities and investment income are translated at the
rates of exchange prevailing on the respective dates of
such transactions.
The Fund generally enters into forward foreign
currency exchange contracts as a hedge, upon the purchase
or sale of a security denominated in a foreign currency.
In addition, the Fund may enter into such contracts as a
hedge against changes in foreign currency exchange rates
on portfolio positions. A forward exchange contract is a
commitment to purchase or sell a foreign currency at a
future date, at a negotiated rate. Risks may arise from
the potential inability of the counterparty to meet the
terms of the contract and from unanticipated movements in
the value of a foreign currency relative to the U.S.
dollar.
The effect of changes in foreign currency exchange
rates on investments is separately identified from the
fluctuations arising from changes in market values of
securities held and reported with all other foreign
currency gains and losses in the Fund's results of
operations.
----------------------------------------------------------
OPTIONS WRITTEN. The Fund may write covered put and call
options. When an option is written, the Fund receives a
premium and becomes obligated to sell or purchase the
underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market
risk of an unfavorable change in the price of the security
underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling or
purchasing a security at a price different from the
current market value. All securities covering call options
written are held in escrow by the custodian bank and the
Fund maintains liquid assets sufficient to cover written
put options in the event of exercise by the holder.
----------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to
take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the
custodian's vault, all securities held as collateral for
repurchase agreements. If the seller of the agreement
defaults and the value of the collateral declines, or if
the seller enters an insolvency proceeding, realization of
the value of the collateral by the Fund may be delayed or
limited.
----------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily
to each class of shares based upon the relative proportion
of net assets represented by such class. Operating
expenses directly attributable to a specific class are
charged against the operations of that class.
----------------------------------------------------------
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. At September 30, 1994, the Fund
had available for federal income tax purposes an unused
capital loss carryover of approximately $10,000, which
will expire in 2002.
<PAGE>
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----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ORGANIZATION COSTS. The Manager advanced $16,395 for
ACCOUNTING POLICIES organization and start-up costs of the Fund. Such expenses
(CONTINUED) 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 October 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 September 30,
1993, amounts have been reclassified to reflect a decrease
in undistributed net investment loss of $539,989, and an
increase in undistributed capital loss on investments of
$539,989. During the year ended September 30, 1994, in
accordance with Statement of Position 93-2, paid-in
capital was decreased by $688,272, undistributed net
investment income was increased by $267,692 and
undistributed capital loss was decreased by $420,580.
----------------------------------------------------------
OTHER. Investment transactions are accounted for on the
date the investments are purchased or sold (trade 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 5,840,432 $27,782,705 6,914,934 $33,354,845
Dividends and distributions reinvested 307,224 1,445,537 164,208 792,992
Redeemed (5,266,746) (24,938,443) (4,420,557) (21,346,196)
---------- ----------- ----------- -----------
Net increase 880,910 $4,289,799 2,658,585 $12,801,641
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
--------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,435,285 $6,786,147 870,393 $4,204,678
Dividends and distributions reinvested 55,275 258,470 9,152 44,291
Redeemed (522,740) (2,451,029) (172,153) (832,120)
---------- ----------- ----------- -----------
Net increase 967,820 $4,593,588 707,392 $3,416,849
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
<FN>
1. For the year ended September 30, 1993 for Class A shares and for the period
from November 30, 1992 (inception of offering) to September 30, 1993 for Class B
shares.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS At September 30, 1994, net unrealized depreciation on
AND LOSSES ON investments of $1,220,923 was composed of gross
INVESTMENTS appreciation of $218,427, and gross depreciation of
$1,439,350.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. OPTION ACTIVITY Option activity for the year ended September 30, 1994 was
as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
-------------------------- --------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF
PREMIUMS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1993 -- $ -- -- $ --
-----------------------------------------------------------------------------------------------------------
Options written 2,537,788 32,173 780 3,047
-----------------------------------------------------------------------------------------------------------
Options expired prior to exercise -- -- (780) (3,047)
--------- ------- ------- -------
Options outstanding at September 30, 1994 2,537,788 $32,173 -- $--
--------- ------- ------- -------
--------- ------- ------- -------
</TABLE>
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund which
TRANSACTIONS WITH provides for an annual fee of .65% on the first $500
AFFILIATES million of net assets with a reduction of .03% on each
$500 million thereafter to $1.5 billion, and .50% on net
assets in excess of $1.5 billion. The Manager has agreed
to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses. A voluntary undertaking
to reimburse Fund expenses to the level needed to maintain
a stable dividend was terminated December 1, 1993.
For the year ended September 30, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $448,316, of which $154,348 was retained by
Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an
affiliated broker/dealer. During the year ended
September 30, 1994, OFDI received contingent deferred
sales charges of $21,256 upon redemption of Class B
shares, as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of
the Manager, is the transfer and shareholder servicing
agent for the Fund and for other registered investment
companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under separate approved plans, each class may expend
up to .25% of its net assets annually to reimburse OFDI
for costs incurred in connection with the personal service
and maintenance of accounts that hold shares of the Fund,
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 September 30, 1994,
OFDI paid $13,353 and $191, respectively, to an affiliated
broker/dealer as reimbursement for Class A and Class B
personal service and maintenance expenses and retained
$57,531 as reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. RESTRICTED The Fund owns securities purchased in private placement
SECURITIES transactions, without registration under the Securities
Act of 1933 (the Act). The securities are valued under
methods approved by the Board of Trustees as reflecting
fair value. The Fund intends to invest no more than 10% of
its net assets (determined at the time of purchase) in
restricted and illiquid securities, excluding securities
eligible for resale pursuant to Rule 144A of the Act that
are determined to be liquid by the Board of Trustees or by
the Manager under Board-approved guidelines. At
September 30, 1994, all restricted and illiquid securities
were transferable under Rule 144A of the Act. They are:
<TABLE>
<CAPTION>
VALUATION PER
UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPTEMBER
30, 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporacion Andina de Formento Nts., 7.25%, 4/30/98(1) 4/15/93 $99.38 $95.31
-----------------------------------------------------------------------------------------------------------
Czechoslovakia National Bank Bonds, 7%, 4/16/96(1) 3/11/93 $99.70 $99.75
-----------------------------------------------------------------------------------------------------------
Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98(1) 6/24/93 $99.63 $95.82
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
<PAGE>
Appendix
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<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 Agent 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 & Wolf, P.C.
1600 Broadway
Denvr, Colorado 80202
<PAGE>
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Financial Highlights: See Part A, Prospectus and Part B,
Statement of Additional Information - Filed herewith.
(2) Independent Auditors' Report: See Part B, Statement of
Additional Information - Filed herewith.
(3) Statement of Investments: See Part B, Statement of
Additional Information - Filed herewith.
(4) Statement of Assets and Liabilities: See Part B, Statement
of Additional Information - Filed herewith.
(5) Statement of Operations: See Part B, Statement of
Additional Information - Filed herewith.
(6) Statement of Changes in Net Assets: See Part B, Statement
of Additional Information - Filed herewith.
(7) Notes to Financial Statements: See Part B, Statement of
Additional Information - Filed herewith.
(8) Independent Auditors' Consent: Filed herewith.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated November 30,
1992: Filed with Post-Effective Amendment No. 2, to
Registrant's Registration Statement, 11/24/93, and
incorporated herein by reference.
(2) By-Laws dated 12/17/91: Previously filed with Registrant's
Initial Registration Statement, 1/21/92, refiled herewith
pursuant to Item 102 of Regulation S-T.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with Post-
Effective Amendment No. 2, to Registrant's
Registration Statement, 11/24/93, and incorporated
herein by reference.
(ii) Specimen Class B Share Certificate: Filed with Post-
Effective Amendment No. 2, to Registrant's
Registration Statement, 11/24/93, and incorporated
herein by reference.
(5) Investment Advisory Agreement dated 4/30/92: Previously
filed with Pre-Effective Amendment No. 2, 3/25/92, to
Registrant's Registration Statement and refiled herewith
pursuant to Item 102 of Regulation S-T.
(6) (i) General Distributor's Agreement dated 10/13/92:
Previously filed with Post-Effective Amendment No. 1
to Registrant's Registration Statement, 11/27/92, and
refiled herewith pursuant to Item 102 of Regulation S-
T.
(ii) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective Amendment
No. 12 of Oppenheimer Government Securities Fund (Reg.
No. 33-02769), 12/2/92, and refiled with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 12
of Oppenheimer Government Securities Fund (Reg. No. 33-
02769), 12/2/92, and refiled with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 12
of Oppenheimer Government Securities Fund (Reg. No. 33-
02769), 12/2/92, and refiled with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Funds Distributor,
Inc. and Newbridge Securities, Inc. dated October 1,
1986: Previously filed with Post-Effective Amendment No.
25 to the Registration Statement of Oppenheimer Special
Fund (File No. 2-45272), 11/1/86, and refiled with
Post-Effective Amendment No. 25 of Oppenheimer Growth
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 4/30/92: Filed with Post-Effective
Amendment No. 1 to Registrant's Registration Statement,
11/27/92, and refiled herewith pursuant to Item 102 of
Regulation S-T.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 3/20/92: Filed with Pre-
Effective Amendment No. 2, 3/25/92, to Registrant's
Registration Statement and refiled herewith pursuant to Item
102 of Regulation S-T.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (i) Form of Standardized and Non-Standardized Profit Sharing
and Pension Plans: 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.
(ii) Form of Individual Retirement Account Trust Agreement
(IRA): Filed with Post-Effective Amendment No. 21 of
Oppenheimer U.S. Government Trust (File No. 2-76645),
8/25/93, and incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and Custody Agreement
for employees of public schools and tax-exempt
organizations: Previously filed with Post-Effective
Amendment No. 47 of Oppenheimer Growth Fund (File No. 33-
33799), 1/31/92, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Previously filed
with Post-Effective Amendment No. 42 to the Registration
Statement of Oppenheimer Equity Income Fund (Reg. No. 2-
33043), 10/28/94, 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 of Oppenheimer Integrity Funds (File No. 2-76547),
3/1/94, and incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A shares dated 6/22/93
under Rule 12b-1 of the Investment Company Act of 1940: Filed
with Post-Effective Amendment No. 3, January 25, 1994, to the
Registrant's Registration Statement, and incorporated herein
by reference.
(ii) Distribution and Service Plan and Agreement for Class B
shares under Rule 12b-1 dated 2/23/94: Filed herewith.
(16) Performance Data Computation Schedule: Filed herewith.
(17) (a) Financial Data Schedule for Class A Shares: Filed herewith.
(b) Financial Data Schedule for Class B Shares: Filed herewith.
-- Power of Attorney: Filed with Post-Effective Amendment No. 2, to
Registrant's Registration Statement, 11/24/93, 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
Title of Class Holders as of 12/30/94
-------------- ----------------------
Class A Shares of Beneficial Interest 1,153
Class B Shares of Beneficial Interest 518
Item 27. Indemnification
---------------
Reference is made to the provisions of Article Seventh of
Registrant's Declaration of Trust filed as Exhibit 24(b)(1) to this
Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser of
the Registrant; it and certain subsidiaries and affiliates act in the same
capacity to other registered investment companies as described in Parts
A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
officer and director of Oppenheimer Management Corporation is, or at any
time during the past two fiscal years has been, engaged for his/her own
account or in the capacity of director, officer, employee, partner or
trustee.
<TABLE>
<CAPTION>
Name & Current Position
with Oppenheimer Other Business and Connections
Management Corporation During the Past Two Years
- ----------------------- ------------------------------
<S> <C>
Lawrence Apolito, None.
Vice President
James C. Ayer, Jr., Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Gold & Special Minerals Fund
and
Oppenheimer Global Emerging Growth Fund.
