-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T/5B+u+PVysHOxtaXjj04v8eQNuqAeNkjt9/7pND1z6bcE77g4UtOZpQmg118vSh 16C8XfAps4/LMxRs1MRYuw== 0000912057-96-003672.txt : 19960304 0000912057-96-003672.hdr.sgml : 19960304 ACCESSION NUMBER: 0000912057-96-003672 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 19960301 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT MUTUAL INVESTMENT ACCOUNTS INC CENTRAL INDEX KEY: 0000356865 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061052841 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-75276 FILM NUMBER: 96529884 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03346 FILM NUMBER: 96529885 BUSINESS ADDRESS: STREET 1: 140 GARDEN ST CITY: HARTFORD STATE: CT ZIP: 06154 BUSINESS PHONE: 2039875002 FORMER COMPANY: FORMER CONFORMED NAME: CONNECTICUT MUTUAL LIQUID ACCOUNT INC DATE OF NAME CHANGE: 19851106 485APOS 1 485APOS As filed with the Securities and Exchange Commission on March 1, 1996 Registration No. 2-75276 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 28 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 29 CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. (Exact name of Registrant as Specified in Charter) 140 Garden Street Hartford, Connecticut 06154 (Address of Principal Executive Office)(Zip Code) Registrant's Telephone Number, Including Area Code: (203) 987-5047 Ann F. Lomeli, Secretary Connecticut Mutual Investment Accounts, Inc. 140 Garden Street Hartford, Connecticut 06154 (Name and Address of Agent for Service) It is proposed that this filing will become effective / / immediately upon filing pursuant to paragraph (b) / / on (date) pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a) / X / on May 1, 1996 pursuant to paragraph (a), of Rule 485 Registrant has registered an indefinite number of securities under the Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment Company Act of 1940. The Rule 24f-2 Notice for the fiscal year ended December 31, 1995 was filed for the Registrant's following series on or about February 29, 1996: Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Total Return Account, Connecticut Mutual Growth Account, CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced Account and CMIA LifeSpan Diversified Income Account. CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Oppenheimer Disciplined Allocation Fund. Cross-Reference Sheet Showing Location in Prospectus and Statement of Additional Information of Information Required by Items of the Registration Form Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 1. Cover Page....................... Cover Page. 2. Synopsis......................... About The Funds -- A Brief Overview of the Fund. 3. Condensed Financial Information.................... About The Funds -- Financial Highlights. 4. General Description of Registrant..................... Cover Page; About The Funds -- How The Fund Is Managed - - Organization and History. 5. Management of the Fund........... About The Funds -- How the Funds are Managed. 6. Capital Stock and Other Securities..................... About The Funds -- Investment Objective and Policies. 7. Purchase of Securities Being Offered.................. About Your Account -- How to Buy Shares; Special Sales Charge Arrangements for Certain Persons; Buying Class A Shares; Buying Class B Shares; Buying Class C Shares. 8. Redemption or Repurchase......... About Your Account -- How to Buy Shares; Special Investor Services; How to Sell Shares; How to Exchange Shares; Shareholder Account Rules and Policies. Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 9. Pending Legal Proceedings........ Not Applicable. 10. Cover Page....................... Cover Page. 11. Table of Contents................ Cover Page. 12. General Information and History........................ Cover Page; How The Funds are Managed -- Organization and History. 13. Investment Objectives and Policy......................... About The Funds -- Investment Objectives and Policies. 14. Management of the Fund........... About The Funds -- How the Funds are Managed. 15. Control Persons and Principal Holders of Securities.......... About The Funds -- How the Funds are Managed. 16. Investment Advisory and Other Services................. About The Funds -- How the Funds are Managed; The Manager, the Subadviser and Their Affiliates; The Distributor; The Transfer Agent. 17. Brokerage Allocation and Other Practices................ About the Funds -- Brokerage Policies of the Funds. 18. Capital Stock and Other Securities..................... About the Funds -- How the Funds are Managed -- Organization and History. 19. Purchase, Redemption and Pricing of Securities Being Offered.... About Your Accounts -- How to Buy Shares; How to Sell Shares; How to Exchange Shares. 20. Tax Status....................... About Your Account -- Dividends, Capital Gains and Taxes. - 2 - Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 21. Underwriters..................... About The Funds -- How the Funds are Managed -- The Manager, the Subadvisers and Their Affiliates; About Your Account -- How To Buy Shares. 22. Calculation of Performance Data........................... About The Funds -- Performance of the Funds; About Your Account -- Dividends, Capital Gains and Taxes. 23. Financial Statements............. Financial Information About the Funds -- Independent Auditors' Report -- Financial Statements. - 3 - OPPENHEIMER DISCIPLINED ALLOCATION FUND PROSPECTUS DATED MAY 1, 1996 Oppenheimer Disciplined Allocation Fund (the "Fund") is a mutual fund that seeks to maximize total investment return (including both capital appreciation and income) principally by allocating its assets among stocks, corporate bonds, U.S. Government securities and money market instruments according to changing market conditions. This allocation process utilizes quantitative asset allocation tools, which measure the relationship among these asset categories, in combination with the judgment of the investment manager concerning current market dynamics. The Fund is not restricted to investing in any specific type of security and may use "hedging" instruments to seek to reduce the risks of market fluctuations that affect the value of the securities the Fund holds. 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 May 1, 1996 Statement of Additional Information. For a free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission ("SEC") and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). (Oppenheimer funds logo) SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF 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. CONTENTS A B O U T T H E F U N D EXPENSES BRIEF OVERVIEW OF THE FUND FINANCIAL HIGHLIGHTS INVESTMENT OBJECTIVE AND POLICIES HOW THE FUND IS MANAGED PERFORMANCE OF THE FUND A B O U T Y O U R A C C O U N T HOW TO BUY SHARES Class A Shares Class B Shares Class C Shares SPECIAL INVESTOR SERVICES AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans HOW TO SELL SHARES By Mail By Telephone HOW TO EXCHANGE SHARES SHAREHOLDER ACCOUNT RULES AND POLICIES DIVIDENDS, CAPITAL GAINS AND TAXES APPENDIX A: DESCRIPTION OF SECURITIES RATINGS APPENDIX B: CREDIT QUALITY DISTRIBUTION APPENDIX C: SPECIAL SALES CHARGE ARRANGEMENTS -2- A B O U T T H E F U N D EXPENSES The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services and those expenses are 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 the share of a Fund's business operating expenses that you will bear indirectly. The numbers below are based on the Fund's expenses during its fiscal year ended December 31, 1995. / / SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of the Fund. Please refer to "About Your Account" starting on page ___ for an explanation of how and when these charges apply. CLASS A CLASS B CLASS C SHARES SHARES SHARES - ------------------------------------------------------------------------------- Maximum Sales 5.75% None None Charge on Purchases (as a % of offering price) - ------------------------------------------------------------------------------- Sales Charge on None None None Reinvested Dividends - ------------------------------------------------------------------------------- Deferred Sales None(1) 5% in the 1% if Charge (as a % first year, shares are of the lower declining redeemed of the original to 1% in the within 12 purchase price sixth year and months of or redemption eliminated purchase(2) proceeds) thereafter(2) - ------------------------------------------------------------------------------- Exchange Fee None None None - ------------------------------------------------------------------------------- Redemption Fee None(3) None(3) None(3) (1) If you invest $1 million or more ($500,000 or more for purchases by OppenheimerFunds prototype 401(k) plans) 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 -- Buying Class A Shares," below. (2) See "How to Buy Shares -- Buying Class B Shares," and "Buying Class C Shares" below, for more information on the contingent deferred sales charges. -3- (3) There is a $10 transaction fee for redemption proceeds paid by Federal Funds wire, but not for redemptions paid by check or ACH transfer through AccountLink. / / 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 advisor, OppenheimerFunds, Inc. (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 the Fund's portfolio securities, audit fees and legal expenses. Those expenses are detailed in the Fund's Financial Statements in the Statement of Additional Information. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS): CLASS A CLASS B CLASS C SHARES SHARES SHARES -------- ------- ------- Management Fees 0.625% 0.625% 0.625% 12b-1 Plan Fees 0.25 % 1.00 % 1.00 % Other Expenses 0.295% 0.295% 0.295% -------- ------- ------- Total Fund Operating Expenses 1.17 % 1.92 % 1.92 % The numbers for Class A shares in the chart above are 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. Class B shares were not publicly offered before October 1, 1995. Therefore, the Annual Fund Operating Expenses shown are based on expenses for the period from October 1, 1995 until December 31, 1995. Class C shares were not publicly offered during the Fund's last fiscal year. Accordingly, the Annual Fund Operating Expenses for Class C shares are estimates based upon amounts that would have been payable if Class C shares had been outstanding during the year. The actual expenses for each class of shares in future years may be more or less than the numbers in the chart, depending on a number of factors, including the actual amount of the Fund's assets represented by each class of shares. The "12b-1 Distribution Plan Fees" for Class A shares are the Service Plan Fees (which can be up to a maximum of 0.25% of average annual net assets of that class). For Class B and Class C shares, 12b-1 Plan Fees include the Service Plan Fees (which can be up to a maximum of 0.25%) and an annual asset-based sales charges of 0.75%. These plans are described in greater detail in "How to Buy Shares." / / 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 table 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: -4- 1 YEAR 3 YEARS 5 YEARS 10 YEARS* ------ ------- ------- --------- Class A Shares $ 69 $ 93 $ 118 $ 191 Class B Shares $ 70 $ 100 $ 124 $ 205 Class C Shares $ 30 $ 60 $ 104 $ 224 If you did not redeem your investment, it would incur the following expenses: 1 YEAR 3 YEARS 5 YEARS 10 YEARS* ------ ------- ------- --------- Class A Shares $ 69 $ 93 $ 118 $ 191 Class B Shares $ 20 $ 60 $ 104 $ 205 Class C Shares $ 20 $ 60 $ 104 $ 224 * The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Because of the effect of the asset-based sales charge and the contingent deferred sales charge on Class B and Class C shares, long-term Class B and Class C shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations. For Class B shareholders, the automatic conversion of Class B shares into Class A shares is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares" for more information. THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT ARE NOT MEANT TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS OF THE FUND, WHICH MAY BE GREATER OR LESSER THAN THOSE SHOWN. 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 in the Fund. 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 to maximize total investment return by utilizing the investment strategy described below. / / WHAT DOES THE FUND INVEST IN? In seeking to maximize total investment return (including capital appreciation and income), the Fund allocates its assets among stocks, corporate bonds, U.S. Government securities and money market instruments according to changing market conditions. This allocation process utilizes quantitative asset allocation tools, which measure the relationship among these asset categories, in combination with the judgment of the Manager concerning current market dynamics. The Fund may also invest in debt securities and preferred stocks rated below investment grade (commonly called junk bonds) and may invest to a limited degree in securities of foreign issuers. The Fund may write covered calls and use certain types of "hedging instruments" and "derivative investments" to try to manage investment risks. These investments are more fully explained in "Investment Objective and Policies" starting on page __. -5- / / WHO MANAGES THE FUND? The Fund's investment advisor is OppenheimerFunds, Inc., which (including a subsidiary) advises investment company portfolios having over $40 billion in assets at December 31, 1995. The Fund's Board of Directors, elected by shareholders, oversees the investment advisor and the portfolio manager. The Manager is paid an advisory fee by the Fund, based on its net assets. The Fund has a portfolio manager, Peter Antos, who is employed by the Manager. He is primarily responsible for the selection of the Fund's securities but is assisted by other managers. 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 stocks and bonds are subject to changes in their value from a number of factors such as changes in general bond and stock market movements. The change in value of a particular stock or bond may result from an event affecting the issuer, or changes in interest rates that can affect stock and bond prices. These changes affect the value of the Fund's investments and its share prices for each class of its shares. In the Oppenheimer funds' spectrum the Fund is more aggressive than most growth and income funds but less so than aggressive growth funds. In addition, there are certain risks associated with the lower quality debt securities and foreign securities the Fund may purchase and the hedging strategies the Manager may utilize. While the Manager tries to reduce risks by diversifying investments, by 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 of the Fund's investment risks. / / 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" beginning on page ___ for more details. / / WILL I PAY A SALES CHARGE TO BUY SHARES? The Fund has three classes of shares. Each class of shares has the same investment portfolio, but different expenses. Class A shares are offered with a front-end sales charge, starting at 5.75% and reduced for larger purchases. Class B and Class C shares are offered without front-end sales charges, but may be subject to a contingent deferred sales charge if redeemed within 6 years or 12 months, respectively, of purchase. There is also an annual asset-based sales charge on Class B and Class C shares. Please review "How To Buy Shares" starting on page ___ for more details, including a discussion about factors you and your financial advisor should consider in determining 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 ___. The Fund also offers exchange privileges to other Oppenheimer funds, described in "How to Exchange Shares" on page ____. / / HOW HAS THE FUND PERFORMED? The Fund measures its performance by quoting average annual total return and cumulative total return, which measure historical performance. Those returns can be compared to the total returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. Please remember that past performance does not guarantee future results. -6- FINANCIAL HIGHLIGHTS The following information for the fiscal year ended December 31, 1995 has been derived from audited financial statements together with the auditors' report for the year ended December 31, 1995 which is included in the Statement of Additional Information. The tables on the following pages present selected financial information about the Fund, including per share data and expense ratios and other data based on the Fund's average net assets. Class B shares have been offered since October 1, 1995. Class C shares were not publicly offered during the periods shown. -7-