Victor Babin, None.
Senior Vice President
Robert J. Bishop Assistant Treasurer of the OppenheimerFunds
Assistant Vice President (listed below); previously a Fund
Controller
for Oppenheimer Management Corporation (the
"Manager").
Christopher O. Blunt, Vice President of Oppenheimer Funds
Vice President Distributor, Inc. Formerly a Vice President
of CIC/DISC Subsidiary.
George Bowen Treasurer of the New York-based
Senior Vice President OppenheimerFunds; Vice President, Secretary
and Treasurer and Treasurer of the Denver-based
OppenheimerFunds. Vice President and
Treasurer of Oppenheimer Funds Distributor,
Inc. (the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment adviser
subsidiary of OMC; Senior Vice President,
Treasurer, Assistant Secretary and a
director of Centennial Asset Management
Corporation ("Centennial"), an investment
adviser subsidiary of the Manager; Vice
President, Treasurer and Secretary of
Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc.
("SFSI"), transfer agent subsidiaries of
OMC; President, Treasurer and Director of
Centennial Capital Corporation; Vice
President and Treasurer of Main Street
Advisers; formerly Senior Vice President/
Comptroller and Secretary of Oppenheimer
Asset Management Corporation ("OAMC"), an
investment adviser which was a subsidiary
of
the OMC.
Michael A. Carbuto, Vice President and Portfolio Manager of
Vice President Oppenheimer Tax-Exempt Cash Reserves,
Centennial California Tax Exempt Trust,
Centennial New York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice President
of Centennial.
William Colbourne, Formerly, Director of Alternative Staffing
Assistant Vice President Resources, and Vice President of Human
Resources, American Cancer Society.
Lynn Coluccy, Vice President Formerly Vice President/Director of
Internal
Audit of the Manager.
O. Leonard Darling, Formerly Co-Director of Fixed Income for
Executive Vice President State Street Research & Management Co.
Robert A. Densen, None.
Vice President
Robert Doll, Jr., Vice President and Portfolio Manager of
Executive Vice President Oppenheimer Growth Fund and Oppenheimer
Target Fund; Senior Vice President and
Portfolio Manager of Strategic Income &
Growth Fund.
John Doney, Vice President Vice President and Portfolio Manager of
Oppenheimer Equity Income Fund.
Andrew J. Donohue, Secretary of the New York-based
Executive Vice President OppenheimerFunds; Vice President of the
& General Counsel Denver-based OppenheimerFunds; Executive
Vice President, Director and General
Counsel
of the Distributor; formerly Senior Vice
President and Associate General Counsel of
the Manager and the Distributor.
Kenneth C. Eich, Treasurer of Oppenheimer Acquisition
Executive Vice President/ Corporation
Chief Financial Officer
George Evans, Vice President Vice President and Portfolio Manager of
Oppenheimer Global Securities Fund.
Scott Farrar, Assistant Treasurer of the
OppenheimerFunds;
Assistant Vice President previously a Fund Controller for the
Manager.
Katherine P.Feld Vice President and Secretary of Oppenheimer
Vice President and Funds Distributor, Inc.; Secretary of
Secretary HarbourView, Main Street Advisers, Inc. and
Centennial; Secretary, Vice President and
Director of Centennial Capital Corp.
Jon S. Fossel, President and director of Oppenheimer
Chairman of the Board, Acquisition Corp. ("OAC"), the Manager's
Chief Executive Officer parent holding company; President, CEO and
and Director a director of HarbourView; a director of
SSI
and SFSI; President, Director, Trustee, and
Managing General Partner of the
Denver-based
OppenheimerFunds; formerly President of the
Manager. President and Chairman of the
Board
of Main Street Advisers, Inc.
Robert G. Galli, Trustee of the New York-based
Vice Chairman OppenheimerFunds; Vice President and
Counsel
of OAC; formerly he held the following
positions: a director of the Distributor,
Vice President and a director of
HarbourView
and Centennial, a director of SFSI and SSI,
an officer of other OppenheimerFunds and
Executive Vice President & General Counsel
of the Manager and the Distributor.
Linda Gardner, None.
Assistant Vice President
Ginger Gonzalez, Formerly 1st Vice President/Director of
Vice President Creative Services for Shearson Lehman
Brothers.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht, Vice President and Portfolio Manager of
Vice President Oppenheimer Insured Tax-Exempt Bond Fund
and
Oppenheimer Intermediate Tax Exempt Bond
Fund; an officer of other OppenheimerFunds;
formerly Vice President of Fixed Income
Portfolio Management at Bankers Trust.
Barbara Hennigar, President and Director of Shareholder
President and Chief Financial Service, Inc.
Executive Officer of
Oppenheimer Shareholder
Services, a division of OMC.
Alan Hoden, Vice President None.
Merryl Hoffman, None.
Vice President
Scott T. Huebl, None.
Assistant Vice President
Jane Ingalls, Formerly a Senior Associate with Robinson,
Assistant Vice President Lake/Sawyer Miller.
Stephen Jobe, None.
Vice President
Avram Kornberg, Formerly a Vice President with Bankers
Vice President Trust.
Paul LaRocco, Portfolio Manager of Oppenheimer Capital
Assistant Vice President Appreciation Fund; Associate Portfolio
Manager of Oppenheimer Discovery Fund and
Oppenheimer Time Fund. Formerly a
Securities Analyst for Columbus Circle
Investors.
Mitchell J. Lindauer, None.
Vice President
Loretta McCarthy, None.
Senior Vice President
Bridget Macaskill, Director of HarbourView; Director of Main
President and Director Street Advisers, Inc.; and Chairman of
Shareholder Services, Inc.
Sally Marzouk, None.
Vice President
Denis R. Molleur, None.
Vice President
Kenneth Nadler, None.
Vice President
David Negri, Vice President and Portfolio Manager of
Vice President Oppenheimer Strategic Bond Fund,
Oppenheimer
Multiple Strategies Fund, Oppenheimer
Strategic Investment Grade Bond Fund,
Oppenheimer Asset Allocation Fund,
Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
the Registrant, Oppenheimer High Income
Fund
and Oppenheimer Bond Fund; an officer of
other OppenheimerFunds.
Barbara Niederbrach, None.
Assistant Vice President
Stuart Novek, Formerly a Director Account Supervisor for
Vice President J. Walter Thompson.
Robert A. Nowaczyk, None.
Vice President
Julia O'Neal, None.
Assistant Vice President
Robert E. Patterson, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Main Street California Tax-
Exempt Fund, Oppenheimer Insured Tax-Exempt
Bond Fund, Oppenheimer Intermediate Tax-
Exempt Bond Fund, Oppenheimer Florida Tax-
Exempt Fund, Oppenheimer New Jersey Tax-
Exempt Fund, Oppenheimer Pennsylvania Tax-
Exempt Fund, Oppenheimer California Tax-
Exempt Fund, Oppenheimer New York
Tax-Exempt
Fund and Oppenheimer Tax-Free Bond Fund;
Vice President of the New York Tax-Exempt
Income Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income Trust.
Tilghman G. Pitts III, Chairman and Director of the Distributor.
Executive Vice President
and Director
Jane Putnam, Associate Portfolio Manager of Oppenheimer
Assistant Vice President Growth Fund and Oppenheimer Target Fund and
Portfolio Manager for Oppenheimer Variable
Account Funds-Growth Fund; Senior
Investment
Officer and Portfolio Manager with Chemical
Bank.
Russell Read, Formerly an International Finance
Consultant
Assistant Vice President for Dow Chemical.
Thomas Reedy, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust; an officer of other
OppenheimerFunds; formerly a Securities
Analyst for the Manager.
David Rosenberg, Vice President and Portfolio Manager of
Vice President Oppenheimer Limited-Term Government Fund
and
Oppenheimer U.S. Government Trust.
Formerly
Vice President and Senior Portfolio Manager
for Delaware Investment Advisors.
Richard H. Rubinstein, Vice President and Portfolio Manager of
Vice President Oppenheimer Asset Allocation Fund,
Oppenheimer Fund and Oppenheimer Multiple
Strategies Fund; an officer of other
OppenheimerFunds; formerly Vice President
and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., an investment
adviser.
Lawrence Rudnick, Formerly Vice President of Dollar Dry Dock
Assistant Vice President Bank.
Ellen Schoenfeld, None.
Assistant Vice President
Nancy Sperte, None.
Senior Vice President
Donald W. Spiro, President and Trustee of the New York-based
Chairman Emeritus OppenheimerFunds; formerly Chairman of the
and Director Manager and the Distributor.
Arthur Steinmetz, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Strategic Diversified Income
Fund, Oppenheimer Strategic Income Fund,
Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond
Fund, The Registrant; an officer of other
OppenheimerFunds.
Ralph Stellmacher, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Champion High Yield Fund and
Oppenheimer High Yield Fund; an officer of
other OppenheimerFunds.
John Stoma, Vice President Formerly Vice President of Pension
Marketing
with Manulife Financial.
James C. Swain, Chairman, CEO and Trustee, Director or
Vice Chairman of the Managing Partner of the Denver-based
Board of Directors OppenheimerFunds; President and a Director
and Director of Centennial; formerly President and
Director of OAMC, and Chairman of the Board
of SSI.
James Tobin, Vice President None.
Jay Tracey, Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Time Fund and Oppenheimer
Discovery Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc, Vice President, Assistant Treasurer of the Distributor and
Assistant Secretary SFSI.
and Assistant Treasurer
Ashwin Vasan, Vice President of Oppenheimer Multi-Sector
Vice President Income Trust and Oppenheimer Multi-
Government Trust: an officer of other
OppenheimerFunds.
Valerie Victorson, None.
Vice President
John Wallace, Vice President and Portfolio Manager of
Vice President Oppenheimer Total Return Fund, and
Oppenheimer Main Street Income and Growth
Fund; an officer of other OppenheimerFunds;
formerly a Securities Analyst and Assistant
Portfolio Manager for the Manager.
Dorothy Warmack, Vice President and Portfolio Manager of
Vice President Daily Cash Accumulation Fund, Inc.,
Oppenheimer Cash Reserves, Centennial
America Fund, L.P., Centennial Government
Trust and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells, None.
Vice President
William L. Wilby, Vice President and Portfolio Manager of
Senior Vice President Oppenheimer Global Fund and Oppenheimer
Global Growth & Income Fund; Vice President
of HarbourView; an officer of other
OppenheimerFunds.
Carol Wolf, Vice President and Portfolio Manager of
Vice President Oppenheimer Money Market Fund, Inc.,
Centennial America Fund, L.P., Centennial
Government Trust, Centennial Money Market
Trust and Daily Cash Accumulation Fund,
Inc.; Vice President of Oppenheimer Multi-
Sector Income Trust; Vice President of
Centennial.
Robert G. Zack, Associate General Counsel of the Manager;
Senior Vice President Assistant Secretary of the
OppenheimerFunds;
and Assistant Secretary Assistant Secretary of SSI, SFSI; an
officer
of other OppenheimerFunds.
Eva A. Zeff, Vice President and Portfolio Manager of
Assistant Vice President Oppenheimer Mortgage Income Fund; an
officer
of other OppenheimerFunds; formerly a
Securities Analyst for the Manager.
Arthur J. Zimmer, Vice President and Portfolio Manager of
Vice President Centennial America Fund, L.P., Oppenheimer
Money Fund, Centennial Government Trust,
Centennial Money Market Trust and Daily
Cash
Accumulation Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income Trust; Vice
President of Centennial; an officer of
other
OppenheimerFunds.
</TABLE>
The OppenheimerFunds include the New York-based OppenheimerFunds
and the Denver-based OppenheimerFunds set forth below:
New York-based OppenheimerFunds
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Mortgage Income Fund
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Trust
Oppenheimer Fund
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Time Fund
Oppenheimer U.S. Government Trust
Denver-based OppenheimerFunds
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion High Yield Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Tax-Exempt Bond Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
The address of Oppenheimer Management Corporation, the New York-
based OppenheimerFunds, Oppenheimer Funds Distributor, Inc., Harbourview
Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and
Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New
York 10048-0203.
The address of the Denver-based OppenheimerFunds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
Shareholder Services, Centennial Asset Management Corporation, Centennial
Capital Corp., and Main Street Advisers, Inc. is 3410 South Galena Street,
Denver, Colorado 80231.
Item 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which Oppenheimer Management
Corporation is the investment adviser, as described in Part A and B of
this Registration Statement and listed in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions
and
Name & Principal Positions & Offices Offices
with
Business Address with Underwriter Registrant
- ---------------- -------------------
- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice
President,
Secretary,
and
Treasurer
Christopher Blunt Vice President None
6 Baker Avenue
Westport, CT 06880
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Mary Ann Bruce* Senior Vice President - None
Financial Institution Div.
Robert Coli Vice President None
12 Whitetail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Ronald Corlew Vice President None
1020 Montecito Drive
Los Angeles, CA 90031
Mary Crooks+ Vice President None
Paul Della Bovi Vice President None
750 West Broadway
Apt. 5M
Long Beach, NY 11561
Andrew John Donohue* Executive Vice Vice
President
President & Director
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Gregory Farley Vice President - None
1116 Westbury Circle Financial Institution Div.
Eagan, MN 55123
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Wendy Fishler* Vice President - None
Financial Institution Div.
Wayne Flanagan Vice President - None
36 West Hill Road Financial Institution Div.
Brookline, NH 03033
Ronald R. Foster Vice President - None
11339 Avant Lane Eastern Division Manager
Cincinnati, OH 45249
Patricia Gadecki Vice President None
6026 First Ave. South,
Apt. 10
St. Petersburg, FL 33707
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President None
609 Chimney Bluff Drive
Mt. Pleasant, SC 29464
Terry Lee Kelley Vice President - None
1431 Woodview Lane Financial Institution Div.
Commerce Township, MI 48382
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Hans Klehmet II Vice President None
26542 Love Lane
Ramona, CA 92065
Ilene Kutno* Assistant Vice President None
Wayne A. LeBlang Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Laura Mulhall* Vice President - None
Director of Key Accounts
Gina Munson Vice President None
120 Fisherville Road
Apt. 136
Concord, NH 03301
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
1900 Eight Avenue
San Francisco, CA 94116
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.
Minnie Ra Vice President - None
109 Peach Street Financial Institution Div.
Avenel, NJ 07001
David Robertson Vice President None
9 Hawks View
Hoeoye Falls, NY 14472
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Robert Romano Vice President None
1512 Fallingbrook Drive
Fishers, IN 46038
James Ruff* President None
Timothy Schoeffler Vice President None
3118 N. Military Road
Arlington, VA 22207
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
785 Beau Chene Dr.
Mandeville, LA 70448
James A. Shaw Vice President - None
5155 West Fair Place Financial Institution Div.
Littleton, CO 80123
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker Vice President - None
2017 N. Cleveland, #2 Financial Institution Div.
Chicago, IL 60614
Michael Stenger Vice President None
C/O America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
Paul Stickney Vice President None
1314 Log Cabin Lane
St. Louis, MO 63124
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
Bernard J. Wolocko Vice President None
33915 Grand River
Farmington, MI 48335
William Harvey Young+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
</TABLE>
(c) Not applicable.
ITEM 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Management Services
-------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of the removal of a Trustee
or Trustees when requested in writing to do so by the holders of at least
10% of the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver and State
of Colorado on the 20th day of January, 1995.
OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND
/s/ James C. Swain
by: --------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures: Title Date
- ----------- ----------------- --------------
/s/ James C. Swain* Chairman, Trustee January 20, 1995
- ---------------------- and Principal
James C. Swain Executive Officer
/s/ Jon S. Fossel* Trustee January 20, 1995
- ----------------------
Jon S. Fossel
/s/ George Bowen* Treasurer and January 20, 1995
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee January 20, 1995
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 20, 1995
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 20, 1995
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 20, 1995
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee January 20, 1995
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 20, 1995
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 20, 1995
- ---------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Form N-1A
Item No. Description
- --------- -----------
24(a)(8) Independent Auditors' Consent
24(b)(2) By-Laws dated 12/17/91
24(b)(5) Investment Advisory Agreement dated 4/30/92
24(b)(6)(i) General Distributor's Agreement dated 10/13/92
24(b)(8) Custody Agreement dated 4/30/92
24(b)(10) Opinion and Consent of Counsel dated 3/20/92
24(b)(15)(ii) Distribution and Service Plan and Agreement for Class
B shares dated 2/23/94
24(b)(16) Performance Data Computation Schedule
24(b)(17)(a) Financial Data Schedule: Class A Shares
24(b)(17)(b) Financial Data Schedule: Class B Shares
INDEPENDENT AUDITORS' CONSENT
Oppenheimer Strategic Short-Term Income Fund
We consent to the use in Post-Effective Amendment No. 4 to the
Registration Statement No. 33-45178 of our report dated October 21, 1994
on the financial statements of Oppenheimer Short-Term Income Fund
appearing in the Statement of Additional Information, which is a part of
such Registration Statement, and to the reference to us under the caption
"Financial Highlights" appearing in the Prospectus, which is also a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 23, 1995
PROSP1\295CON
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
(the "Trust")
BY-LAWS
(adopted December 17, 1991)
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders
(which terms as used herein shall, together with all other terms defined
in the Declaration of Trust, have the same meaning as in the Declaration
of Trust) shall be held at the principal office of the Trust or at such
other place as may from time to time be designated by the Board of
Trustees and stated in the notice of meting.
Section 2. Shareholder Meetings. Meetings of the Shareholders for
any purpose or purposes may be called by the Chairman of the Board of
Trustees, if any, or by the President or by the Board of Trustees and
shall be called by the Secretary upon receipt of the request in writing
signed by Shareholders holding not less than one third of the entire
number of Shares issued and outstanding and entitled to vote thereat.
Such request shall state the purpose or purposes of the proposed meeting.
In addition, meetings of the Shareholders shall be called by the Board of
Trustees upon receipt of the request in writing signed by Shareholders
that hold not less than ten percent of the entire number of Shares issued
and outstanding and entitled to vote thereat, stating that the purpose of
the proposed meeting is the removal of a Trustee.
Section 3. Notice of Meetings of Shareholders. Not less than ten
days' and not more than 120 days' written notice of every meeting of
Shareholders, stating the time and place thereof (and the general nature
of the business proposed to be transacted at any special or extraordinary
meeting), shall be given to each Shareholder entitled to vote thereat by
leaving the same with him or at his residence or usual place of business
or by mailing it, postage prepaid and addressed to him at his address as
it appears upon the books of the Trust.
No notice of the time, place or purpose of any meeting of
Shareholders need be given to any Shareholder who attends in person or by
proxy or to any Shareholder who, in writing executed and filed with the
records of the meeting, either before or after the holding thereof, waives
such notice.
Section 4. Record Dates. The Board of Trustees may fix, in advance
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 Shareholders or the
Shareholders of any Series or Class for the determination of the
Shareholders of record entitled to notice of and to vote at a
Shareholders' meeting; for the determination of shareholders entitled to
receive dividends, distributions, rights or allotments of rights; or for
any other purpose requiring the fixing of a record date. Only such
Shareholders 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.
Section 5. Access to Shareholder List. The Board of Trustees
shall make available a list of the names and addresses of all shareholders
as recorded on the books of the Trust, upon receipt of the request in
writing signed by not less than ten Shareholders (who have been such for
at least 6 months) holding Shares of the Trust or any Series or Class
valued at $25,000 or more at current offering price (as defined in the
Trust's Prospectus) or holding not less than one percent in amount of the
entire number of shares of the Trust or any Series or Class issued and
outstanding; such request must state that such Shareholders wish to
communicate with other Shareholders with a view to obtaining signatures
to a request for a meeting to remove one or more trustees pursuant to
Section 2 of Article I and Section 2 of Article II of these By-Laws and
be accompanied by a form of communication to the Shareholders. The Board
of Trustees may, in its discretion, satisfy its obligation under this
Section 5 by either, as required by Section 16(c) of the Investment
Company Act, making available the Shareholder List to such Shareholders
at the principal offices of the Trust, or at the offices of the Trust's
transfer agent, during regular business hours, or by mailing a copy of
such Shareholders' proposed communication and form of request, at their
expense, to all other Shareholders. Notwithstanding the foregoing, the
Board of Trustees may also take such other action as may be permitted
under Section 16(c) of the Investment Company Act.
Section 6. Quorum, Adjournment of Meetings. The presence in person
or by proxy of the holders of record of more than one-third of the Shares,
or of the shares of any Series or Class, of the Trust issued and
outstanding and entitled to vote thereat, shall constitute a quorum,
respectively, at all meetings of the Shareholders; provided, however, that
if any action to be taken by the Shareholders or by a Series or Class 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
Shareholders there shall be less than a quorum present, the Shareholders
or Trustees 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.
Section 7. Voting and Inspectors. At all meetings of Shareholders,
each Shareholder shall be entitled to one vote on each matter submitted
to a vote of the Shareholders or the vote of the Shareholders of the
affected Series or Class for each Share standing in his name on the books
of the Trust on the date fixed for determination of Shareholders 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 or Class shall be
deemed to be affected when a vote of the holders of that Series or Class
on a matter is required by the Investment Company Act of 1940; provided,
however, that as to any matter with respect to which a vote of
Shareholders is required by the Investment Company Act of 1940 or by any
applicable law that must be complied with, such requirements as to a vote
by Shareholders shall apply in lieu of Individual Class Voting as
described above. Any fractional Share shall carry proportionately all the
rights of a whole Share, including the right to vote and the right to
receive dividends. Any Shareholder thus entitled to vote at any such
meeting of Shareholders shall be entitled to vote either in person or by
proxy appointed by instrument in writing subscribed by such Shareholder
or his duly authorized attorney-in-fact.
All elections of Trustees shall be had by a plurality of the votes
cast and all questions shall be decided by a majority of the votes cast,
in each case at a duly constituted meeting, except as otherwise provided
in the Declaration of Trust or in these By-Laws or by specific statutory
provision superseding the restrictions and limitations contained in the
Declaration of Trust or in these By-Laws.
At any election of Trustees, the Board of Trustees prior thereto may,
or, if they have not so acted, the Chairman of the meeting may, and upon
the request of the holders of ten percent (10%) of the Shares entitled to
vote at such election shall, appoint two inspectors of election who shall
first subscribe an oath or affirmation to execute faithfully the duties
of inspectors at such election with strict impartiality and according to
the best of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of Trustee
shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request
of the holders of ten percent (10%) of the Shares entitled to vote on such
election or matter.
Section 8. Conduct of Shareholders' Meetings. The meetings of the
Shareholders shall be presided over by the Chairman of the Board of
Trustees, if any, or if he shall not be present, by the President, or if
he shall not be present, by a Vice-President, or if none of the Chairman
of the Board of Trustees, the President or any Vice-President is present,
by a chairman to be elected at the meeting. The Secretary of the Trust,
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, than the meeting shall elect its
secretary.