FINANCIAL HIGHLIGHTS* CLASS A SHARES YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA: 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- NET ASSET VALUE, BEGINNING OF PERIOD $13.44 $14.54 $13.81 $14.02 $11.94 $12.69 $11.51 $10.91 $11.87 $10.91 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .60 .55 .48 .50 .54 .66 .76 .53 .38 .31 Net realized and unrealized 2.59 (.86) 1.70 .86 2.79 (.68) 1.81 .60 .13 .99 gain (loss) on investment, ---- ----- ---- --- ---- ----- ---- --- --- --- options written and foreign currency transactions Total income (loss) from 3.19 (.31) 2.18 1.36 3.33 (.02) 2.57 1.13 .51 1.30 investment operations - ----------------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment (.60) (.55) (.48) (.50) (.54) (.66) (.76) (.53) (.38) (.30) income Distributions from net (.57) (.24) (.97) (1.07) (.71) (.07) (.63) -- (1.09) (.04) realized gain on investments ----- ----- ----- ------ ----- ----- ---- ----- ------ ----- and foreign currency transactions Total dividends and (1.17) (.79) (1.45) (1.57) (1.25) (.73) (1.39) (.53) (1.47) (.34) distributions to shareholders - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $15.46 $13.44 $14.54 $13.81 $14.02 $11.94 $12.69 $11.51 $10.91 $11.87 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 23.95% (2.11)% 15.89% 9.90% 28.21% (0.21)% 22.61% 10.40% 3.92% 11.88% - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $218,099 $177,904 $171,205 $109,701 $86,455 $66,382 $65,071 $54,253 $44,770 $35,382 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Net investment income (loss) 4.00% 3.80% 3.40% 3.61% 4.02% 5.31% 5.90% 4.61% 3.15% 3.22% Expenses 1.17% .96% 1.02% 1.11% 1.20% 1.24% 1.20% 1.11% 1.08% 1.26% - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 55.20% 115.01% 155.16% 177.85% 122.40% 115.45% 149.22% 223.62% 197.79% 143.32% - -----------------------------------------------------------------------------------------------------------------------------------
- ---------- * G.R. Phelps & Co. managed the Fund during these periods. (a) Annual total returns do not include the effect of sales charges. -8- FINANCIAL HIGHLIGHTS* (CONT'D.) CLASS B SHARES(c) PERIOD ENDED DECEMBER 31, 1995 ------------------ PER SHARE OPERATING DATA: Net asset value, beginning of period $ 15.48 - ------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .07 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions .70 ----------- Total income (loss) from investment operations .77 - ------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.07) Distributions from net realized gain on investments (.52) and foreign currency transactions ----------- Total dividends and distributions to shareholders (.59) - ------------------------------------------------------------------------------- Net asset value, end of period $ 15.66 ----------- ----------- - ------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(b) 4.93% - ------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 650 - ------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) .73%(a) Expenses 1.92%(a) - ------------------------------------------------------------------------------- Portfolio turnover rate 55.20% - ------------------------------------------------------------------------------- * G.R. Phelps & Co. managed the Fund during this period. (a) Annualized. (b) Total returns do not include the effect of sales charges. (c) For the period from October 1, 1995 (inception) through December 31, 1995. -9- INVESTMENT OBJECTIVE AND POLICIES OBJECTIVE. The Fund seeks to maximize total investment return (including capital appreciation and income) by allocating its assets among stocks, corporate bonds, U.S. Government securities and money market instruments according to changing market conditions. INVESTMENT POLICIES AND STRATEGIES. The Fund's allocation process utilizes quantitative asset allocation tools, which measure the relationship among these asset categories, in combination with the judgment of the Manager concerning current market dynamics. Allocating assets among different types of investments allows the Fund to take advantage of opportunities wherever they occur, but also subjects the Fund to the risks of a given investment type. The Fund's debt securities are expected to have a portfolio maturity of 6 to 12 years. At least 25% of the Fund's total assets will be invested in fixed income senior securities. The Fund may invest up to 25% of its total assets in the aggregate in debt securities and preferred stocks rated below investment grade (commonly called junk bonds) and unrated securities determined by the Manager to be of comparable credit quality. The Fund will not invest in lower rated securities rated below B at the time of purchase. Unrated debt securities will not exceed 10% of the Fund's total assets. The Fund may invest up to 20% of its total assets in mortgage dollar rolls. The Fund may also invest up to 5% of its total assets in inverse floating rate instruments which are a type of derivative security. Consistent with the foregoing policies, the Fund may invest to a limited degree in securities of foreign issuers. / / 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 practices 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 not a fundamental policy. Shareholders of the Fund will be given 30 days' advance written notice of a change to the Fund's investment objective. Fundamental policies are those that cannot be changed without the approval of a "majority" of a Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act to be a particular percentage of outstanding voting shares (and this term is explained in the Statement of Additional Information). The Fund's Board of Directors may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. / / STOCK INVESTMENT RISKS. Because the Fund invests a substantial portion of its assets in stocks, the value of the Fund's portfolio will be affected by changes in the stock markets. At times, the stock markets can be volatile and stock prices can change substantially. This market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. Not all stock prices change uniformly or at the same time, and other factors can affect a particular stock's prices (for example, poor earnings reports by an issuer, loss of major customers, major litigation against an issuer, and changes in government regulations affecting an industry). Not all of these factors can be predicted. -10- The Fund attempts to limit market risks by diversifying its investments, that is, by not holding a substantial amount of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one company. Also, the Fund does not concentrate its investments in any one industry or group of industries. Because of the types of securities the Fund invests in and the investment techniques the Fund uses, the Fund is designed for investors who are investing for the long term. It is not intended for investors seeking assured income or preservation of capital. Because changes in overall market prices can occur at any time, and because the income earned on securities is subject to change, there is no assurance that the Fund will achieve its investment objective, and when you redeem your shares, they may be worth more or less than what you paid for them. / / INTEREST RATE RISKS. Debt securities in which the Fund may invest include corporate debt obligations, U.S. Government securities, municipal obligations, mortgage-backed and asset-backed securities, adjustable rate securities, stripped securities, custodial receipts for Treasury certificates, zero coupon bonds, equipment trust certificates, loan participation notes, structured notes and money market instruments. Debt securities are subject to changes in their values due to changes in prevailing interest rates. When prevailing interest rates fall, the value of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. Changes in the value of securities held by the Fund mean that the Fund's share prices can go up or down when interest rates change because of the effect of the change on the value of the Fund's portfolio of debt securities. / / SPECIAL RISKS OF INVESTING IN LOWER-RATED SECURITIES. The Fund can invest in high-yield, below grade debt securities (including both rated and unrated securities). These "lower-grade" securities are commonly known as "junk bonds." They generally offer higher income potential than investment grade securities. "Lower-grade" securities have a rating below "BBB" by Standard & Poor's Ratings Group ("Standard & Poor's") or "Baa" by Moody's Investors Services, Inc. ("Moody's") or similar ratings by other domestic or foreign rating organizations, or they are not rated by a nationally-recognized rating organization but the Manager judges them to be comparable to lower-rated securities. The Fund will not purchase securities rated below B by Moody's or Standard & Poor's. The Fund may retain securities whose ratings fall below B after purchase unless and until the Manager determines that disposing of such securities is in the best interests of the Fund. Appendix A to this Prospectus describes the rating categories of Moody's and Standard & Poor's. Appendix B provides a summary of ratings assigned to the Fund's debt holdings. These percentages are historical and do not necessarily indicate the current or future debt holdings of the Fund. All corporate debt securities (whether foreign or domestic) are subject to some degree of credit risk. High yield, lower-grade securities, whether rated or unrated, often have speculative characteristics and 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. For foreign lower-grade debt securities, these risks are in addition to the risks of investing in foreign securities, described below. 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. -11- / / FOREIGN SECURITIES. Consistent with its investment objective and policies, the Fund may purchase equity and debt securities issued or guaranteed by foreign companies or foreign governments or their agencies. The Fund may purchase securities in any country, developed or underdeveloped. Investments in securities of issuers in underdeveloped countries or countries that have emerging markets generally may offer greater potential for gain but involve more risk and may be considered highly speculative. As a matter of fundamental policy, the Fund may not invest more than 10% of its total assets in foreign securities, except that the Fund may invest up to 25% of its total assets in foreign equity and debt securities that are (i) issued, assumed or guaranteed by foreign governments or their political subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic issuers, including Eurodollar securities, or (iii) issued, assumed or guaranteed by foreign issuers having a class of securities listed for trading on the New York Stock Exchange. Foreign currency will be held by the Fund only in connection with the purchase or sale of foreign securities. / / FOREIGN SECURITIES HAVE SPECIAL RISKS. The change in value of a foreign currency against the U.S. dollar will result in a change in the value of securities denominated in that foreign currency. For example, foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental, economic or monetary policy in the U.S. or abroad, or other political and economic factors. More information about the risks and potential rewards of investing in foreign securities is contained in the Statement of Additional Information. / / PORTFOLIO TURNOVER. A change in the securities held by the Fund is known as "portfolio turnover." The Fund ordinarily does not engage in short- term trading to try to achieve its objective. For the fiscal year ended December 31, 1995, the Fund's portfolio turnover rate was 55.20%. The "Financial Highlights," above, show the Fund's portfolio turnover rates during past fiscal years. Portfolio turnover affects brokerage costs, dealer markups and other transaction costs, and results in the Fund's realization of capital gains or losses for tax purposes. It may also affect the ability of the Fund to qualify as a "regulated investment company" under the Internal Revenue Code and avoid being taxed on amounts distributed as dividends and capital gains to shareholders. The Fund qualified as such in its fiscal year ended December 31, 1995 and intends to do so in the future, although it reserves the right not to qualify. OTHER INVESTMENT TECHNIQUES AND STRATEGIES. The Fund may also use the investment techniques and strategies described below, which involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations on their use that may help to reduce some of the risks. / / WARRANTS AND RIGHTS. Warrants basically are options to purchase stock at set prices that are valid for a limited period of time. Rights are similar to warrants but normally have a short duration and are distributed directly by the issuer to its shareholders. The Fund may invest up to 5% of its total assets in warrants or rights. That 5% limitation does not apply to warrants the Fund has acquired as part of units with other securities or that are attached to other securities. No more than 2% of the Fund's total assets may be invested in warrants that are not listed on either The New York Stock Exchange or The American Stock Exchange. For further details, see "Warrants and Rights" in the Statement of Additional Information. -12- / / U.S. GOVERNMENT SECURITIES. Certain U.S. Government Securities, including U.S. Treasury bills, notes and bonds, and mortgage participation certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae") are supported by the full faith and credit of the U.S. Government, which in general terms means that the U.S. Treasury stands behind the obligation to pay principal and interest. Ginnie Mae certificates are one type of mortgage-related U.S. Government Security the Fund may invest in. Other mortgage-related U.S. Government Securities the Fund invests in that are issued or guaranteed by federal agencies or government-sponsored entities are not supported by the full faith and credit of the U.S. Government. Those securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of the Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported only by the credit of the instrumentality, such as the Federal National Mortgage Association ("Fannie Mae") or the Student Loan Marketing Association and obligations supported by the discretionary authority of the U.S. Government to repurchase certain obligations of U.S. Government agencies or instrumentalities such as the Federal Land Banks and the Federal Home Loan Banks. Other U.S. Government Securities the Fund may invest in are collateralized mortgage obligations ("CMOs"). The value of U.S. Government Securities will fluctuate until they mature depending on prevailing interest rates. Because the yields on U.S. Government Securities are generally lower than on corporate debt securities, when the Fund holds U.S. Government Securities it may attempt to increase the income it can earn from them by writing covered call options against them, when market conditions are appropriate. Writing covered calls is explained below, under "Hedging." / / MORTGAGE-BACKED SECURITIES AND CMOS. Certain mortgage-backed securities, whether issued by the U.S. Government or by private issuers, "pass-through" to investors the interest and principal payments generated by a pool of mortgages assembled for sale by government agencies. Pass-through mortgage-backed securities entail the risk that principal may be repaid at any time because of prepayments on the underlying mortgages. That may result in greater price and yield volatility than traditional fixed-income securities that have a fixed maturity and interest rate. The Fund may also invest in CMOs, which generally are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities. Payment of the interest and principal generated by the pool of mortgages relating to the CMOs are passed through to the holders as the payments are received. CMOs are issued with a variety of classes or series which have different maturities. Certain CMOs may be more volatile and less liquid than other types of mortgage-related securities, because of the possibility of the prepayment of principal due to prepayments on the underlying mortgage loans. The Fund may also invest in CMOs that are "stripped." That means that the security is divided into two parts, one of which receives some or all of the principal payments (and is known as a "P/O") and the other which receives some or all of the interest (and is known as an "I/O"). P/Os and I/Os are generally referred to as "derivative investments," discussed further below. The yield to maturity on the class that receives only interest is extremely sensitive to the rate of payment of the principal on the underlying mortgages. Principal prepayments increase that sensitivity. Stripped securities that pay "interest only" are therefore subject to greater price volatility when interest rates change, and they have the additional risk that if the underlying mortgages are prepaid, the Fund will lose the anticipated cash flow from the interest on the -13- prepaid mortgages. That risk is increased when general interest rates fall, and in times of rapidly falling interest rates, the Fund might receive back less than its investment. The value of "principal only" securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Private-issuer stripped securities are generally purchased and sold by institutional investors through investment banking firms. At present, established trading markets have not yet developed for these securities. Therefore, most private-issuer stripped securities may be deemed "illiquid." If the Fund holds illiquid stripped securities, the amount it can hold will be subject to the Fund's investment policy limiting investments in illiquid securities to 10% of the Fund's net assets. / / ASSET-BACKED SECURITIES. The Fund may invest in "asset-backed" securities. These represent interests in pools of consumer loans and other trade receivables, similar to mortgage-backed securities. 