Section 9. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Shareholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary
of the meeting, who shall decide all questions touching the qualification
of voters, the validity of the proxies, and the acceptance or rejection
of votes, unless inspectors of election shall have been appointed as
provided in Section 7, in which event such inspectors of election shall
decide all such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and affairs
of the Trust shall be conducted and managed by a Board of Trustees
consisting of the number of initial Trustees, which number may be
increased or decreased as provided in Section 2 of this Article. Each
Trustee shall, except as otherwise provided herein, hold office until the
next meeting of Shareholders of the Trust following his election called
for the purpose of electing Trustees or until his successor is duly
elected and qualifies. Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees; Removal. The
Board of Trustees, by the vote of a majority of the entire Board, may
increase the number of Trustees to a number not exceeding fifteen, and may
elect Trustees to fill the vacancies created by any such increase in the
number of Trustees until the next meeting called for the purpose of
electing Trustees or until their successors are duly elected and qualify;
the Board of Trustees, by the vote of a majority of the entire Board, may
likewise decrease the number of Trustees to a number not less than three
but the tenure of office of any Trustee shall not be affected by any such
decrease. Vacancies occurring other than by reason of any such increase
shall be filled by a vote of a majority of the entire Board then sitting.
In the event that after the proxy material has been printed for a meeting
of Shareholders at which Trustees are to be elected and any one or more
nominees named in such proxy material should die, become incapacitated or
fail to stand for election, the authorized number of Trustees shall be
automatically reduced by the number of such nominees, unless the Board of
Trustees prior to the meeting shall otherwise determine.
A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative votes of the holders of not
less than two-thirds of the outstanding Shares of the Trust, present in
person or by proxy at any meeting of Shareholders at which such vote may
be taken, provided that a quorum is present. Any Trustee at any time may
be removed for cause by resolution duly adopted at any meeting of the
Board of Trustees provided that notice thereof is contained in the notice
of such meeting and that such resolution is adopted by the vote of at
least two thirds of the Trustees whose removal is not proposed. As used
herein, "for cause" shall mean any cause which under Massachusetts law
would permit the removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust outside
Massachusetts, at any office or offices of the Trust or at any other place
as they may from time to time by resolution determine, or, in the case of
meetings, as they may from time to time by resolution determine or as
shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 4. Regular Meetings. Regular meetings of the Board of
Trustees shall be held at such time and on such notice, if any, as the
Trustees may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of
Trustees may be held from time to time upon call of the Chairman of the
Board of Trustees, if any, the President or two or more of the Trustees,
by oral, telegraphic or written notice duly served on or sent or mailed
to each Trustee not less than one day before such meeting. No notice need
be given to any Trustee who attends in person or to any Trustee who in
writing executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. Such notice or waiver
of notice need not state the purpose or purposes of such meeting.
Section 6. Quorum. A majority of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a
quorum shall in no case be less than two Trustees. If at any meeting of
the Board there shall be less than a quorum present (in person or by open
telephone line, to the extent permitted by the Investment Company Act of
1940 (the "1940 Act")), a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained. The
act of the majority of the Trustees present at any meeting at which there
is a quorum shall be the act of the Board, except as may be otherwise
specifically provided by statute, by the Declaration of Trust or by these
By-Laws.
Section 7. Executive Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, elect from the
Trustees an Executive Committee to consist of such number of Trustees (but
not less than two) as the Board may from time to time determine. The Board
of Trustees by such affirmative vote shall have power at any time to
change the members of such Committee and may fill vacancies in the
Committee by election from the Trustees. When the Board of Trustees is
not in session, the Executive Committee shall have and may exercise any
or all of the powers of the Board of Trustees in the management of the
business and affairs of the Trust (including the power to authorize the
seal of the Trust to be affixed to all papers which may require it) except
as provided by law and except the power to increase or decrease the size
of, or fill vacancies on, the Board. The Executive Committee may fix its
own rules of procedure, and may meet, when and as provided by such rules
or by resolution of the Board of Trustees, but in every case the presence
of a majority shall be necessary to constitute a quorum. In the absence
of any member of the Executive Committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a member
of the Board of Trustees to act in the place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the
affirmative vote of a majority of the entire Board, may appoint other
committees which shall in each case consist of such number of members of
the Board (not less than two) and shall have and may exercise such powers
as the Board may determine in the resolution appointing them. A majority
of all members of any such committee may determine its action, and fix the
time and place of its meetings, unless the Board of Trustees shall
otherwise provide. The Board of Trustees shall have power at any time to
change the members and powers of any such committee, to fill vacancies,
and to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of Trustees and
Committees. Any action required or permitted to be taken at any meeting
of the Board of Trustees or any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of
the Board, or of such committee, as the case may be. Trustees or members
of a committee of the Board of Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment; such
participation shall, except as otherwise required by the 1940 Act, have
the same effect as presence in person.
Section 10. Compensation of Trustees and Committee Members.
Trustees and members of the Committees appointed by the Board shall be
entitled to receive such compensation from the Trust for their services
as may from time to time be voted by the Board of Trustees.
Section 11. Dividends. Dividends or distributions payable on the
Shares of any Series or Class of the Trust may, but need not be, declared
by specific resolution of the Board as to each dividend or distribution;
in lieu of such specific resolutions, the Board may, by general
resolution, determine the method of computation thereof, the method of
determining the Shareholders of the Series or Class to which they are
payable and the methods of determining whether and to which Shareholders
they are to be paid in cash or in additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Trust
shall include a Chairman of the Board of Trustees, a President, one or
more Vice-Presidents (the number thereof to be determined by the Board of
Trustees), a Secretary and a Treasurer. The Chairman of the Board and the
President shall be selected from among the Trustees. The Board of
Trustees may also in its discretion appoint Assistant Secretaries,
Assistant Treasurers, and other officers, agents and employees, who shall
have authority and perform such duties as the Board or the Executive
Committee may determine. The Board of Trustees may fill any vacancy which
may occur in any office. Any two offices, except those of Chairman of the
Board and Secretary and President and Secretary, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument is required by law or these
By-Laws to be executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall
be until their respective successors are chosen and qualify; however, any
officer may be removed from office at any time with or without cause by
the vote of a majority of the entire Board of Trustees.
Section 3. Powers and Duties. The officers of the Trust shall have
such powers and duties as generally pertain to their respective offices,
as well as such powers and duties as may from time to time be conferred
by the Board of Trustees or the Executive Committee. Unless otherwise
ordered by the Board of Trustees, the Chairman of the Board shall be the
Chief Executive Officer.
ARTICLE IV
SHARES
Section 1. Share Certificates. The Board of Trustees has discretion
to determine from time to time whether (i) all of the Shares of the Trust
or any Series or Class shall be issued without certificates, or (ii) if
certificates are to be issued for any Shares, the extent and conditions
for such issuance, and the form(s) of such certificates.
Section 2. Transfer of Shares. Shares of any Series or Class shall
be transferable on the books of the Trust 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 or Class, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the
authenticity of the signature as the Trust or its agent may reasonably
require; in the case of shares not represented by certificates, the same
or similar requirements may be imposed by the Board of Trustees.
Section 3. Share Ledgers. The share ledgers of the Trust,
containing the name and address of the Shareholders of each Series and of
the Trust and the number of shares of that Series or Class, held by them
respectively, shall be kept at the principal offices of the Fund or, if
the Trust employs a transfer agent, at the offices of the transfer agent
of the Trust.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Trustees may determine the conditions upon which a new certificate may be
issued in place of a certificate which is alleged to have been lost,
stolen or destroyed; and may, in their discretion, require the owner of
such certificate or his legal representative to give bond, with sufficient
surety to the Trust and the transfer agent, if any, to indemnify it and
such transfer agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the Trust, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Trust shall be fixed by the Board of Trustees.
ARTICLE VII
INDEMNIFICATION
Before an indemnitee shall be indemnified by the Trust, 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 Trust or the investment adviser nor parties to the
proceeding or by independent legal counsel in a written opinion.
The Trust may advance attorneys' fees and expenses of litigation to
an indemnitee if the indemnitee undertakes to repay the advance unless it
is determined that he is entitled to indemnification under the Declaration
of Trust, and at least one of the following is satisfied: (1) the
indemnitee provides security for his undertaking, or (2) the Trust is
insured against losses arising by reason of lawful advances, or (3) a
majority of the disinterested nonparty Trustees 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 VIII
AMENDMENT OF BY-LAWS
The By-Laws of the Trust may be altered, amended, added to or
repealed by the Shareholders or by majority vote of the entire Board of
Trustees, but any such alteration, amendment, addition or repeal of the
By-Laws by action of the Board of Trustees may be altered or repealed by
the Shareholders.
ORGZN\295#2
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 1992, by and between OPPENHEIMER
STRATEGIC SHORT-TERM INCOME FUND (hereinafter referred to as the "Fund"),
a series fund currently consisting of one series and OPPENHEIMER
MANAGEMENT CORPORATION (hereinafter referred to as "OMC").
WHEREAS, the Fund is an open-end, diversified management investment
company registered as such with the Securities and Exchange Commission
(the "Commission") pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), and OMC is an investment adviser registered as
such with the Commission under the Investment Advisors Act of 1940;
WHEREAS, the Fund desires that OMC shall act as its investment adviser
with respect to the Fund's Class A Shares pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as
follows:
1. General Provision.
The Fund hereby employs 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 its Board of Trustees the benefit of its
best judgment, effort, advice and recommendations and shall, at all times
conform to, and use its best efforts to enable the Fund to conform to (i)
the provisions of the Investment Company Act and any rules or regulations
thereunder; (ii) any other applicable provisions of state or Federal law;
(iii) the provisions of the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (iv) policies and determinations of the
Board of Trustees of the Fund; (v) the fundamental policies and investment
restrictions of the Fund as reflected in its registration statement under
the Investment Company Act or as such policies may, from time to time, be
amended by the Fund's shareholders; and (vi) the Prospectus and Statement
of Additional Information of the Fund in effect from time to time. The
appropriate officers and employees of OMC shall be available upon
reasonable notice for consultation with any of the Trustees and officers
of the Fund with respect to any matters dealing with the business and
affairs of the Fund including the valuation of portfolio securities of the
Fund which 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 Fund's
Board of Trustees, (i) regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities; (ii) supervise
continuously the investment program of the Fund and the composition of its
portfolio and determine what securities shall be purchased or sold by the
Fund; and (iii) arrange, subject to the provisions of paragraph 7 hereof,
for the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the Fund's portfolio.
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement and
subject to the provisions of paragraph 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 or in any way limit or restrict OMC or any of its directors,
officers, stockholders or employees from buying, selling or trading any
securities for its or their own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by OMC of its duties
and obligations under this Agreement.
3. Other Duties of OMC.
OMC shall, at its own expense, provide and supervise the activities
of all administrative and clerical personnel as shall be required to
provide effective 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 officers for the Fund.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed by OMC
under this Agreement, or to be paid by the Distributor of the shares of
the Fund, shall be paid by the Fund, including, but not limited to: (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums
for fidelity and other coverage requisite to its operations; (iv)
compensation and expenses of its trustees other than those associated or
affiliated with OMC; (v) legal and audit expenses; (vi) custodian and
transfer agent fees and expenses; (vii) expenses incident to the
redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers
thereto; (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 Fund may have (on behalf of the Fund) to
indemnify its officers and trustees with respect thereto. Any officers
or employees of OMC or any entity controlling, controlled by or under
common control with OMC who also serve as officers, trustees or employees
of the Fund shall not receive any compensation from the Fund for their
services.
5. Compensation of OMC.
The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for the performance of all functions and duties on its part
to be performed pursuant to the provisions hereof, a fee computed on the
aggregate net asset value of the Class A shares of the Fund as of the
close of each business day and payable monthly at the following annual
rate:
.65% of the first $500 million of net assets;
.62% of the next $500 million;
.59% of the next $500 million; and
.50% of net assets in excess of $1.5 billion.
6. Use of Name "Oppenheimer."
OMC hereby grants to the Fund a royalty-free, non-exclusive license
to use the name "Oppenheimer" in the name of the Fund for the duration of
this Agreement and any extensions or renewals thereof. To the extent
necessary to protect OMC's rights to the name "Oppenheimer" under
applicable law, such license shall allow OMC to inspect and, subject to
control by the Fund's Board, control the nature and quality of services
offered by the Fund under such name and may, upon termination of this
Agreement, be terminated by OMC, in which event the Fund shall promptly
take whatever action may be necessary to change its name and discontinue
any further use of the name "Oppenheimer" in the name of the Fund or
otherwise. The name "Oppenheimer" may be used 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
Fund to pay such broker-dealers a commission for effecting a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker-dealer adequately qualified to effect such transaction
would have charged for effecting that transaction, if OMC determines, in
good faith, that such commission is reasonable in relation to the value
of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OMC or its affiliates with respect to the accounts as
to which they exercise investment discretion. In reaching such
determination, OMC will not be required to place or attempt to place a
specific dollar value on the brokerage and/or research services provided
or being provided by such broker-dealer. In demonstrating that such
determinations were made in good faith, OMC shall be prepared to show that
all commissions were allocated for purposes contemplated by this Agreement
and that the total commissions paid by the Fund over a representative
period selected by the Fund's trustees were reasonable in relation to the
benefits to the Fund.
(d) OMC shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any
particular portfolio transactions or to select any broker-dealer on the
basis of its purported or "posted" commission rate but will, to the best
of its ability, endeavor to be aware of the current level of the charges
of eligible broker-dealers and to minimize the expense incurred by the
Fund for effecting its portfolio transactions to the extent consistent
with the interests and policies of the Fund as established by the
determinations of the Board of Trustees of the Fund and the provisions of
this paragraph 7.
(e) The Fund recognizes that an affiliated broker-dealer: (i) may act
as one of the Fund's regular brokers for the Fund so long as it is lawful
for it so to act; (ii) may be a major recipient of brokerage commissions
paid by the Fund; and (iii) may effect portfolio transactions for the Fund
only if the commissions, fees or other remuneration received or to be
received by it are determined in accordance with procedures contemplated
by any rule, regulation or order adopted under the Investment Company Act
for determining the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 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.
Unless earlier terminated pursuant to paragraph 10 hereof, this Agreement
shall remain in effect until December 31, 1992, and thereafter will
continue in effect from year to year, so long as such continuance shall
be approved at least annually by the Fund's Board of Trustees, including
the vote of the majority of the trustees of the Fund who are not parties
to this Agreement or "interested persons" (as defined in the Investment
Company Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding voting
securities of the Fund and by such a vote of the Fund's Board of Trustees.
9. Disclaimer of Shareholder or Trustee Liability.
OMC understands and agrees that the obligations of the Fund under
this Agreement are not binding upon any shareholder or Trustee of the Fund
personally, but bind only the Fund and the Fund's property; OMC represents
that it has notice of the provisions of the Declaration of Trust of the
Fund disclaiming shareholder or Trustee liability for acts or obligations
of the Fund.
10. Termination.
This Agreement may be terminated (i) by OMC at any time without
penalty upon sixty days' written notice to the Fund (which notice may be
waived by the Fund); or (ii) by the Fund at any time without penalty upon
sixty days' written notice to OMC (which notice may be waived by OMC)
provided that such termination by the Fund shall be directed or approved
by the vote of a majority of all of the trustees of the Fund then in
office or by the vote of the holders of a "majority" of the outstanding
voting securities of the Fund (as defined in the Investment Company Act).
11. 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.
12. Definitions.
The terms and provisions of the Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions
contained in the Investment Company Act.
OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND
Attest:
_____________________________ By: __________________________________
Robert G. Galli, Vice President
OPPENHEIMER MANAGEMENT CORPORATION
Attest:
_____________________________ By: ______________________________________
Andrew J. Donohue,
Senior Vice President
ADVISORY/295
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
AND
OPPENHEIMER FUND MANAGEMENT, INC.
Date: October 13, 1992
OPPENHEIMER FUND MANAGEMENT, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND, a Massachusetts
business trust (the "Fund"), is registered as an investment company under
the Investment Company Act of 1940 (the "1940 Act"), and an indefinite
number of one or more classes of its shares of beneficial interest
("Shares") have been registered under the Securities Act of 1933 (the
"1933 Act") to be offered for sale to the public in a continuous public
offering in accordance with the terms and conditions set forth in the
Prospectus and Statement of Additional Information ("SAI") included in the
Fund's Registration Statement as it may be amended from time to time (the
"current Prospectus and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the
sale and distribution of Shares which have been registered as described
above and of any additional Shares which may become registered during the
term of this Agreement. You have advised the Fund that you are willing
to act as such General Distributor, and it is accordingly agreed by and
between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you
as the sole General Distributor, pursuant to the aforesaid continuous
public offering of its Shares, and the Fund further agrees from and after
the date of this Agreement, that it will not, without your consent, sell
or agree to sell any Shares otherwise than through you, except (a) the
Fund may itself sell shares without sales charge as an investment to the
officers, trustees or directors and bona fide present and former full-time
employees of the Fund, the Fund's Investment Adviser and affiliates
thereof, and to other investors who are identified in the current
Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Fund may issue shares in connection with a merger,
consolidation or acquisition of assets on such basis as may be authorized
or permitted under the 1940 Act; (c) the Fund may issue shares for the
reinvestment of dividends and other distributions of the Fund or of any
other Fund if permitted by the current Prospectus and/or SAI; and (d) the
Fund may issue shares as underlying securities of a unit investment trust
if such unit investment trust has elected to use Shares as an underlying
investment; provided that in no event as to any of the foregoing
exceptions shall Shares be issued and sold at less than the then-existing
net asset value.
2. Sale of Shares. You hereby accept such appointment and agree
to use your best efforts to sell Shares, provided, however, that when
requested by the Fund at any time because of market or other economic
considerations or abnormal circumstances of any kind, or when agreed to
by mutual consent of the Fund and the General Distributor, you will
suspend such efforts. The Fund may also withdraw the offering of Shares
at any time when required by the provisions of any statute, order, rule
or regulation of any governmental body having jurisdiction. It is
understood that you do not undertake to sell all or any specific number
of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value
plus a front-end sales charge not in excess of 8.5% of the offering price,
but which front-end sales charge shall be proportionately reduced or
eliminated for larger sales and under other circumstances, in each case
on the basis set forth in the Fund's current Prospectus and/or SAI. The
redemption proceeds of shares offered and sold at net asset value with or
without a front-end sales charge may be subject to a contingent deferred
sales charge ("CDSC") under the circumstances described in the current
Prospectus and/or SAI. You may reallow such portion of the front-end
sales charge to dealers or cause payment (which may exceed the front-end
sales charge, if any) of commissions to brokers through which sales are
made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and
brokers shall collectively include all domestic or foreign institutions
eligible to offer and sell the Shares), and in the event the Fund has more
than one class of Shares outstanding, then you may impose a front-end
sales charge and/or a CDSC on Shares of one class that is different from
the charges imposed on Shares of the Fund's other class(es), in each case
as set forth in the current Prospectus and/or SAI, provided the front-end
sales charge and CDSC to the ultimate purchaser do not exceed the
respective levels set forth for such category of purchaser in the Fund's
current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept
or reject orders for the purchase of Shares at your
discretion. Any consideration which you may receive in
connection with a rejected purchase order will be returned
promptly.
(b) You agree promptly to issue or to cause the duly appointed
transfer or shareholder servicing agent of the Fund to
issue as your agent confirmations of all accepted purchase
orders and to transmit a copy of such confirmations to the
Fund. The net asset value of all Shares which are the
subject of such confirmations, computed in accordance with
the applicable rules under the 1940 Act, shall be a
liability of the General Distributor to the Fund to be
paid promptly after receipt of payment from the
originating dealer or broker (or investor, in the case of
direct purchases) and not later than eleven business days
after such confirmation even if you have not actually
received payment from the originating dealer or broker or
investor. In no event shall the General Distributor make
payment to the Fund later than permitted by applicable
rules of the National Association of Securities Dealers,
Inc.
(c) If the originating dealer or broker shall fail to make
timely settlement of its purchase order in accordance with
applicable rules of the National Association of Securities
Dealers, Inc., or if a direct purchaser shall fail to make
good payment for shares in a timely manner, you shall have
the right to cancel such purchase order and, at your
account and risk, to hold responsible the originating
dealer or broker, or investor. You agree promptly to
reimburse the Fund for losses suffered by it that are
attributable to any such cancellation, or to errors on
your part in relation to the effective date of accepted
purchase orders, limited to the amount that such losses
exceed contemporaneous gains realized by the Fund for
either of such reasons with respect to other purchase
orders.
(d) In the case of a canceled purchase for the account of a
directly purchasing shareholder, the Fund agrees that if
such investor fails to make you whole for any loss you pay
to the Fund on such canceled purchase order, the Fund will
reimburse you for such loss to the extent of the aggregate
redemption proceeds of any other shares of the Fund owned
by such investor, on your demand that the Fund exercise
its right to claim such redemption proceeds. The Fund
shall register or cause to be registered all Shares sold
to you pursuant to the provisions hereof in such names and
amounts as you may request from time to time and the Fund
shall issue or cause to be issued certificates evidencing
such Shares for delivery to you or pursuant to your
direction if and to the extent that the shareholder
account in question contemplates the issuance of such
certificates. All Shares when so issued and paid for,
shall be fully paid and non-assessable by the Fund (which
shall not prevent the imposition of any CDSC that may
apply) to the extent set forth in the current Prospectus
and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are
appointed and shall act as Agent of the Fund. You are
authorized, for so long as you act as General Distributor
of the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund
("Shares") on the basis of orders received from each
dealer ("authorized dealer") with which you have a dealer
agreement for the sale of Shares and permitting resales of
Shares to you, provided that such authorized dealer, at
the time of placing such resale order, shall represent (i)
if such Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been
delivered to it by the registered owner with a request for
the redemption of such Shares executed in the manner and
with the signature guarantee required by the then-
currently effective prospectus of the Fund, or (ii) if
such Shares are uncertificated, that the registered
owner(s) has delivered to the dealer a request for the
redemption of such Shares executed in the manner and with
the signature guarantee required by the then-currently
effective prospectus of the Fund.
(b) You shall (a) have the right in your discretion to accept
or reject orders for the repurchase of Shares; (b)
promptly transmit confirmations of all accepted repurchase
orders; and (c) transmit a copy of such confirmation to
the Fund, or, if so directed, to any duly appointed
transfer or shareholder servicing agent of the Fund. In
your discretion, you may accept repurchase requests made
by a financially responsible dealer which provides you
with indemnification in form satisfactory to you in
consideration of your acceptance of such dealer's request
in lieu of the written redemption request of the owner of
the account; you agree that the Fund shall be a third
party beneficiary of such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or
shareholder servicing agent of any certificate(s) (if any
has been issued) for repurchased Shares and a written
redemption request of the registered owner(s) of such
Shares executed in the manner and bearing the signature
guarantee required by the then-currently effective
Prospectus or SAI of the Fund, the Fund will pay or cause
its duly appointed transfer or shareholder servicing agent
promptly to pay to the originating authorized dealer the
redemption price of the repurchased Shares (other than
repurchased Shares subject to the provisions of part (d)
of Section 5 of this Agreement) next determined after your
receipt of the dealer's repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of
this Agreement, repurchase orders received from an
authorized dealer after the determination of the Fund's
redemption price on a regular business day will receive
that day's redemption price if the request to the dealer
by its customer to arrange such repurchase prior to the
determination of the Fund's redemption price that day
complies with the requirements governing such requests as
stated in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all
reasonably available measures to assure the accurate
performance of all services to be performed by you
hereunder within the requirements of any statute, rule or
regulation pertaining to the redemption of shares of a
regulated investment company and any requirements set
forth in the then-current Prospectus and/or SAI of the
Fund. You shall correct any error or omission made by you
in the performance of your duties hereunder of which you
shall have received notice in writing and any necessary
substantiating data; and you shall hold the Fund harmless
from the effect of any errors or omissions which might
cause an over- or under-redemption of the Fund's Shares
and/or an excess or non-payment of dividends, capital
gains distributions, or other distributions.