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 may be 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. / / INVERSE FLOATING RATE INSTRUMENTS. The Fund may invest in inverse floating rate debt instruments ("inverse floaters"), including leveraged inverse floaters and inverse floating rate mortgage-backed securities, such as inverse floating rate "interest only" stripped mortgage-backed securities. The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. / / MORTGAGE DOLLAR ROLLS. The Fund may invest up to 20% of its assets in mortgage dollar rolls. In a mortgage dollar roll the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the Fund foregoes principal and interest paid on the mortgage-backed securities. The Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. A "covered roll" is a specific type of dollar roll for which there is an offsetting cash position or a cash equivalent security position which matures on or before the forward settlement date of the dollar roll transaction. All rolls entered into by the Fund will be covered rolls. Covered rolls are not treated as a borrowing or other senior security and will be excluded from the calculation of the Fund's borrowings and other senior securities. The Manager is also permitted to purchase mortgage-backed securities and to sell such securities without regard to the length of time held in separate transactions that do not constitute dollar rolls. For financial reporting and tax purposes, the Fund treats mortgage rolls as two separate transactions: one involving the purchase of securities and a separate transaction involving a sale. The Fund does not currently intend to enter into mortgage dollar roll transactions that are accounted for as a financing. -14- / / SHORT-TERM DEBT SECURITIES. When the Manager believes it is appropriate, the Fund can hold cash or invest without limit in money market instruments. The Fund will invest in high quality, short-term money market instruments such as U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company); short-term debt obligations of corporate issuers; and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of domestic or foreign banks and savings and loan associations. The Fund will purchase money market instruments denominated in a foreign currency only within the limitations described under "Foreign Securities." The issuers of these foreign money market instruments have at least one billion dollars (U.S.) of assets. The Fund may also invest in obligations of foreign branches of U.S. banks (referred to as Eurodollar obligations) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investment in securities of U.S. banks as described in "Foreign Securities" above. / / LOANS OF PORTFOLIO SECURITIES. Subject to its investment policies and restrictions, the Fund may seek to increase its income by lending portfolio securities in transactions other than repurchase agreements. The Fund must receive collateral for a loan. As a matter of fundamental policy, these loans are limited to not more than 33 1/3% of the Fund's total assets (taken at market value) and are subject to other conditions described in the Statement of Additional Information. See "Loans of Portfolio Securities" in the Statement of Additional Information on securities loans. / / "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. / / 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. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund may experience costs in disposing of the collateral and may experience losses if there is any delay in doing so. As a matter of fundamental policy, the Fund will not enter into a repurchase agreement that causes more than 10% of its net assets in illiquid and restricted securities (as described below) which includes repurchase agreements having a maturity beyond seven days. / / ILLIQUID AND RESTRICTED SECURITIES. Under the policies established by the Fund's Board of Directors, 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. As a matter of fundamental policy, the Fund will not invest more than 10% of its total assets in illiquid and restricted securities (including repurchase agreements having a maturity beyond 7 days, portfolio securities which do not have readily available market quotations and time deposits maturing in more than 2 days). -15- / / HEDGING. The Fund may write covered call options on securities, stock or bond indices and foreign currency and may purchase and sell certain kinds of futures contracts, forward contracts, and options on futures, broadly based stock or bond indices and foreign currencies, or enter into interest rate swap agreements. These are all referred to as "hedging instruments." The Fund may use hedging instruments for hedging and, in the case of covered calls, non-hedging purposes as described below. The Fund may write covered call options and buy and sell 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 and writing covered calls, hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, 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, defensive reasons, or to raise cash to distribute to shareholders. / / FUTURES. The Fund may buy and sell futures contracts that relate to (1) foreign currencies (these are referred to as "Forward Contracts" and are discussed below), (2) financial indices, such as U.S. or foreign government securities indices, corporate debt securities indices or equity securities indices (these are referred to as Financial Futures) and (3) interest rates (those are referred to as Interest Rate Futures). These types of Futures are described in "Hedging" in the Statement of Additional Information. The Fund engages in Futures transactions and related options only for bona fide hedging purposes. / / COVERED CALL OPTIONS AND OPTIONS ON FUTURES. The Fund may write (that is, sell) call options on securities, indices and foreign currencies for hedging or liquidity purposes and write call options on Futures for hedging and non-hedging purposes, but only if all such calls are "covered." This 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 while the call is outstanding or, in the case of calls on futures, segregate appropriate liquid assets. 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). After the Fund writes a call, not more than 20% of the value of its total assets may be subject to calls. The Fund may sell covered call options that are traded on U.S. or foreign securities or commodity exchanges or which are used by Options Clearing Corporation. In the case of foreign currency options, they may be quoted by major recognized dealers in those options. / / 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 for hedging purposes to try to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has purchased or sold, or to protect against possible losses from -16- changes in the relative value of the U.S. dollar and a foreign currency. Normally, the Fund will not use "cross hedging," where the Fund hedges against changes in currencies other than the currency in which a security it holds is denominated. The Fund will not speculate in foreign exchange. / / HEDGING INSTRUMENTS CAN BE VOLATILE INVESTMENTS AND MAY INVOLVE SPECIAL RISKS. The use of hedging instruments requires special skills and knowledge of investment techniques that are different from what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce 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 options, futures and forward contracts are subject to special tax rules that may affect the amount, timing and character of the Fund's income and distributions. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. 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. Interest rate swaps are subject to the risk that the other party will fail to meet its obligations (or that the underlying issuer will fail to pay on time), as well as interest rate risks. The Fund could be obligated to pay more under its swap agreements than it received 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. 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, currency or commodity. The Fund may not purchase or sell physical commodities; however, the Fund may purchase and sell foreign currency in hedging transactions. This shall not prevent the Fund from selling covered call options or buying or selling futures contracts or from investing in securities or other instruments backed by physical commodities. Derivative investments used by the Fund are used in some cases for hedging purposes and in other cases to seek income. In the broadest sense, exchange-traded options and futures contracts (discussed in "Hedging," above) may be considered "derivative investments." "Index-linked" or "commodity-linked" notes are debt securities of companies that call for interest payments and/or payment on the maturity of the note in different terms than the typical note where the borrower agrees to pay a fixed sum on the maturity of the note. Principal and/or interest payments on an index-linked note depend on the performance of one or more market indices, such as the S&P 500 Index or a weighted index of commodity futures, such as crude oil, gasoline and natural gas. The Fund may invest in "debt exchangeable for common stock" of an issuer or "equity-linked" debt securities of an issuer. At maturity, the principal amount of the debt security is exchanged for common stock of the issuer or is payable in an amount based on the issuer's common stock price at the time of maturity. In either case there is a risk that the amount payable at maturity will be less than the expected principal amount of the debt. -17- The Fund may also invest in currency-indexed securities. Typically, these are short-term or intermediate-term debt securities having a value at maturity and/or an interest rate determined by reference to one or more foreign currencies. The currency-indexed securities purchased by the Fund may make payments based on a formula. The payment of principal or periodic interest may be calculated as a multiple of the movement of one currency against another currency, or against an index. These investments may entail increased risk to principal and increased price volatility. There are special risks in investing in derivative investments. The company issuing the instrument may fail to pay the amount due on the maturity of the instrument. Also, the underlying investment or security might not perform the way the Manager expected it to perform. Markets, underlying securities and indices may move in a direction not anticipated by the Manager. Performance of derivative investments may also be influenced by interest rate and stock market changes in the U.S. and abroad. All of this can mean that the Fund will realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. Please refer to "Illiquid and Restricted Securities." OTHER INVESTMENT RESTRICTIONS. The Fund has other investment restrictions which are "fundamental" policies. Among these fundamental policies, the Fund cannot do any of the following: / / Borrow amounts in excess of 10% of the Fund's total assets, taken at market value at the time of the borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes, or make investments in portfolio securities while such outstanding borrowings exceed 5% of the Fund's total assets. / / (a) Invest more than 5% of the Fund's total assets (taken at market value at the time of each investment) in the securities (other than United States Government or Government agency securities) of any one issuer (including repurchase agreements with any one bank or dealer) or more than 15% of the Fund's total assets in the obligations of any one bank; and (b) purchase more than either (i) 10% in principal amount of the outstanding debt securities of an issuer, or (ii) 10% of the outstanding voting securities of an issuer, except that such restrictions shall not apply to securities issued or guaranteed by the United States Government or its agencies, bank money instruments or bank repurchase agreements. / / Invest more than 25% of its assets in securities of issuers in any single industry, provided that this limitation shall not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. For the purpose of this restriction, each utility that provides a separate service (e.g., gas, gas transmission, electric or telephone) shall be considered a separate industry. This test shall be applied on a pro forma basis using the market value of all assets immediately prior to making any investment. / / Allow its current obligations under reverse repurchase agreements (together with borrowings) to exceed one-third of the value of its total assets (less all its liabilities other than the obligations under borrowings and such agreements). All of the percentage restrictions described above and elsewhere in this Prospectus apply only at the time the Fund purchases a security, and the Fund need not dispose of a security merely because the Fund's assets have changed or the security has increased in value relative to the size of the Fund. There are other fundamental policies discussed in the Statement of Additional Information. -18- HOW THE FUND IS MANAGED ORGANIZATION AND HISTORY. The Fund is a diversified series of Oppenheimer Series Fund, Inc. (the "Company"). The Company was organized in 1981 as a Maryland corporation and is an open-end management investment company. Organized as a series fund, the Company presently has eight series, including the Fund. The Fund is governed by a Board of Directors, which is responsible for protecting the interests of shareholders under Maryland law. The Directors meet periodically throughout the year to oversee the Fund's activities, review its performance, and review the actions of the Manager. "Directors and Officers of the Funds" in the Statement of Additional Information names the Directors and officers of the Fund and provides more information about them. Although the Fund is not required by law to hold annual meetings, it may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Director or to take other action described in the Fund's Articles of Incorporation. The Board of Directors has the power, without shareholder approval, to divide unissued shares of the Fund into two or more classes. The Board has done so, and the Fund currently has three classes of shares, Class A, Class B and Class C. All classes invest in the same investment portfolio. 