(f) In the event an authorized dealer initiating a repurchase
order shall fail to make delivery or otherwise settle such
order in accordance with the rules of the National
Association of Securities Dealers, Inc., you shall have
the right to cancel such repurchase order and, at your
account and risk, to hold responsible the originating
dealer. In the event that any cancellation of a Share
repurchase order or any error in the timing of the
acceptance of a Share repurchase order shall result in a
gain or loss to the Fund, you agree promptly to reimburse
the Fund for any amount by which any loss shall exceed
then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of
its current Prospectus and SAI. The Fund agrees that it will use its best
efforts to continue the effectiveness of the Registration Statement under
the 1933 Act. The Fund further agrees to prepare and file any amendments
to its Registration Statement as may be necessary and any supplemental
data in order to comply with the 1933 Act. The Fund will furnish you at
your expense with a reasonable number of copies of the Prospectus and SAI
and any amendments thereto for use in connection with the sale of Shares.
7. 1940 Act Registration. The Fund has already registered under
the 1940 Act as an investment company, and it will use its best efforts
to maintain such registration and to comply with the requirements of the
1940 Act.
8. State Blue Sky Qualification. At your request, the Fund will
take such steps as may be necessary and feasible to qualify Shares for
sale in states, territories or dependencies of the United States, the
District of Columbia, the Commonwealth of Puerto Rico and in foreign
countries, in accordance with the laws thereof, and to renew or extend any
such qualification; provided, however, that the Fund shall not be required
to qualify shares or to maintain the qualification of shares in any
jurisdiction where it shall deem such qualification disadvantageous to the
Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or
short position in the Shares, but this provision shall not
prevent you or your officers from acquiring Shares for
investment purposes only; and
(b) You shall furnish to the Fund any pertinent information
required to be inserted with respect to you as General
Distributor within the purview of the Securities Act of
1933 in any reports or registration required to be filed
with any governmental authority; and
(c) You will not make any representations inconsistent with
the information contained in the current Prospectus and/or
SAI; and
(d) You shall maintain such records as may be reasonably
required for the Fund or its transfer or shareholder
servicing agent to respond to shareholder requests or
complaints, and to permit the Fund to maintain proper
accounting records, and you shall make such records
available to the Fund and its transfer agent or
shareholder servicing agent upon request; and
(e) In performing under this Agreement, you shall comply with
all requirements of the Fund's current Prospectus and/or
SAI and all applicable laws, rules and regulations with
respect to the purchase, sale and distribution of Shares.
10. Allocation of Costs. The Fund shall pay the cost of composition
and printing of sufficient copies of its Prospectus and SAI as shall be
required for periodic distribution to its shareholders and the expense of
registering Shares for sale under federal securities laws. You shall pay
the expenses normally attributable to the sale of Shares, other than as
paid under the Fund's Distribution Plan under Rule 12b-1 of the 1940 Act,
including the cost of printing and mailing of the Prospectus (other than
those furnished to existing shareholders) and any sales literature used
by you in the public sale of the Shares and for registering such shares
under state blue sky laws pursuant to paragraph 8.
11. Duration. This Agreement shall take effect on the date first
written above, and shall supersede any and all prior General Distributor's
Agreements by and among the Fund and you. Unless earlier terminated
pursuant to paragraph 12 hereof, this Agreement shall remain in effect
until September 30, 1993. This Agreement shall continue in effect from
year to year thereafter, provided that such continuance shall be
specifically approved at least annually: (a) by the Fund's Board of
Trustees or by vote of a majority of the voting securities of the Fund;
and (b) by the vote of a majority of the Trustees, who are not parties to
this Agreement or "interested persons" (as defined the 1940 Act) of any
such person, cast in person at a meeting called for the purpose of voting
on such approval.
12. Termination. This Agreement may be terminated (a) by the
General Distributor at any time without penalty by giving sixty days'
written notice (which notice may be waived by the Fund); (b) by the Fund
at any time without penalty upon sixty days' written notice to the General
Distributor (which notice may be waived by the General Distributor); or
(c) by mutual consent of the Fund and the General Distributor, provided
that such termination by the Fund shall be directed or approved by the
Board of Trustees of the Fund or by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund. In the event
this Agreement is terminated by the Fund, the General Distributor shall
be entitled to be paid the CDSC under paragraph 3 hereof on the redemption
proceeds of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except
in writing and shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors; however, this Agreement
shall not be assigned by either party and shall automatically terminate
upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property; the General
Distributor represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming Trustee and shareholder
liability for acts or obligations of the Fund.
15. Section Headings. The heading of each section is for
descriptive purposes only, and such headings are not to be construed or
interpreted as part of this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding, so
indicate by signing in the space provided below.
OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND
By_________________________________
Chairman
Accepted:
OPPENHEIMER FUND MANAGEMENT, INC.
By_______________________________
Vice President
OFMI\295#2
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
CUSTODY AGREEMENT
Agreement made as of this 30th day of April, 1992, between
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND, a business trust organized
and existing under the laws of the Commonwealth of Massachusetts, having
its principal office and place of business at 3410 South Galena Street,
Denver, Colorado 80231 (hereinafter called the "Fund"), and THE BANK OF
NEW YORK, a New York corporation authorized to do a banking business,
having its principal office and place of business at 48 Wall Street, New
York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices
and Certifications described in the Exhibits delivered in connection
herewith.
2. "Authorized Person" shall mean any person, whether or not such
person is an Officer or employee of the Fund, duly authorized by the Board
of Trustees of the Fund to give Oral Instructions and Written Instructions
on behalf of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated in any such
Certificate as an "Officer of OSS" shall be an Authorized Person only for
purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-
entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
4. "Call Option" shall mean an exchange traded Option with respect
to Securities other than Index, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof
the specified underlying instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received (irrespective of
constructive receipt) by the Custodian and signed on behalf of the Fund
by any two Officers. The term Certificate shall also include instructions
by the Fund to the Custodian communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian for an investment
company, or any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account so de-
nominated which is specifically allocated to a Series and pledged to the
Custodian as security for, and in consideration of, the Custodian's
issuance of any Put Option guarantee letter or similar document described
in paragraph 8 of Article V herein.
8. "Covered Call Option" shall mean an exchange traded Option
entitling the holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer thereof the
specified underlying instruments, currency, or Securities (excluding
Futures Contracts) which are owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission,
its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized
to act as a depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Fund's Board of
Trustees specifically approving deposits therein by the Custodian,
including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm commitment to
buy or sell financial instruments on a U.S. commodities exchange or board
of trade at a specified future time at an agreed upon price.
11. "Foreign Subcustodian" shall mean an "Eligible Foreign
Custodian" as defined in Rule 17-5 which is appointed by the Custodian to
perform or coordinate the receipt, custody and delivery of Foreign
Property of the Fund outside the United States in a manner consistent with
the provisions of this Agreement and whose written contract is approved
by the Board of Trustees of the Fund in accordance with Rule 17f-5.
References to the Custodian herein shall, when appropriate, include
reference to its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the
laws of a foreign country which operates a system outside the United
States in general use by foreign banks and securities brokers for the
central or transnational handling of securities or equivalent book-entries
which is regulated by a foreign government or agency thereof and which is
an "Eligible Foreign Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term
paper as defined in Rule 17f-5 under the Act, whether issued in registered
or bearer form.
14. "Foreign Property" shall mean Foreign Securities and money of
any currency which is held outside of the United States.
15. "Futures Contract" shall mean a Financial Futures Contract
and/or Index Futures Contracts.
16. "Futures Contract Option" shall mean an Option with respect to
a Futures Contract.
17. "Investment Company Act of 1940" shall mean the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
18. "Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount
of cash equal to a specified dollar amount times the difference between
the value of a particular index at the close of the last business day of
the contract and the price at which the futures contract is originally
struck.
19. "Index Option" shall mean an exchange traded Option entitling
the holder, upon timely exercise, to receive an amount of cash determined
by reference to the difference between the exercise price and the value
of the index on the date of exercise.
20. "Margin Account" shall mean a segregated account in the name of
a broker, dealer, futures commission merchant, or a Clearing Member, or
in the name of the Fund for the benefit of a broker, dealer, futures
commission merchant, or Clearing Member, or otherwise, in accordance with
an agreement between the Fund, the Custodian and a broker, dealer, futures
commission merchant or a Clearing Member (a "Margin Account Agreement"),
separate and distinct from the custody account, in which certain
Securities and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may from
time to time determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or withdrawn from,
a Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
21. "Money Market Security" shall mean all instruments and ob-
ligations commonly known as a money market instruments, where the purchase
and sale of such securities normally requires settlement in federal funds
on the same day as such purchase or sale, including, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and/or principal by the government of the United
States or agencies or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to Securities and bank
time deposits.
22. "Nominee" shall mean, in addition to the name of the registered
nominee of the Custodian, (i) a partnership or other entity of a Foreign
Subcustodian which is used solely for the assets of its customers other
than the Custodian and the Foreign Subcustodian, if any, by which it was
appointed; or (ii) the nominee of a Foreign Depository which is used for
the securities and other assets of its customers, members or participants.
23. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of
1934, its successor or successors, and its nominee or nominees.
24. "Officers" shall mean the President, any Vice President, the
Secretary, the Treasurer, the Controller, any Assistant Secretary, any
Assistant Treasurer, and any other person or persons, whether or not any
such other person is an officer or employee of the Fund, but in each case
only if duly authorized by the Board of Trustees of the Fund to execute
any Certificate, instruction, notice or other instrument on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as
holding the position of "Officer of OSS" shall be an Officer only for
purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option, Index
Option and/or a Put Option.
26. "Oral Instructions" shall mean verbal instructions actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian
to be an Authorized Person.
27. "Put Option" shall mean an exchange traded Option with respect
to instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
28. "Repurchase Agreement" shall mean an agreement pursuant to which
the Fund buys Securities and agrees to resell such Securities at a
described or specified date and price.
29. "Reverse Repurchase Agreement" shall mean an agreement pursuant
to which the Fund sells Securities and agrees to repurchase such
Securities at a described or specified date and price.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. 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.
3described in paragraphs 1 and 2 of this Article may with respect to any
particular Repurchase Agreement or Reverse Repurchase Agreement be
combined and delivered to the Custodian at the time of entering into such
Repurchase Agreement or Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate specifying
with respect to each such loan: (a) the Series to which the loaned
Securities are specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately iden-
tified, and (f) the name of the broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the Securities
thus designated to the broker, dealer or financial institution to which
the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or a Depository only in the form of a
certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by
the Fund, the Fund shall deliver or cause to be delivered to the Custodian
a Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal
amount to be returned, (d) the date of termination, (e) the total amount
to be delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institution from
which the Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution to
which such Securities were loaned and upon receipt thereof shall pay, out
of the moneys held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from
time to time make such deposits thereto, or withdrawals therefrom, as
specified in a Certificate. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash
and/or the amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the number
of shares or the principal amount of any particular Securities to be
deposited by the Custodian into, or withdrawn from, a Senior Securities
Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such
deposit has been made.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing
Member in whose name, or for whose benefit, the account was established
as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt
with in accordance with the terms and conditions of the Margin Account
Agreement.
4. The Custodian shall to the extent permitted by the Fund's
Declaration of Trust, investment restrictions and the Investment Company
Act of 1940 have a continuing lien and security interest in and to any
property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may
enforce its lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option guarantee letter
or similar document or any receipt issued hereunder by the Custodian;
provided, however, that the Custodian shall not be required to issue any
Put Option guarantee letter unless it shall have received an opinion of
counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien
and security interest is valid, enforceable and not limited by the
Declaration of Trust, any investment restrictions or the Investment
Company Act of 1940. In the event the Custodian should realize on any
such property net proceeds which are less than the Custodian's obligations
under any Put Option guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with
a statement with respect to each Margin Account in which money or
Securities are held specifying as of the close of business on the previous
business day: (a) the name of the Margin Account; (b) the amount and kind
of Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such Margin
Account.
6. The Custodian shall establish a Collateral Account and from time
to time shall make such deposits thereto as may be specified in a
Certificate. Promptly after the close of business on each business day
in which cash and/or Securities are maintained in a Collateral Account for
any Series, the Custodian shall furnish the Fund with a statement with
respect to such Collateral Account specifying the amount of cash and/or
the amount and kind of Securities held therein. No later than the close
of business next succeeding the delivery to the Fund of such statement,
the Fund shall furnish to the Custodian a Certificate or Written
Instructions specifying the then market value of the Securities described
in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding
Put Option guarantee letter or similar document, the Fund shall promptly
specify in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution
of the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribu-
tion, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and
the total amount payable to the Transfer Agent Account and any sub-
dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein and the
declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth
the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series
to the shareholders of record as of that date and the total amount payable
to the Transfer Agent Account on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions, or Certificate, as the case may be,
the Custodian shall pay to the Transfer Agent Account out of the moneys
held for the account of the Series specified therein the total amount
payable to the Transfer Agent Account and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or
cause to be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Fund's General Distributor,
the Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall
pay, out of the money held for the account of such Series, all original
issue or other taxes required to be paid by the Fund in connection with
such issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder
in connection with a redemption of any Shares, it shall furnish, or cause
to be furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting
forth the Series and number of Shares received by the Transfer Agent for
redemption and that such Shares are in good form for redemption, the
Custodian shall make payment to the Transfer Agent Account out of the
moneys held in the separate account in the name of the Series the total
amount specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held
by the Custodian in the separate account for such Series shall be insuffi-
cient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate, Oral
Instructions, or Written Instructions or which results in an overdraft in
the separate account of such Series for some other reason, or if the Fund
is for any other reason indebted to the Custodian with respect to a Ser-
ies, (except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate agreement
and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the
Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day
year for the actual number of days involved) equal to the Federal Funds
Rate plus 1/2%, such rate to be adjusted on the effective date of any change
in such Federal Funds Rate but in no event to be less than 6% per annum.
In addition, unless the Fund has given a Certificate that the Custodian
shall not impose a lien and security interest to secure such overdrafts
(in which event it shall not do so), the Custodian shall have a continuing
lien and security interest in the aggregate amount of such overdrafts and
indebtedness as may from time to time exist in and to any property
specifically allocated to such Series at any time held by it for the
benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or 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.
Trustees of the Fund, appoint one or more banking institutions as
subcustodian or subcustodians, or as co-Custodian or co-Custodians, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed
institution; provided, however, that appointment of any foreign banking
institution or depository shall be subject to the provisions of Article
XV hereof.
8. The Custodian agrees to indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of the
negligence, bad faith or willful misconduct of any subcustodian of the
Securities and moneys owned by the Fund.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it,
for the account of the Fund and specifically allocated to a Series are
such as properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees
to pay to the Custodian all reasonable out-of-pocket expenses and such
compensation as may be agreed upon in writing from time to time between
the Custodian and the Fund. The Custodian may charge such compensation,
and any such expenses with respect to a Series incurred by the Custodian
in the performance of its duties under this Agreement against any money
specifically allocated to such Series. The Custodian shall also be
entitled to charge against any money held by it for the account of a
Series the amount of any loss, damage, liability or expense, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement attributable to, or arising out of, its
serving as Custodian for such Series. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall include, but
are not limited to, the expenses of subcustodians and foreign branches of
the Custodian incurred in settling outside of New York City transactions
involving the purchase and sale of Securities of the Fund. Notwithstanding
the foregoing or anything else contained in this Agreement to the
contrary, the Custodian shall, prior to effecting any charge for
compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing, Oral Instructions, or Written
Instructions received by the Custodian and reasonably believed by the
Custodian to be genuine. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming Oral Instructions or Written
Instructions in such manner so that such Certificate or facsimile thereof
is received by the Custodian, whether by hand delivery, telecopier or
other similar device, or otherwise, by the close of business of the same
day that such Oral Instructions or Written Instructions are given to the
Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur
no liability to the Fund in acting upon Oral Instructions or Written
Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from
an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed
by the Custodian to be given in accordance with the terms and conditions
of any Margin Account Agreement. Without limiting the generality of the
foregoing, the Custodian shall be under no duty to inquire into, and shall
not be liable for, the accuracy of any statements or representations
contained in any such instrument or other notice including, without limi-
tation, any specification of any amount to be paid to a broker, dealer,
futures commission merchant or Clearing Member. This paragraph shall not
excuse any failure by the Custodian to have acted in accordance with any
Margin Agreement it has executed or any Certificate, Oral Instructions,
or Written Instructions given in accordance with this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be
the property of the Fund. Such books and records shall be prepared and
maintained by the Custodian as required by the Investment Company Act of
1940, as amended, and other applicable Securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall
have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the Fund or
the Fund's authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reasonable request
of the Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such delivery
which are maintained by the Custodian on a computer disc, or are similarly
maintained, and the Fund shall reimburse the Custodian for its expenses
of providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the Book-
Entry system, each Depository or O.C.C., and with such reports on its own
systems of internal accounting control as the Fund may reasonably request
from time to time.
15. The Custodian shall furnish upon request annually to the Fund
a letter prepared by the Custodian's accountants with respect to the
Custodian's internal systems and controls in the form generally provided
by the Custodian to other investment companies for which the Custodian
acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising out of, or
related to, the Custodian's performance of its obligations under this
Agreement, except for any such liability, claim, loss and demand arising
out of the negligence, bad faith, or willful misconduct of the Custodian,
any co-Custodian or subcustodian appointed by the Custodian, or that of
the officers, employees, or agents of any of them.
17. Subject to the foregoing provisions of this Agreement, the
Custodian shall deliver and receive Securities, and receipts with respect
to such Securities, and shall make and receive payments only in accordance
with the customs prevailing from time to time among brokers or dealers in
such Securities and, except as may otherwise be provided by this Agreement
or as may be in accordance with such customs, shall make payment for
Securities only against delivery thereof and deliveries of Securities only
against payment therefor.
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.
parties, replaces all prior agreements and may not be amended or modified
in any manner except by a written agreement executed by both parties with
the same formality as this Agreement and approved by a resolution of the
Board of Trustees of the Fund, except that Appendices A and B may be
amended unilaterally by the Fund without such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the Custodian or The Bank of
New York without the written consent of the Fund, authorized or approved
by a resolution of the Fund's Board of Trustees. For purposes of this
paragraph, no merger, consolidation, or amalgamation of the Custodian, The
Bank of New York, or the Fund shall be deemed to constitute an assignment
of this Agreement.
7. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of a
state or federal court situated in New York City, New York in connection
with any dispute arising hereunder and hereby waives its right to trial
by jury.
8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Board of Trustees
of the Fund as Trustees and not individually and that the obligations of
the instrument are not binding upon any of the Trustees or shareholders
individually but are binding upon the assets and property of the Fund;
provided, however, that the Declaration of Trust of the Fund provides that
the assets of a particular series of the Fund shall under no circumstances
be charges with liabilities attributable to any other series of the Fund
and that all persons extending credit to, or contracting with or having
any claim against a particular series of the Fund shall look only to the
assets of that particular series for payment of such credit, contract or
claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized and
their respective seals to be hereunto affixed, as of the day and year
first above written.
OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND
By: _______________________________
Robert G. Galli, Vice President
[SEAL]
Attest:
___________________________________
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
[SEAL] By__________________________________
Attest:
___________________________________
CUSTODY\295<PAGE>
APPENDIX A
I, President and I,
, of Oppenheimer Fund,
a Massachusetts business trust (the "Fund") do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust
and By-Laws to give Oral Instructions and Written Instructions on behalf
of the Fund, except that those persons designated as being an "Officer of
OSS" shall be an Authorized Person only for purposes of Articles XII and
XIII. The signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX B
I, President and I,
, of Oppenheimer Fund, a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of
OSS" is specified serve in the following positions with the Fund and each
has been duly elected or appointed by the Board of Trustees of the Fund
to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws. With respect to the following
individuals for whom a position of "Officer of OSS" is specified, each
such individual has been designated by a resolution of the Board of
Trustees of the Fund to be an Officer for purposes of the Fund's Custody
Agreement with The Bank of New York, but only for purposes of Articles XII
and XIII thereof and a certified copy of such resolution is attached
hereto. The signatures of each individual below set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
of Oppenheimer Fund (the "Fund"),
further certifies that the following resolutions were adopted by the Board
of Trustees of the Fund at a meeting duly held on __________________, 199
, at which a quorum at all times present and that such resolutions have
not been modified or rescinded and are in full force an effect as of the
date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the
Fund dated as of 199 (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing
basis to act in accordance with, and to rely on
instructions by the Fund to the Custodian communicated by
a Terminal Link as defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to officers of the
Fund as defined in the Custody Agreement, and shall
establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of such
access codes.
RESOLVED, that Officers of the Fund as defined in the
Custody Agreement shall, following the establishment of
such access codes and such internal safekeeping
procedures, advise the Custodian that the same have been
established by delivering a Certificate, as defined in the
Custody Agreement, and the Custodian shall be entitled to
rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of
, as of the day of , 199 .
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:
EXHIBIT A
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of Oppenheimer Fund, a Massachusetts business trust
(the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on 199
, at which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and
the Fund dated as of , 199 (the "Custody
Agreement") is authorized and instructed on a continuous
and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all Securities eligible
for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Book-
Entry System to the extent possible in connection with its
performance thereunder, including, without limitation, In
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and
returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of
, 199 .
__________________________
[SEAL]<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned , hereby certi-
fies that he or she is the duly elected and acting
of Oppenheimer Fund, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted
by the Board of Trustees of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and
the Fund dated as of , 199 (the "Custody
Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the
contrary to deposit in The Depository Trust Company
("DTC") as a "Depository" as defined in the Custody
Agreement, all Securities eligible for deposit therein,
regardless of the Series to which the same are speci-
fically allocated, and to utilize DTC to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
as of the day of , 199 .
___________________________
[SEAL]<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, hereby certifies that he or
she is the duly elected and acting
of Oppenheimer Fund, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted
by the Board of Trustees of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and
the Fund dated as of 199 , (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing
basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to
deposit in the Participants Trust Company as a Depository,
as defined in the Custody Agreement, all Securities
eligible for deposit therein, regardless of the Series to
which the same are specifically allocated, and to utilize
the Participants Trust Company to the extent possible in
connection with its performance thereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities,
and deliveries and returns of Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 199 .
_______________________
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting
of Oppenheimer Fund, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted
by the Board of Trustees of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and
the Fund dated as of , 199 (the "Custody
Agreement") is authorized and instructed on a continuous
and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction
in Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the
Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of , 199 .