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 on matters submitted to the vote of shareholders. Shares of each class may have separate voting rights on matters in which interests of one class are different from interests of another class, and shares of a particular class vote as a class on matters that affect that class alone. Shares are freely transferrable. Please refer to "How the Funds are Managed" in the Statement of Additional Information for further information on voting of shares. THE MANAGER AND ITS AFFILIATES. The Fund is managed by the Manager, OppenheimerFunds, Inc., 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 Directors, 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 Oppenheimer funds, with assets of more than $40 billion as of December 31, 1995, and with more than 2.8 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. / / PORTFOLIO MANAGEMENT. The principal Portfolio Manager of the Fund is Peter M. Antos. He is a Vice President of the Fund and the Manager and has been the senior portfolio manager of the Fund's portfolio since 1989. He is also a Chartered Financial Analyst and serves as a portfolio manager of other Oppenheimer funds. Mr. Antos was employed since 1989 by the Fund's prior investment adviser, G.R. Phelps & Co., Inc., as a Vice President and Senior Portfolio Manager, Equities, before joining OppenheimerFunds, Inc. Mr. Michael C. Strathearn, Mr. Stephen F. Libera, and Mr. Authur J. Zimmer are also Vice Presidents and portfolio managers of the Fund. Messrs. Strathearn and Libera are each a chartered Financial -19- Analyst. Messrs. Strathearn and Libera was each employed by Connecticut Mutual Life Insurance Company, the parent of G. R. Phelps, as a Portfolio Manager prior to joining Oppenheimer Funds, Inc. on March 1, 1996. Mr. Zimmer is a Vice President of Oppenheimer Management Corporation and is an officer of other Oppenheimer funds. Formerly, Mr. Zimmer was a Vice President of Hanifen Imhoff Management Company (a mutual fund investment adviser). / / FEES AND EXPENSES. Under the Investment Advisory Agreement, the Fund pays the Manager the following annual fee, which declines on additional assets as the Fund grows: 0.625% of the first $300 million of aggregate net assets; 0.500% of the next $100 million; and 0.450% of net assets in excess of $400 million. The Fund's management fee for its last fiscal year was 0.625% of the average annual net assets for Class A and Class B shares (on an annualized basis). There were no Class C shares outstanding during the year. The Fund pays expenses related to its daily operations, such as custodian fees, Directors' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. More information about the Investment Advisory Agreement and the other expenses paid by the Fund is contained in the Statement of Additional Information. There is also information about the Fund's brokerage policies and practices in "Brokerage Policies of the Funds" 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 OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as the Fund's Distributor. The Distributor also distributes the shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. / / THE TRANSFER AGENT. The Fund's Transfer Agent is OppenheimerFunds Services, a division of the Manager, which acts as the shareholder servicing agent for the Fund on an "at-cost" basis. It also acts as the shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free number shown below in this Prospectus or on the back cover. PERFORMANCE OF THE FUND EXPLANATION OF PERFORMANCE TERMINOLOGY. The Fund uses the terms "total return" to illustrate its performance. The performance of each class of shares is shown 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. These returns measure the performance of a hypothetical account in the Fund over various periods, and do not show the performance of each shareholder's account (which will vary if dividends are received in cash, or shares are sold or purchased). The Fund's performance data may help you see how well your investment has done over time and to compare it to market indices, as we have done below. -20- It is important to understand that the Fund's total returns represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Fund's performance. The Fund's investment performance will vary over time, 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 include the payment of the current maximum initial sales charge. When total returns are shown for Class B and Class C shares, they include the effect of the contingent deferred sales charge that applies to the period for which total return is shown. When total returns are shown for a one-year period (or less) for Class C shares, they include the effect of the contingent deferred sales charge. Total returns may also be quoted at "net asset value," without including the effect of either the front-end or the appropriate contingent deferred sales charge, as applicable, and those returns would be reduced if sales charges were deducted. A B O U T Y O U R A C C O U N T HOW TO BUY SHARES CLASSES OF SHARES. The Fund offers investors three different classes of shares. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. / / CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on investments up to $1 million (up to $500,000 for purchases by OppenheimerFunds prototype 401(k) plans). If you purchase Class A shares as part of an investment of at least $1 million ($500,000 for OppenheimerFunds prototype 401(k) plans) in shares of one or more Oppenheimer funds, you will not pay an initial sales charge, but if you sell any of those shares within 18 months of buying them, you may pay a contingent deferred sales charge. The amount of that sales charge will vary depending on the amount you invested. Sales charge rates are described in "Buying Class A Shares," 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 six years of buying them, you will normally pay a contingent deferred sales charge that varies depending on how long you owned your shares, as described in "Buying Class B Shares," below. -21- / / CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time of purchase, but if you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1%, as discussed in "Buying Class C Shares," 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 and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares. 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 each class, and considered the effect of the asset-based sales charge on Class B and Class C 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 your investment each year. Of course, the actual performance of your investment cannot be predicted and will vary, based on the Fund's actual investment returns, and the operating expenses borne by each class of shares, and which class of shares you invest in. The factors discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes. / / HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. Because of the effect of class-based expenses your choice will also depend on how much you invest. For example, the reduced sales charges available for larger purchases of Class A shares may, over time, offset the effect of paying an initial sales charge on your investment (which reduces the amount of your investment dollars used to buy shares for your account), compared to the effect over time of higher class-based expenses on the shares of Class B or Class C for which no initial sales charge is paid. / / INVESTING FOR THE SHORT TERM. If you have a short term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares, because of the effect of the Class B contingent deferred sales charge if you redeem in less than seven years, as well as the effect of the Class B asset-based sales charge on the investment return for that class in the short-term. Class C shares might be the appropriate choice (especially for investments of less than $100,000), because there is no initial sales charge on Class C shares, and the contingent deferred sales charge does not apply to amounts you sell after holding them one year. However, if you plan to invest more than $100,000 for the shorter term, then the more you invest and the more your investment horizon increases toward six years Class C shares might not be as advantageous as Class A shares. That is because the annual asset-based sales charge on Class C shares will have a greater economic impact on your account over the longer term than the -22- reduced front-end sales charge available for larger purchases of Class A shares. For example, Class A might be more advantageous than Class C (as well as Class B) for investments of more than $100,000 expected to be held for 5 or 6 years (or more). For investments over $250,000 expected to be held 4 to 6 years (or more), Class A shares may become more advantageous than Class C (and B). If investing $500,000 or more, Class A may be more advantageous as your investment horizon approaches 3 years or more. And for most investors who invest $1 million or more, in most cases Class A shares will be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the Distributor normally will not accept purchase orders of $500,000 or more of Class B or $1 million or more of Class C shares from a single investor. / / INVESTING FOR THE LONGER TERM. If you are investing for the longer term, for example, for retirement, and do not expect to need access to your money for seven years or more, Class B shares may be an appropriate consideration, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charge available for larger investments in Class A shares under a Fund's Right of Accumulation. Of course all of these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, using the assumed annual performance return stated above, and you should analyze your options carefully. / / ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because some features may not be available to Class B or C shareholders, or other features (such as Automatic Withdrawal Plans) may not be advisable (because of the effect of the contingent deferred sales charge in non-retirement accounts) for Class B or Class C shareholders, you should carefully review how you plan to use your investment account before deciding which class of shares to buy. For example, share certificates are not available for Class B or Class C shares and if you are considering using your shares as collateral for a loan, this may be a factor to consider. Additionally, dividends payable to Class B and Class C shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A, such as the Class B and Class C asset-based sales charges described below and in the Statement of Additional Information. / / 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 for selling another class. It is important that investors understand that the purpose of the Class B and Class C contingent deferred sales charges and asset-based sales charges is the same as the purpose of the front-end sales charge on sales of Class A shares: to reimburse the Distributor for commissions it pays to dealers and financial institutions for selling shares. HOW MUCH MUST YOU INVEST? You can open the Fund account with a minimum initial investment of $1,000 and make additional investments at any time with as little as $25. There are reduced minimum investments under special investment plans: With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial plans and military allotment plans, you can make initial and subsequent investments for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. -23- 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 Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. / / HOW ARE SHARES PURCHASED? You can buy shares several ways -- through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. WHEN YOU BUY SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES. / / BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order with the Distributor on your behalf. / / BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New Account Application and return it with a check payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment 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 to transmit funds electronically to PURCHASE SHARES, to have the Transfer Agent SEND REDEMPTION PROCEEDS, or 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 Oppenheimer funds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. / / AT WHAT PRICES ARE SHARES SOLD? Shares are sold at the public offering price based on the net asset value (and any initial sales charge that applies) that is next determined after the Distributor receives the purchase order in Denver, Colorado. 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 -24- 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, IN ITS SOLE DISCRETION, MAY REJECT ANY PURCHASE ORDER FOR THE FUND'S SHARES. SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix C to this Prospectus sets forth conditions for the waiver of, or exemption from, sales charges or the special sales charge rates that apply to purchases of shares of the Fund (including purchases by exchange) by a person who was a shareholder of one of the Former Quest for Value Funds and Former Connecticut Mutual Funds (each as defined in that Appendix). BUYING 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 may be net asset value. In some cases, reduced sales charges may be available, as described below. Out of the amount you invest, the Fund receives the net asset value to invest for your account. The sales charge varies depending on the amount of your purchase. A portion of the sales charge may be retained by the Distributor and allocated to your dealer as commission. Different sales charge rates and commissions applied to sales of Class A shares prior to March 21, 1996. The current sales charge rates and commissions paid to dealers and brokers are as follows:
FRONT-END SALES FRONT-END SALES COMMISSION AS AMOUNT OF PURCHASE CHARGE AS PERCENTAGE CHARGE AS PERCENTAGE PERCENTAGE OF OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE - ------------------------------------------------------------------------------- Less than $25,000 5.75% 6.10% 4.75% - ------------------------------------------------------------------------------- $25,000 or more but less than $50,000 5.50% 5.82% 4.75% - ------------------------------------------------------------------------------- $50,000 or more but less than $100,000 4.75% 4.99% 4.00% - ------------------------------------------------------------------------------- $100,000 or more but less than $250,000 3.75% 3.90% 3.00% - ------------------------------------------------------------------------------- $250,000 or more but less than $500,000 2.50% 2.56% 2.00% - ------------------------------------------------------------------------------- $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - -------------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws. / / CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds in the following cases: -25- / / purchases aggregating $1 million or more, or / / purchases by an OppenheimerFunds prototype 401(k) plan that: (1) buys shares costing $500,000 or more or (2) has, at the time of purchase, 100 or more eligible participants, or (3) certifies that it projects to have annual plan purchases of $200,000 or more. The Distributor pays dealers of record commissions on those 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 purchases over $5 million. That commission will be paid only on the amount of those purchases in excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k) prototype plans) 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% either (1) of the aggregate net asset value of the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. The Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all Oppenheimer funds 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 Oppenheimer funds (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 and Class B shares you purchase for your individual accounts, or jointly, or for trust or custodial accounts on behalf of your children who are minors. 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. -26- Additionally, you can add together current purchases of Class A and Class B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate for current purchases of Class A shares. You can also include Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your investment in one of the Oppenheimer funds. 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 Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Distributor. 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, if you purchase Class A shares or Class A and Class B shares of the Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares purchased during that period. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. / / WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not imposed in the circumstances described below. There is an explanation of this policy in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN PURCHASERS. Class A shares purchased by the following investors are not subject to any Class A sales charges: / / the Manager or its affiliates; / / 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; / / registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; / / dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees; / / employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and 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); / / 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 (those clients may be charged a transaction fee by their dealer, broker or advisor for the purchase or sale of shares of the Fund) -27- / / 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 administrative services. / / directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons; / / accounts for which Oppenheimer Capital is the investment adviser (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts; / / any unit investment trust that has entered into an appropriate agreement with the Distributor; / / a TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and C TRAC-2000 program on November 24, 1995; or / / qualified retirement plans that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, provided that such arrangements are consummated and share purchases commence by March 31, 1996. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN TRANSACTIONS. Class A shares issued or purchased in the following transactions are not subject to Class A sales charges: / / shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party; / / shares purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or one of its affiliates acts as sponsor; / / shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor; / / shares purchased and paid for with the proceeds of shares redeemed in the past 12 months from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid (this waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner); this waiver must be requested when the purchase order is placed for your Fund shares, and the Distributor may require evidence of your qualification for this waiver; and / / shares purchased with the proceeds of maturing principal of units of any Qualified Unit Investment Liquid Trust Series. -28- WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: / / for retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans, including OppenheimerFunds prototype 401(k) plans (these are all referred to as "Retirement Plans"); / / to return excess contributions made to Retirement Plans; / / to make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the original account value; / / involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (see "Shareholder Account Rules and Policies," below); / / if, at the time a purchase order is placed for Class A shares that would otherwise be subject to the Class A contingent deferred sales charge, the dealer agrees in writing to accept the dealer's portion of the commission payable on the sale in installments of 1/18th of the commission per month (and no further commission will be payable if the shares are redeemed within 18 months of purchase); or / / for distributions from OppenheimerFunds prototype 401(k) plans for any of the following cases or purposes: (1) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must occur after the participant's account was established); (2) hardship withdrawals, as defined in the plan; (3) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (4) to meet the minimum distribution requirements of the Internal Revenue Code; (5) to establish "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code, or (6) separation from service. / / 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 Directors authorizes such reimbursements, which it has not done as yet) 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. -29- BUYING 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 six years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to compensate it for 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 six years, and (3) shares held the longest during the six-year period. The contingent deferred sales charge is not imposed in the circumstances described in "Waivers of Class B and Class C Sales Charges," below. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule:
YEARS SINCE BEGINNING OF CONTINGENT DEFERRED SALES CHARGE MONTH IN WHICH ON REDEMPTIONS IN THAT YEAR PURCHASE ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE) - ----------------------------------------------------------------------------------------- 0-1 5.0% - ----------------------------------------------------------------------------------------- 1-2 4.0% - ----------------------------------------------------------------------------------------- 2-3 3.0% - ----------------------------------------------------------------------------------------- 3-4 3.0% - ----------------------------------------------------------------------------------------- 4-5 2.0% - ----------------------------------------------------------------------------------------- 5-6 1.0% - ----------------------------------------------------------------------------------------- 6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Different contingent deferred sales charges applied to redemptions of Class B shares prior to March 31, 1996. / / AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution and Service Plan, described below. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and -30- distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements -- Class A, Class B and Class C Shares" in the Statement of Additional Information. BUYING CLASS C SHARES. Class C shares are sold at net asset value per share without an initial sales charge. However, if Class C shares are redeemed within 12 months of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class C contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to the Fund in connection with the sale of Class C shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 12 months, and (3) shares held the longest during the 12-month period. / / DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES. The Fund has adopted Distribution and Service Plans for Class B and Class C shares to compensate the Distributor for its costs in distributing Class B and C shares and servicing accounts. Under the Plans, the Fund pays the Distributor an annual "asset-based sales charge" of 0.75% per year on Class B shares that are outstanding for six years or less and on Class C shares. The Distributor also receives a service fee of 0.25% per year. Under the Plan, both fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The asset-based sales charge allows investors to buy Class B or C shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell those shares. The Distributor uses the service fees to compensate dealers for providing personal services for accounts that hold Class B or C shares. Those services are similar to those provided under the Class A Service Plan, described above. The Distributor pays the 0.25% service fees to dealers in advance for the first year after Class B or Class C shares have been sold by the dealer and retains the service fee paid by the Fund in that year. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor currently pays sales commissions of 3.75% on the purchase price of Class B shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sales of Class B shares is therefore 4.00% of the purchase price. The Fund pays the asset-based sales charge to the Distributor for its services rendered in distributing Class B shares. Those payments, retained by the Distributor, are at a fixed rate that is not related to the Distributor's expenses. The services rendered by the Distributor include paying and financing the payment of sales commissions, service fees and other costs of distributing and selling Class B shares. -31- The Distributor currently pays sales commissions of 0.75% of the purchase price of Class C shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sale of Class C shares is therefore 1.00% of the purchase price. The Distributor retains the asset-based sales charge during the first year Class C shares are outstanding to recoup the sales commissions it has paid, the advances of service fee payments it has made, and its financing costs and other expenses. The Distributor plans to pay the asset-based sales charge as an ongoing commission to the dealer on Class C shares that have been outstanding for a year or more. The Distributor's actual expenses in selling Class B and C shares may be more than the payments it receives from contingent deferred sales charges collected on redeemed shares and from the Fund under the Distribution and Service Plans for Class B and C shares. Therefore, those expenses may be carried over and paid in future years. If the Fund terminates its Plan, the Board of Directors may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the Plan was terminated. / / WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C contingent deferred sales charge will not be applied to shares purchased in certain types of transactions nor will it apply to Class B and Class C shares redeemed in certain circumstances as described below. The reasons for this policy are in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B and Class C contingent deferred sales charges will be waived for redemptions of shares in the following cases, if the Transfer Agent is notified that these conditions apply to the redemption: / / distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must have occurred after the account was established); / / redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder (the death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration); / / returns of excess contributions to Retirement Plans; / / distributions from IRAs (including SEP-IRAs and SAR/SEP accounts) before the participant is age 59-1/2, and distributions from 403(b)(7) custodial plans or pension or profit sharing plans before the participant is age 59-1/2 but only after the participant has separated from service, if the distributions are made in substantially equal periodic payments over the life (or life expectancy) of the participant or the joint lives (or joint 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 -32- 10% of the account value annually, measured from the date the Transfer Agent receives the request); / / shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," below; or / / distributions from OppenheimerFunds prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet minimum distribution requirements as defined in the Internal Revenue Code; (4) to make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for separation from service. WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases: / / shares sold to the Manager or its affiliates; / / shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; and / / shares issued in plans of reorganization to which the Fund is a party. 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 should 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 by sending signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. / / 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. -33- / / 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 Oppenheimer funds 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 Oppenheimer funds 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 to exchange an amount you establish in advance automatically for shares of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other Oppenheimer funds 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 Class A or Class B shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the same Fund or other Oppenheimer funds without paying a sales charge. This privilege applies to Class A shares that you purchased subject to an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge when you redeemed them. This privilege does not apply to Class C shares. You must be sure to ask the Distributor for this privilege when you send your payment. 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 -34- / / 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 / / 401(K) PROTOTYPE RETIREMENT PLANS for businesses 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 by selling (redeeming) some or all of your shares on any regular business day. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. The Fund offers you a number of ways to sell your shares: in writing or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. IF YOU HAVE QUESTIONS ABOUT ANY OF THESE PROCEDURES, AND ESPECIALLY IF YOU ARE REDEEMING SHARES IN A SPECIAL SITUATION, SUCH AS DUE TO THE DEATH OF THE OWNER, OR FROM A RETIREMENT PLAN, PLEASE CALL THE TRANSFER AGENT FIRST, AT 1-800-525-7048, FOR ASSISTANCE. / / RETIREMENT ACCOUNTS. To sell shares in an OppenheimerFunds retirement account in your name, call the Transfer Agent for a distribution request form. There are special income tax withholding requirements for distributions from retirement plans and you must submit a withholding form with your request to avoid delay. If your retirement plan account is held for you by your employer, you must arrange for the distribution request to be sent by the plan administrator or trustee. There are additional details in the Statement of Additional Information. / / CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): / / You wish to redeem more than $50,000 worth of shares and receive a check / / The redemption check is not payable to all shareholders listed on the account statement / / The redemption check is not sent to the address of record on your account statement / / Shares are being transferred to a Fund account with a different owner or name / / Shares are 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 -35- bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. IF YOU ARE SIGNING AS A FIDUCIARY OR ON BEHALF OF A CORPORATION, PARTNERSHIP OR OTHER BUSINESS, 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 account statement) / / The dollar amount or number of shares to be redeemed / / Any special payment instructions / / Any share certificates for the shares you are selling / / The signatures of all registered owners exactly as the account is registered, and / / Any special 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: OppenheimerFunds Services P.O. Box 5270, Denver, Colorado 80217 SEND COURIER OR EXPRESS MAIL REQUESTS TO: OppenheimerFunds 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. -36- / / TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by telephone, in any seven-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 OR WIRE. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be transferred. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank account if the bank is a member of the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire. To place a wire redemption request, call the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable the Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. To establish wire redemption privileges on an account that is already established, please contact the Transfer Agent for instructions. 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 Oppenheimer funds at net asset value per share at the time of exchange, without sales charge. To exchange shares, you must meet several conditions: / / Shares of the fund selected for exchange must be available for sale in your state of residence. / / The prospectuses of the 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. -37- SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF THE SAME CLASS IN THE OTHER OPPENHEIMER FUNDS. For example, you can exchange Class A shares of the Fund only for Class A shares of another fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are considered to be Class A shares for this purpose. 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 names and address. Shares held under certificates may not be exchanged by telephone. You can find a list of Oppenheimer funds currently available for exchanges in the Statement of Additional Information or obtain one by calling a service representative at 1-800-525-7048. That list can change from time to time. 