____________________________
[SEAL]<PAGE>
EXHIBIT D
[FORM OF FOREIGN SUBCUSTODIAN AGREEMENT]<PAGE>
Appendix A
Article XIX.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
Exhibit D 34
Article XV.4 34
Schedule A
Article XV.1 33
CUSTODY\295
MYER, SWANSON & ADAMS, P.C.
The Colorado State Bank Building
1600 Broadway - Suite 1850
Denver, Colorado 80202-4918
March 20, 1992
Oppenheimer Strategic Short-Term Income Fund
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the proposed public offering of shares of beneficial
interest of Oppenheimer Strategic Short-Term Income Fund (the "Trust"),
we have examined such records and documents as we deem necessary for the
purpose of this opinion.
The Trust is a business trust duly organized and validly existing under
the laws of the Commonwealth of Massachusetts. As of the date of this
letter, it is our opinion that the indefinite number of shares of the
Trust covered by its Registration Statement on Form N-1A (SEC Reg. No. 33-
45178), 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 Trust subject to the matters set
forth in the next paragraph.
Under Massachusetts law, shareholders of the Trust may, under certain
circumstances, be held personally liable as partners for the obligations
of the Trust. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of
the trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon.
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 Trust or its shares.
Sincerely,
/s/ Allan B. Adams
--------------------------------------------
Allan B. Adams of Myer, Swanson & Adams, P.C.
OPINION\295
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd
day of February, 1994, by and between OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND (the "Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the
"Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for a
portion of its costs incurred in connection with the distribution of
Shares, and the personal service and maintenance of shareholder accounts
that hold Shares ("Accounts"). The Fund may act as distributor of
securities of which it is the issuer, pursuant to the Rule, according to
the terms of this Plan. The Distributor is authorized under the Plan to
pay "Recipients," as hereinafter defined, for rendering (1) distribution
assistance in connection with the sale of Shares and/or (2) administrative
support services with respect to Accounts. Such Recipients are intended
to have certain rights as third-party beneficiaries under this Plan. The
terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the
1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., or
its successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day (the "Service
Fee"), plus (ii) within ten (10) days of the end of each month, in
the aggregate amount of 0.0625% (0.75% on an annual basis) of the
average during the month of the aggregate net asset value of Shares
computed as of the close of each business day (the "Asset-Based Sales
Charge") outstanding for six years or less (the "Maximum Holding
Period"). Such Service Fee payments received from the Fund will
compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board
with respect to Accounts. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor and Recipients
for providing distribution assistance in connection with the sales
of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take
appropriate steps to terminate the Recipient's status as such under
the Plan, whereupon such entity's rights as a third-party beneficiary
hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make service
fee payments ("Advance Service Fee Payments") to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed (i) 0.25% of the average during the
calendar quarter of the aggregate net asset value of Shares, computed
as of the close of business on the day such Shares are sold,
constituting Qualified Holdings sold by the Recipient during that
quarter and owned beneficially or of record by the Recipient or by
its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of Shares computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee Payments
do not exceed the limits on payments to Recipients that are, or may
be, imposed by Article III, Section 26, of the NASD Rules of Fair
Practice. In the event Shares are redeemed less than one year after
the date such Shares were sold, the Recipient is obligated and will
repay to the Distributor on demand a pro rata portion of such Advance
Service Fee Payments, based on the ratio of the time such shares were
held to one (1) year. The Advance Service Fee Payments described in
part (i) of the preceding sentence may, at the Distributor's sole
option, be made more often than quarterly, and sooner than the end
of the calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Trustees. A majority of the
Independent Trustees may at any time or from time to time decrease
and thereafter adjust the rate of fees to be paid to the Distributor
or to any Recipient, but not to exceed the rate set forth above,
and/or direct the Distributor to increase or decrease the Maximum
Holding Period, the Minimum Holding Period or the Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings, Maximum Holding Period 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
Trustees); (iv) other direct distribution costs of the type approved
by the Board, including without limitation the costs of sales
literature, advertising and prospectuses (other than those furnished
to current Shareholders) and state "blue sky" registration expenses;
and (v) any service rendered by the Distributor that a Recipient may
render pursuant to part (a) of this Section 3. The Distributor's
costs of providing the above-mentioned services are hereinafter
collectively referred to as "Distribution and Service Costs." "Carry
Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed
the Quarterly Limitation. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied
in the following order of priority: first, to interest on
unreimbursed Carry Forward Expenses, second, to reduce any
unreimbursed Carry Forward Expenses, third, to reduce Distribution
and Service Costs during that quarter, and fourth, to reduce the
Asset-Based Sales Charge payments by the Fund to the Distributor in
that quarter. Carry Forward Expenses shall be carried forward by the
Fund until payment can be made under the Quarterly Limitation.
(e) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing distribution expenditures properly attributable to
the Shares, including the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, the amount paid
to the Distributor and the Distribution and Service Costs and Carry
Forward Expenses for that period. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses
incurred in prior years and not previously recovered with respect to the
distribution of Shares in conjunction with the Board's annual review of
the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on February 23, 1994, for the purpose of
voting on this Plan, and replaces the Fund's Distribution and Service Plan
and Agreement dated June 22, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until October 31, 1994 and from year
to year thereafter or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Trustees cast in person at a meeting
called for the purpose of voting on such continuance. This Plan may not
be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described
above, and all material amendments must be approved by a vote of the Board
and of the Independent Trustees. This Plan may be terminated at any time
by vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's
outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of any
Carry Forward Expenses and related costs properly incurred in respect of
Shares sold prior to the effective date of such termination, and whether
the Fund shall continue to make payment to the Distributor in the amount
the Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all or part of
such amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and
the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
<PAGE>
OPPENHEIMER STRATEGIC SHORT-TERM
INCOME FUND
By: _____________________________
Andrew J. Donohue, Vice President
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:_______________________________
Katherine P. Feld, Vice President
& Secretary
OFMI\295B.1
Oppenheimer Strategic Short-Term Income Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10
years which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
08/26/92 0.0208840 0.0000 4.940
09/23/92 0.0254240 0.0000 4.880
10/28/92 0.0317800 0.0000 4.810
11/25/92 0.0241222 0.0000 4.750
12/31/92 0.0284631 0.0006504 4.750
01/27/93 0.0224586 0.0000 4.790
02/24/93 0.0232904 0.0000 4.850
03/24/93 0.0232904 0.0000 4.850
04/28/93 0.0291130 0.0000 4.870
05/26/93 0.0232904 0.0000 4.840
06/23/93 0.0232904 0.0000 4.830
07/28/93 0.0291130 0.0000 4.840
08/25/93 0.0232904 0.0000 4.850
09/22/93 0.0232904 0.0000 4.850
10/27/93 0.0291130 0.0000 4.860
11/24/93 0.0241222 0.0000 4.830
12/31/93 0.0299448 0.0065073 4.830
01/26/94 0.0216268 0.0000 4.850
02/23/94 0.0232904 0.0000 4.810
03/23/94 0.0232904 0.0000 4.730
04/26/94 0.0291130 0.0000 4.660
05/25/94 0.0232904 0.0000 4.620
06/22/94 0.0232904 0.0000 4.610
07/27/94 0.0291130 0.0000 4.600
08/24/94 0.0232904 0.0000 4.600
09/28/94 0.0291130 0.0000 4.560
Class B Shares
12/31/92 0.0202852 0.0006504 4.750
01/27/93 0.0182269 0.0000 4.780
02/24/93 0.0200269 0.0000 4.840
03/24/93 0.0195783 0.0000 4.850
04/28/93 0.0249110 0.0000 4.860
05/26/93 0.0202163 0.0000 4.840
06/23/93 0.0203475 0.0000 4.830
07/28/93 0.0252652 0.0000 4.840
08/25/93 0.0195594 0.0000 4.850
09/22/93 0.0185163 0.0000 4.840
10/27/93 0.0249464 0.0000 4.850
11/24/93 0.0211534 0.0000 4.830
12/31/93 0.0258342 0.0065073 4.820
01/26/94 0.0189399 0.0000 4.840
02/23/94 0.0204622 0.0000 4.810
03/23/94 0.0202993 0.0000 4.730
f:\rr\dnvshare\sai\093094\295.sch
Oppenheimer Strategic Short-Term Income Fund
Page 2
January 17, 1995
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
04/26/94 0.0253745 0.0000 4.650
05/25/94 0.0205957 0.0000 4.620
06/22/94 0.0205633 0.0000 4.600
07/27/94 0.0257385 0.0000 4.590
08/24/94 0.0206098 0.0000 4.600
09/28/94 0.0257743 0.0000 4.560
1. Average Annual Total Returns for the Periods Ended 09/30/94:
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
Class A Shares
Examples, assuming a maximum sales charge of 3.50%:
One Year Inception
$ 970.89 1 $1,011.77 .4632
(---------) - 1 = -2.91% (---------) - 1 = 0.54%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 4.00% for
the first year, and 3.00% for the second year:
One Year Inception
$ 958.49 1 $1,036.26 .5448
(---------) - 1 = -4.15% (---------) - 1 = 1.96%
$1,000 $1,000
Oppenheimer Strategic Short-Term Income Fund
Page 3
January 17, 1995
1. Average Annual Total Returns for the Periods Ended 09/30/94 (Continued):
Examples at NAV:
Class A Shares
One Year Inception
$1,006.11 1 $1,048.46 .4632
(---------) - 1 = 0.61% (---------) - 1 = 2.22%
$1,000 $1,000
Class B Shares
One Year Inception
$ 996.10 1 $1,065.12 .5448
(---------) - 1 = -0.39% (---------) - 1 = 3.50%
$1,000 $1,000
2. Cumulative Total Returns for the Periods Ended 9/30/94:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 3.50%:
One Year Inception
$ 970.89 - $1,000 $1,011.77 - $1,000
------------------ = -2.91% ------------------ = 1.18%
$1,000 $1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 4.00% for
the first year, and 3.00% the second year:
One Year Inception
$ 958.49 - $1,000 $1,036.26 - $1,000
------------------ = -4.15% ------------------ = 3.63%
$1,000 $1,000
Oppenheimer Strategic Short-Term Income Fund
Page 4
January 17, 1995
2. Cumulative Total Returns for the Periods Ended 9/30/94 (Continued):
Examples at NAV:
Class A Shares
One Year Inception
$1,006.11 - $1,000 $1,048.46 - $1,000
------------------ = 0.61% ------------------ = 4.85%
$1,000 $1,000
Class B Shares
One Year Inception
$ 996.10 - $1,000 $1,065.12 - $1,000
------------------ = -0.390% ------------------ = 6.51%
$1,000 $1,000
Oppenheimer Strategic Short-Income Fund
Page 5
January 17, 1995
3. Standardized Yield for the 30-Day Period Ended 09/30/94:
The Fund's standardized yields are calculated using the following
formula set forth in the SEC rules:
a - b 6
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 = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 3.50%:
$176,412.34 - $27,498.00 6
2{(------------------------ + 1) - 1} = 6.16%
6,208,540 x $4.73
Class B Shares
Example at NAV:
$ 47,821.75 - $12,396.87 6
2{(------------------------ + 1) - 1} = 5.61%
1,683,986 x $4.55
Oppenheimer Strategic Short-Term Income Fund
Page 6
January 17, 1995
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 9/30/94:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a / 30) x 365 } / b or c
The symbols above represent the following factors:
a = The accrual 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:
Class A Shares
Dividend Yield
at Maximum Offering $.0249540/30 x 365
------------------ = 6.42%
$4.73
Dividend Yield
at Net Asset Value $.0249540/30 x 365
------------------ = 6.66%
$4.56
Class B Shares
Dividend Yield
at Net Asset Value $.0221152/30 x 365
------------------ = 5.91%
$4.55
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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