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 up to seven days if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to the Fund. / / Because excessive trading can hurt fund performance and harm shareholders, the Fund reserves the right to refuse any exchange request that will disadvantage it, or to refuse multiple exchange requests submitted by a shareholder or dealer. / / The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. / / For tax purposes, exchanges of shares involve a redemption of the shares of the Fund you own and a purchase of the shares of the other fund, which may result in a taxable gain or a loss. For more information about taxes affecting exchanges, please refer to "How to Exchange Shares" in the Statement of Additional Information. / / 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. -38- 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 which is normally 4:00 P.M., but may be earlier on some days, on each day the Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Fund's Board of Directors has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained. These procedures are described more completely in the Statement of Additional Information. / / THE OFFERING OF SHARES may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Directors at any time the Board believes it is in the Fund's best interest to do so. / / TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions of any one owner. Telephone privileges apply to each owner of the account and the dealer representative of record for the account unless and until the Transfer Agent receives cancellation instructions from an owner of the account. / / THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data concerning transactions and has adopted other procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax identification numbers and other account data or by using PINs, and by confirming such transactions in writing. If the Transfer Agent does not use reasonable procedures it may be liable for losses due to unauthorized transactions, but otherwise neither the Transfer Agent nor the Fund will be liable for losses or expenses arising out of telephone instructions reasonably believed to be genuine. If you are unable to reach the Transfer Agent during periods of unusual market activity, you may not be able to complete a telephone transaction and should consider placing your order by mail. / / REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE TRANSFER AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to time, the Transfer Agent in its discretion may waive certain of the requirements for redemptions stated in this Prospectus. / / DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS BY PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Fund if the dealer performs any transaction erroneously. / / THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the value of the securities in the Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A, Class B and Class C shares. Therefore, the redemption value of your shares may be more or less than their original cost. / / PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission -39- delaying or suspending such payments. For accounts registered in the name of a broker-dealer, payment will be forwarded within 3 business days. 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 has fewer than 100 shares, 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 your correct, certified Social Security or Employer Identification Number and any other certifications required by the Internal Revenue Service ("IRS") when you sign your application, or if you violate IRS regulations on tax reporting of income. / / 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 charge when redeeming certain Class A, Class B and Class C shares. / / TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, the Fund will mail only one copy of each annual and semi-annual report to shareholders having the same last name and address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of those materials be sent personally to that shareholder. DIVIDENDS, CAPITAL GAINS AND TAXES DIVIDENDS. The Fund declares and pays dividends separately for Class A, Class B and Class C shares from net investment income semi-annually. Normally, dividends are paid on the last business day every dividend period, but the Board of Directors can change that date. Dividends paid on Class A shares generally are expected to be higher than for Class B and Class C shares because expenses allocable to Class B and Class C shares will generally be higher. CAPITAL GAINS. The Fund may make distributions annually in December out of any net short-term or long-term capital gains. Long-term capital gains will be separately identified in the tax information your Fund sends you after the end of the year. Distributions of short-term capital gains are treated as ordinary income 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: -40- / / REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of the Fund. / / REINVEST CAPITAL GAINS ONLY. You can elect to reinvest long-term capital gains in the Fund while receiving dividends by check or sent to your bank account on AccountLink. / / RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for all dividends and long-term capital gains distributions or have them sent to your bank on AccountLink. / / REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMERFUNDS ACCOUNT. You can reinvest all distributions in another Oppenheimer funds 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. The Fund's distributions from long-term capital gains are taxable to shareholders as long-term capital gains, no matter how long you held your shares. Dividends paid by the Fund from short-term capital gains and net investment income, including certain net realized foreign exchange gains, are taxable as ordinary income. These dividends and distributions are subject to Federal income tax and may be subject to state or local taxes. Your distributions are taxable as described above, whether you reinvest them in additional shares or take them in cash. Corporate shareholders may be entitled to the corporate dividends received deduction for some portion of the Fund's distributions treated as ordinary income, subject to applicable limitations under the Internal Revenue Code. Every year the Fund will send you and the IRS a statement showing the aggregate amount and character of the dividends and other taxable distributions you received for the previous year. / / "BUYING A DIVIDEND". When the 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 and repurchases, including redemptions for exchanges, may produce a taxable gain or a loss, which generally will be a capital gain or loss for shareholders who hold shares of the Fund as capital assets. Such a gain or loss is the difference between your tax basis, which is usually the price you paid for the shares, and the proceeds you received when you sold them. Special tax rules may apply to certain redemptions preceded or followed by investments in the Fund or another Oppenheimer fund. / / RETURNS OF CAPITAL. In certain cases distributions made by the Fund may be considered a return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. A return of capital will reduce your tax basis in shares of the Fund but will not be taxable except to the extent it exceeds such tax basis. / / FOREIGN TAXES. The Fund may be subject to foreign withholding taxes or other foreign taxes on income (possibly including capital gains) on certain of its foreign investments, if any. These taxes may be reduced or eliminated pursuant to an income tax treaty in some cases. The Fund does not expect to qualify to pass such foreign taxes and any related tax deductions or credits through to its shareholders. -41- The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code. Provided that the Fund so qualifies, it will not be required to pay any federal income tax on its net investment income and net realized capital gains that it distributes to its shareholders in accordance with certain timing requirements. This information is only a summary of certain federal tax information about your investment. Tax-exempt or tax-deferred investors, foreign investors, and investors subject to special tax rules (such as certain banks and securities dealers) may have different tax consequences not described above. More tax 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. -42- APPENDIX A: DESCRIPTION OF RATINGS CATEGORIES OF RATING SERVICES DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS Aaa: Bonds 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 rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as "high- grade" bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of "Aaa" securities. A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds rated "Baa" are considered medium grade obligations, that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated "Caa" are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated "C" can be regarded as having extremely poor prospects of ever attaining any real investment standing. DESCRIPTION OF STANDARD & POOR'S BOND RATINGS AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from "AAA" issues only in small degree. A: Bonds rated "A" have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. A-1 BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the "A" category. BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "CC" the highest degree. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. A-2 APPENDIX B CREDIT QUALITY DISTRIBUTION The average quality distribution of the portfolio of Oppenheimer Disciplined Allocation Fund during the year ended December 31, 1995 was as follows: QUALITY DISTRIBUTION % OF AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO - ---------------------- -------------- --------- Government Securities $38,963,546.03 19.48% AAA 684,257.15 0.34% AA 1,905,602.13 0.95% A 18,169,459.25 9.08% BBB 12,720,500.93 6.36% BB 4,519,705.47 2.26% B 287,220.83 0.14% Unrated 2,047,630.26 1.02% Debt Securities 79,297,922.05 39.64% Equity Securities 79,855,031.63 39.93% Short-Term Securities 40,893,893.07 20.44% -------------- --------- Total Portfolio 200,046,846.74 100.00% B-1 APPENDIX C SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS The initial and contingent sales charge rates and waivers for Class A, Class B and Class C shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund, Quest for Value Small Capitalization Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds merged into various Oppenheimer funds on November 24, 1995. The funds listed above are referred to in this Prospectus as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of the Fund (i) acquired by such shareholder pursuant to an exchange of shares of one of the Oppenheimer funds that was one of the Former Quest for Value Funds or (ii) received by such shareholder pursuant to the merger of any of the Former Quest for Value Funds into an Oppenheimer fund on November 24, 1995. CLASS A SALES CHARGES / / REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST SHAREHOLDERS / / PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT PLANS. The following table sets forth the initial sales charge rates for Class A shares purchased by a "Qualified Retirement Plan" through a single broker, dealer or financial institution, or by members of "Associations" formed for any purpose other than the purchase of securities if that Qualified Retirement Plan or that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single employer. C-1 FRONT-END SALES FRONT-END SALES CHARGE AS A CHARGE AS A COMMISSION AS NUMBER OF ELIGIBLE PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF EMPLOYEES OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - -------------------------------------------------------------------------------- 9 or fewer 2.50% 2.56% 2.00% - -------------------------------------------------------------------------------- At least 10 but not more than 49 2.00% 2.04% 1.60% For purchases by Qualified Retirement plans and Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described on pages to of this Prospectus. Purchases made under this arrangement qualify for the lower of the sales charge rate in the table based on the number of eligible employees in a Qualified Retirement Plan or members of an Association or the sales charge rate that applies under the Rights of Accumulation described above in the Prospectus. In addition, purchases by 401(k) plans that are Qualified Retirement Plans qualify for the waiver of the Class A initial sales charge if they qualified to purchase shares of any of the Former Quest For Value Funds by virtue of projected contributions or investments of $1 million or more each year. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations, or as eligible employees in Qualified Retirement Plans also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Fund's Distributor. / / SPECIAL CLASS A CONTINGENT DEFERRED SALES CHARGE RATES Class A shares of the Fund purchased by exchange of shares of other Oppenheimer funds that were acquired as a result of the merger of Former Quest for Value Funds into those Oppenheimer funds, and which shares were subject to a Class A contingent deferred sales charge prior to November 24, 1995 will be subject to a contingent deferred sales charge at the following rates: if they are redeemed within 18 months of the end of the calendar month in which they were purchased, at a rate equal to 1.0% if the redemption occurs within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six months. Class A shares of any of the Former Quest for Value Funds purchased without an initial sales charge on or before November 22, 1995 will continue to be subject to the applicable contingent deferred sales charge in effect as of that date as set forth in the then-current prospectus for such fund. / / WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS Class A shares of the Fund purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: / / Shareholders of the Fund who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. / / Shareholders of the Fund who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. C-2 / / WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS The Class A contingent deferred sales charge will not apply to redemptions of Class A shares of the Fund purchased by the following investors who were shareholders of any Former Quest for Value Fund: / / Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. / / Participants in Qualified Retirement Plans that purchased shares of any of the Former Quest For Value Funds pursuant to a special "strategic alliance" with the distributor of those funds. The Fund's Distributor will pay a commission to the dealer for purchases of Fund shares as described above in "Class A Contingent Deferred Sales Charge." CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE WAIVERS / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged, if those shares were purchased prior to March 6, 1995: in connection with (i) distributions to participants or beneficiaries of plans qualified under Section 401(a) of the Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation plans under Section 457 of the Code, and other employee benefit plans, and returns of excess contributions made to each type of plan, (ii) withdrawals under an automatic withdrawal plan holding only either Class B or C shares if the annual withdrawal does not exceed 10% of the initial value of the account, and (iii) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995 BUT PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such fund merged, if those shares were purchased on or after March 6, 1995, but prior to November 24, 1995: (1) distributions to participants or beneficiaries from Individual Retirement Accounts under Section 408(a) of the Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made either (a) to an individual participant as a result of separation from service or (b) following the death or disability (as defined in the Code) of the participant or beneficiary; (2) returns of excess contributions to such retirement plans; (3) redemptions other than from retirement plans following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); (4) withdrawals under an automatic withdrawal plan (but only for Class B or C shares) where the annual withdrawals do not exceed 10% of the initial value of the account; and (5) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, B or C shares of the Fund described in this section if within 90 days C-3 after that redemption, the proceeds are invested in the same Class of shares in the Fund or another Oppenheimer fund. SPECIAL DEALER ARRANGEMENTS. Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and that were transferred to an OppenheimerFunds prototype 401(k) plan shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000 as to any one plan. Dealers who sold Class C shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and (i) the shares held by those plans were exchanged for Class A shares, or (ii) the plan assets were transferred to an OppenheimerFunds prototype 401(k) plan, shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000. SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER CONNECTICUT MUTUAL FUNDS Certain of the sales charge waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of [Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account], Connecticut Mutual Growth Account, Connecticut Mutual Total Return Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Capital Appreciation Account and CMIA LifeSpan Balanced Account (the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds. CLASS A SALES CHARGE WAIVERS Additional Class A shares of the Fund may be purchased without a sales charge, provided that the Class A shares of the Fund were acquired prior to March 1, 1996, by: (1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase; (2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; (3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; (4) NASD registered representatives whose employer consents to such purchases, and by the spouses and immediate family members of such representatives; (5) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the Fund's prior distributor, and its affiliated companies; (6) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; (7) any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which was beyond the applicable surrender charge period and which was used to fund a qualified plan, who exchanged the variable annuity contract for Class A shares of the Fund; and (8) an institution acting as a fiduciary on behalf of an individual or individuals, where such institution was directly compensated by the individual(s) for C-4 recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to a CDSC. CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS The contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of the Fund and exchanges of Class A or Class B shares of the Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 1, 1996 or (ii) were acquired by exchange from an Oppenheimer Fund that was a Former Connecticut Mutual Fund and the shares of such Former Connecticut Mutual Fund were purchased prior to March 1, 1996: (1) by the estate of the deceased shareholder; (2) upon the disability of the shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (Code); (3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; (4) as tax-free returns of excess contributions to such retirement or employee benefit plans; (5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment management company; (6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; (7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; (8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to a Systematic Withdrawal Plan but limited to no more than 12% of the original value annually; and (9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. C-5 OPPENHEIMER DISCIPLINED ALLOCATION FUND Two World Trade Center New York, New York 10048-0203 1-800-525-7048 INVESTMENT ADVISOR OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 DISTRIBUTOR OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 CUSTODIAN OF PORTFOLIO SECURITIES State Street Bank & Trust Company 225 Franklin Street Boston, Massachusetts 02110 INDEPENDENT AUDITORS Arthur Andersen LLP One Financial Plaza Hartford, Connecticut 06103 LEGAL COUNSEL NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, OPPENHEIMERFUNDS, INC., OPPENHEIMERFUNDS DISTRIBUTOR, INC. OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE. *PRINTED ON RECYCLED PAPER - -------------------- CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Oppenheimer Disciplined Value Fund. Cross-Reference Sheet Showing Location in Prospectus and Statement of Additional Information of Information Required by Items of the Registration Form Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 1. Cover Page....................... Cover Page. 2. Synopsis......................... About The Funds -- A Brief Overview of the Fund. 3. Condensed Financial Information.................... About The Funds -- Financial Highlights. 4. General Description of Registrant..................... Cover Page; About The Funds -- How The Fund Is Managed - - Organization and History. 5. Management of the Fund........... About The Funds -- How the Funds are Managed. 6. Capital Stock and Other Securities..................... About The Funds -- Investment Objective and Policies. 7. Purchase of Securities Being Offered.................. About Your Account -- How to Buy Shares; Special Sales Charge Arrangements for Certain Persons; Buying Class A Shares; Buying Class B Shares; Buying Class C Shares. 8. Redemption or Repurchase......... About Your Account -- How to Buy Shares; Special Investor Services; How to Sell Shares; How to Exchange Shares; Shareholder Account Rules and Policies. Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 9. Pending Legal Proceedings........ Not Applicable. 10. Cover Page....................... Cover Page. 11. Table of Contents................ Cover Page. 12. General Information and History........................ Cover Page; How The Funds are Managed -- Organization and History. 13. Investment Objectives and Policy......................... About The Funds -- Investment Objectives and Policies. 14. Management of the Fund........... About The Funds -- How the Funds are Managed. 15. Control Persons and Principal Holders of Securities.......... About The Funds -- How the Funds are Managed. 16. Investment Advisory and Other Services................. About The Funds -- How the Funds are Managed; The Manager, the Subadviser and Their Affiliates; The Distributor; The Transfer Agent. 17. Brokerage Allocation and Other Practices................ About the Funds -- Brokerage Policies of the Funds. 18. Capital Stock and Other Securities..................... About the Funds -- How the Funds are Managed -- Organization and History. 19. Purchase, Redemption and Pricing of Securities Being Offered.... About Your Accounts -- How to Buy Shares; How to Sell Shares; How to Exchange Shares. 20. Tax Status....................... About Your Account -- Dividends, Capital Gains and Taxes. - 2 - Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 21. Underwriters..................... About The Funds -- How the Funds are Managed -- The Manager, the Subadvisers and Their Affiliates; About Your Account -- How To Buy Shares. 22. Calculation of Performance Data........................... About The Funds -- Performance of the Funds; About Your Account -- Dividends, Capital Gains and Taxes. 23. Financial Statements............. Financial Information About the Funds -- Independent Auditors' Report -- Financial Statements. - 3 - OPPENHEIMER DISCIPLINED VALUE FUND PROSPECTUS DATED MAY 1, 1996 Oppenheimer Disciplined Value Fund (the "Fund") is a mutual fund that seeks long term growth of capital by investing primarily in common stocks with low price-earnings ratios and better-than-anticipated earnings. Current income is a secondary consideration. In selecting investments for the Fund, the investment advisor uses a quantitative investment discipline in combination with fundamental securities analysis. The Fund may invest the remainder of its assets in corporate and U.S. Government debt obligations and short-term instruments. The Fund may also use "hedging" instruments to seek to reduce the risks of market fluctuations that affect the value of the securities the Fund holds. If the Fund has no limits on junk, the NASAA guidelines require this legend. If the 10% limit under "normal circumstances is a "restriction," then this is not need on cover. 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 May 1, 1996 Statement of Additional Information. For a free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission ("SEC") and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). (Oppenheimer funds logo) SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF 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. CONTENTS A B O U T T H E F U N D EXPENSES BRIEF OVERVIEW OF THE FUND FINANCIAL HIGHLIGHTS INVESTMENT OBJECTIVE AND POLICIES HOW THE FUND IS MANAGED PERFORMANCE OF THE FUND A B O U T Y O U R A C C O U N T HOW TO BUY SHARES Class A Shares Class B Shares Class C Shares SPECIAL INVESTOR SERVICES AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans HOW TO SELL SHARES By Mail By Telephone HOW TO EXCHANGE SHARES SHAREHOLDER ACCOUNT RULES AND POLICIES DIVIDENDS, CAPITAL GAINS AND TAXES APPENDIX A: DESCRIPTION OF SECURITIES RATINGS APPENDIX B: SPECIAL SALES CHARGE ARRANGEMENTS -2- A B O U T T H E F U N D EXPENSES The Fund pays a variety of expenses directly for management of its assets, administration, distribution of its shares and other services and those expenses are 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 the share of a Fund's business operating expenses that you will bear indirectly. The numbers below are based on the Fund's expenses during its fiscal year ended December 31, 1995. / / SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of the Fund. Please refer to "About Your Account" starting on page ___ for an explanation of how and when these charges apply.
CLASS A CLASS B CLASS C SHARES SHARES SHARES - ------------------------------------------------------------------------------- Maximum Sales 5.75% None None Charge on Purchases (as a % of offering price) - ------------------------------------------------------------------------------- Sales Charge on None None None Reinvested Dividends - ------------------------------------------------------------------------------- Deferred Sales None(1) 5% in the 1% if Charge (as a % first year, shares are of the lower declining redeemed of the original to 1% in the within 12 purchase price sixth year and months of or redemption eliminated purchase(2) proceeds) thereafter(2) - ------------------------------------------------------------------------------- Exchange Fee None None None - ------------------------------------------------------------------------------- Redemption Fee None(3) None(3) None(3)
(1) If you invest $1 million or more ($500,000 or more for purchases by OppenheimerFunds prototype 401(k) plans) 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 -- Buying Class A Shares," below. (2) See "How to Buy Shares -- Buying Class B Shares," and "Buying Class C Shares" below, for more information on the contingent deferred sales charges. -3- (3) There is a $10 transaction fee for redemption proceeds paid by Federal Funds wire, but not for redemptions paid by check or ACH transfer through AccountLink. / / 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 advisor, OppenheimerFunds, Inc. (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 the Fund's portfolio securities, audit fees and legal expenses. Those expenses are detailed in the Fund's Financial Statements in the Statement of Additional Information. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
CLASS A CLASS B CLASS C SHARES SHARES SHARES ------ ------ ------ Management Fees 0.625 % 0.625 % 0.625 % 12b-1 Plan Fees 0.25 % 1.00 % 1.00 % Other Expenses 0.345 % 0.345 % 0.345 % ------- ------- ------- Total Fund Operating Expenses 1.22 % 1.97 % 1.97 %
The numbers for Class A shares in the chart above are 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. Class B shares were not publicly offered before October 1, 1995. Therefore, the Annual Fund Operating Expenses shown are based on expenses for the period from October 1, 1995 until December 31, 1995. Class C shares were not publicly offered during the Fund's last fiscal year. Accordingly, the Annual Fund Operating Expenses for Class C shares are estimates based upon amounts that would have been payable if Class C shares had been outstanding during the year. The actual expenses for each class of shares in future years may be more or less than the numbers in the chart, depending on a number of factors, including the actual amount of the Fund's assets represented by each class of shares. The "12b-1 Distribution Plan Fees" for Class A shares are the Service Plan Fees (which can be up to a maximum of 0.25% of average annual net assets of that class). For Class B and Class C shares, 12b-1 Plan Fees include the Service Plan Fees (which can be up to a maximum of 0.25%) and an annual asset-based sales charges of 0.75%. These plans are described in greater detail in "How to Buy Shares." / / 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 table 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: -4-
1 YEAR 3 YEARS 5 YEARS 10 YEARS* ------ ------- ------- --------- Class A Shares $ 69 $ 94 $ 121 $ 197 Class B Shares $ 70 $ 102 $ 126 $ 210 Class C Shares $ 30 $ 62 $ 106 $ 230
If you did not redeem your investment, it would incur the following expenses:
1 YEAR 3 YEARS 5 YEARS 10 YEARS* ------ ------- ------- --------- Class A Shares $ 69 $ 94 $ 121 $ 197 Class B Shares $ 20 $ 62 $ 106 $ 210 Class C Shares $ 20 $ 62 $ 106 $ 230
* The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Because of the effect of the asset-based sales charge and the contingent deferred sales charge on Class B and Class C shares, long-term Class B and Class C shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations. For Class B shareholders, the automatic conversion of Class B shares into Class A shares is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares" for more information. THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT ARE NOT MEANT TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS OF THE FUND, WHICH MAY BE GREATER OR LESSER THAN THOSE SHOWN. 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 in the Fund. 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 seeks long-term growth of capital by investing primarily in common stocks with low price-earnings ratios and better-than-anticipated earnings. Realization of current income is a secondary consideration. / / WHAT DOES THE FUND INVEST IN? Under normal market conditions, the Fund expects to invest primarily in common stocks. The Fund may invest the remainder of its assets in U.S. Government debt and corporate obligations, including bonds rated below investment grade (commonly called "junk bonds") and may invest to a limited degree in foreign securities. The Fund may write covered calls and use certain types of "hedging instruments" and "derivative investments" to seek to reduce the risks of market fluctuations that affect the value of the securities the Fund holds or to seek total return. These investments are more fully explained in "Investment Objective and Policies" starting on page __. -5- / / WHO MANAGES THE FUND? The Fund's investment advisor is OppenheimerFunds, Inc., which (including a subsidiary) advises investment company portfolios having over $40 billion in assets at December 31, 1995. The Fund's Board of Directors, elected by shareholders, oversees the investment advisor and the portfolio manager. The Manager is paid an advisory fee by the Fund, based on its net assets. The Fund has a portfolio manager, Peter Antos, who is employed by the Manager. He is primarily responsible for the selection of the Fund's securities, but is assisted by other managers. 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 stocks are subject to changes in their value from a number of factors such as changes in general stock market movements. A change in value of a particular stock may result from an event affecting the issuer. These changes affect the value of the Fund's investments and its share prices for each class of its shares. In the Oppenheimer funds' spectrum, the Fund is considered a growth fund that is considerably more aggressive than equity income or growth and income funds because it invests for long-term growth of capital in common stocks that tend to be more volatile than other investments. While the Manager tries to reduce risks by diversifying investments, by researching securities before they are purchased for a 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 of the Fund's investment risks. / / 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" beginning on page ___ for more details. / / WILL I PAY A SALES CHARGE TO BUY SHARES? The Fund has three classes of shares. Each class of shares has the same investment portfolio, but different expenses. Class A shares are offered with a front-end sales charge, starting at 5.75% and reduced for larger purchases. Class B and Class C shares are offered without front-end sales charges, but may be subject to a contingent deferred sales charge if redeemed within 6 years or 12 months, respectively, of purchase. There is also an annual asset-based sales charge on Class B and Class C shares. Please review "How To Buy Shares" starting on page ___ for more details, including a discussion about factors you and your financial advisor should consider in determining 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 ___. The Fund also offers exchange privileges to other Oppenheimer funds, described in "How to Exchange Shares" on page ____. / / HOW HAS THE FUND PERFORMED? The Fund measures its performance by quoting an average annual total return and cumulative total return, which measure historical performance. Those returns can be compared to the stock market total returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. Please remember that past performance does not guarantee future results. -6- FINANCIAL HIGHLIGHTS The following information for the fiscal year ended December 31, 1995 has been derived from audited financial statements together with the auditors' report for the year ended December 31, 1995 which is included in the Statement of Additional Information. The tables on the following pages present selected financial information about the Fund, including per share data and expense ratios and other data based on the Fund's average net assets. Class B shares were only offered during a portion of the fiscal year ended December 31, 1995, commencing on October 1, 1995. Class C shares were not publicly offered during the periods shown, and consequently, no information on Class C shares is included in the tables on the following pages or in the Fund's financial statements. -7-
FINANCIAL HIGHLIGHTS* CLASS A SHARES YEARS ENDED DECEMBER 31, --------------------------------------------------------- PER SHARE OPERATING DATA: 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- Net asset value, beginning of period $14.20 $15.14 $14.20 $14.40 $11.62 $13.05 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .25 .22 .30 .26 .25 .34 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions 4.88 (.32) 2.64 1.44 4.00 (1.36) ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations 5.13 (.10) 2.94 1.70 4.25 (1.02) - ---------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.25) (.22) (.30) (.26) (.25) (.34) Distributions from net realized gain on investments and foreign currency transactions (1.24) (.62) (1.70) (1.64) (1.22) (.07) ------ ------ ------ ------ ------ ------ Total dividends and distributions to shareholders (1.49) (.84) (2.00) (1.90) (1.47) (.41) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.84 $14.20 $15.14 $14.20 $14.40 $11.62 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ - ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 36.40% (0.65)% 20.91% 11.99% 36.91% (7.98)% - ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $118,118 $78,390 $64,495 $45,600 $40,716 $35,202 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 1.53% 1.50% 1.95% 1.74% 1.74% 2.73% Expenses 1.22% 1.02% 1.05% 1.12% 1.19% 1.19% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69.69% 98.46% 99.67% 141.69% 148.30% 143.95% - ---------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS* CLASS A SHARES YEARS ENDED DECEMBER 31, ------------------------------------- PER SHARE OPERATING DATA: 1989 1988 1987 1986 ---- ---- ---- ---- Net asset value, beginning of period $11.00 $ 9.80 $11.97 $10.94 - ------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .51 .20 .22 .24 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions 3.30 1.20 (.12) 1.11 ------ ------ ------ ------ Total income (loss) from investment operations 3.81 1.40 .10 1.35 - ------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.51) (.20) (.22) (.24) Distributions from net realized gain on investments and foreign currency transactions (1.25) -.- (2.05) (.08) ------ ------ ------ ------ Total dividends and distributions to shareholders (1.76) (.20) (2.27) (.32) - ------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.05 $11.00 $9.80 $11.97 ------ ------ ------ ------ ------ ------ ------ ------ - ------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 34.86% 14.32% (0.29)% 12.25% - ------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $137,323 $26,285 $19,638 $19,469 - ------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 3.90% 1.95% 1.71% 2.21% Expenses 1.18% 1.23% 1.17% 1.31% - ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 169.75% 246.14% 214.32% 163.15% - --------------------------------------------------------------------------------------------------------
- ------------------------ * G.R. Phelps & Co. managed the Fund during these periods. (a) Annual total returns do not include the effect of sales charges. -8-
FINANCIAL HIGHLIGHTS* (CONT'D.) CLASS B SHARES(c) PERIOD ENDED DECEMBER 31, 1995 ----------------- PER SHARE OPERATING DATA: Net asset value, beginning of period $ 17.83 - ----------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .02 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions 1.40 ------ Total income (loss) from investment operations 1.42 - ----------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (0.2) Distributions from net realized gain on investments and foreign currency transactions (1.15) ------ Total dividends and distributions to shareholders (1.17) - ----------------------------------------------------------------------------------------- Net asset value, end of period $ 18.08 ------ ------ - ----------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(b) 8.04% - ----------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $ 717 - ----------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) .21%(a) Expenses 1.97%(a) - ----------------------------------------------------------------------------------------- Portfolio turnover rate 69.69% - -----------------------------------------------------------------------------------------
- ------------------------- * G.R. Phelps & Co. managed the Fund during this period. (a) Annualized. (b) Total returns do not include the effect of sales charges. (c) For the period from October 1, 1995 (inception) through December 31, 1995. -9- INVESTMENT OBJECTIVE AND POLICIES OBJECTIVE. The Fund seeks long term growth of capital by investing primarily in common stocks with low price-earnings ratios and better-than-anticipated earnings. Realization of current income is a secondary consideration. INVESTMENT POLICIES AND STRATEGIES. Under normal circumstances, most of the Fund's assets will be invested in stocks. The Manager chooses stock investments for the Fund using quantitative value investment discipline in combination with fundamental securities analysis. A stock may have a low price-earnings ratio (for example, below the price-earnings ratio of the S&P 500 Index) because it is out-of-favor in the market. Stocks with low price-earnings ratios have performed better than the market averages in most years of recent decades. When an out-of-favor company demonstrates better earnings than what most analysts were expecting, this is referred to as a favorable earnings surprise. This may cause market analysts and investors to reevaluate the issuer's earnings expectations and the price-earnings multiple which may cause the company's stock price to outperform the market averages. As stocks with low price-earnings ratios and favorable earnings surprises are identified, the Manager uses fundamental securities analysis to select individual stocks for the Fund. When the price-earnings ratio of a stock held by the Fund moves significantly above the multiple of the overall stock market, or the company reports a material earnings disappointment, the Fund will normally sell the stock. The Fund may invest the remainder of its assets (up to 10% under normal circumstances) in U.S. Government and corporate debt obligations, including convertible bonds which may be rated as low as B by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group ("S&P"). Consistent with the foregoing policies, the Fund may invest to a limited degree in securities of foreign issuers, including issuers in developing countries. Please refer to "Foreign Securities," below. / / STOCK INVESTMENT RISKS. Because the Fund invests a substantial portion of its assets in stocks, the value of the Fund's portfolio will be affected by changes in the stock markets. At times, the stock markets can be volatile and stock prices can change substantially. This market risk will affect the Fund's net asset value per share, which will fluctuate as the values of the Fund's portfolio securities change. Not all stock prices change uniformly or at the same time, and other factors can affect a particular stock's prices (for example, poor earnings reports by an issuer, loss of major customers, major litigation against an issuer, and changes in government regulations affecting an industry). Not all of these factors can be predicted. The Fund attempts to limit market risks by diversifying its investments, that is, by not holding a substantial amount of the stock of any one company and by not investing too great a percentage of the Fund's assets in any one company. Also, the Fund does not concentrate its investments in any one industry or group of industries. Because of the types of securities the Fund invests in and the investment techniques the Fund uses, the Fund is designed for investors who are investing for the long term. It is not intended for investors seeking assured income or preservation of capital. Because changes in overall market prices can occur at any time, and because the income earned on securities is subject to change, there is no assurance that the Fund will achieve -10- its investment objective, and when you redeem your shares, they may be worth more or less than what you paid for them. / / CAN A 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 practices 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 not a fundamental policy. Shareholders of the Fund will be given 30 days' advance written notice of a change to the Fund's investment objective. Fundamental policies are those that cannot be changed without the approval of a "majority" of a Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act to be a particular percentage of outstanding voting shares (and this term is explained in the Statement of Additional Information). The Fund's Board of Directors may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. / / PORTFOLIO TURNOVER. A change in the securities held by the Fund is known as "portfolio turnover." The Fund ordinarily does not engage in short-term trading to try to achieve its objective. For the fiscal year ended December 31, 1995, the Fund's portfolio turnover rate was 69.69%. The "Financial Highlights," above, show the Fund's portfolio turnover rates during past fiscal years. Portfolio turnover affects brokerage costs, dealer markups and other transaction costs, and results in the Fund's realization of capital gains or losses for tax purposes. It may also affect the ability of the Fund to qualify as a "regulated investment company" under the Internal Revenue Code and avoid being taxed on amounts distributed as dividends and capital gains to shareholders. The Fund qualified in its fiscal year ended December 31, 1995 and intends to do so in the future, although it reserves the right not to qualify. / / DEBT SECURITIES. Under normal circumstances, the Fund may invest some of its assets (normally up to 10%) in debt securities. However, when market conditions for stocks are volatile, the Fund may increase its investments in debt securities for defensive purposes. The values of debt securities may fluctuate because of events affecting the issuer and its ability to pay interest and repay principal (this is referred to as "credit risk"). Additionally, debt securities are affected by changes in interest rates. When prevailing interest rates go up, the market value of already issued debt securities tends to go down. When interest rates go up, the market value of already issued debt securities tends to go up. The magnitude of those fluctuations is generally greater for longer-term securities. While interest rate changes do not affect the income the Fund receives on already-purchased securities, the value of the Fund's shares can be affected. The types of debt securities the Fund invests in are described below. / / U.S. GOVERNMENT SECURITIES. Certain U.S. Government Securities, including U.S. Treasury bills, notes and bonds, and mortgage participation certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae") are supported by the full faith and credit of the U.S. Government, which in general terms means that the U.S. Treasury stands behind the obligation to pay principal and interest. Ginnie Mae certificates are one type of mortgage-related U.S. Government Security the Fund may invest in. Other mortgage-related U.S. -11- Government Securities the Fund invests in that are issued or guaranteed by federal agencies or government-sponsored entities are not supported by the full faith and credit of the U.S. Government. Those securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of the Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported only by the credit of the instrumentality, such as the Federal National Mortgage Association ("Fannie Mae") or the Student Loan Marketing Association and obligations supported by the discretionary authority of the U.S. Government to repurchase certain obligations of U.S. Government agencies or instrumentalities such as the Federal Land Banks and the Federal Home Loan Banks. The value of U.S. Government Securities will fluctuate until they mature, depending on prevailing interest rates. Because the yields on U.S. Government Securities are generally lower than on corporate debt securities, when the Fund holds U.S. Government Securities it may attempt to increase the income it can earn from them by writing covered call options against them, when market conditions are appropriate. Writing covered calls is explained below, under "Hedging." / / SHORT-TERM DEBT SECURITIES. When the Manager believes it is appropriate, the Fund can hold cash or invest without limit in money market instruments. The Fund will invest in high quality, short-term money market instruments such as U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company); short-term debt obligations of corporate issuers; and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of domestic or foreign banks and savings loan associations. The Fund will purchase money market instruments denominated in a foreign currency only within the limitations described under "Foreign Securities." The issuers of these foreign money market instruments have at least one billion dollars (U.S.) of assets. The Fund may also invest in obligations of foreign branches of U.S. banks (referred to as Eurodollar obligations) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investment in securities of U.S. banks, as described in "Foreign Securities," below. / / SPECIAL RISKS OF LOWER-GRADE SECURITIES. The Fund can invest in high-yield, below-investment grade nationally-recognized debt securities (including both rated and unrated securities). These "lower-grade securities are commonly known as "junk bonds." They generally offer higher income potential than investment grade securities. "Lower-grade" securities have a rating below "BBB" by Standard & Poor's or "Baa" by Moody's or similar ratings by other domestic and foreign rating organizations, or they are not rated by a nationally-recognized rating organization, but the Manager judges them to be comparable to lower-rated securities. The Fund will not purchase securities rated below B by Moody's or S&P. The Fund may retain securities whose ratings fall below B after purchase unless and until the Manager determines that disposing of such securities is in the best interests of the Fund. Appendix A to this Prospectus describes the rating categories of Moody's and Standard & Poor's. All corporate debt securities (whether foreign or domestic) are subject to some degree of credit risk. High yield, lower-grade securities, whether rated or unrated, often have speculative characteristics and 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 -12- 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. For foreign lower-grade debt securities, these risks are in addition to the risks of investing in foreign securities, described below. 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. / / CONVERTIBLE SECURITIES. Convertible securities are bonds, preferred stocks and other securities that pay a fixed rate of interest or dividend and are convertible into the issuer's common stock at the option of the buyer. While the value of these securities depends in part on interest rate changes, their value is also sensitive to the credit quality of the issuer and will change based on the price of the underlying stock. While these securities generally offer less potential for gains than common stock and less income than non-convertible bonds, but their income helps to provide a cushion against the stock price's declines. / / FOREIGN SECURITIES. The Fund may purchase equity and debt securities issued or guaranteed by foreign companies. The Fund may purchase securities in any country, developed or underdeveloped. Investments in securities of issuers in underdeveloped countries or countries that have emerging markets generally may offer greater potential for gain but involve more risk and may be considered highly speculative. As a matter of fundamental policy, the Fund may not invest more than 10% of its total assets in foreign securities, except that the Fund may invest up to 25% of its total assets in foreign equity and debt securities that are (i) issued, assumed or guaranteed by foreign governments or their political subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic issuers, including Eurodollar securities, or (iii) issued, assumed or guaranteed by foreign issuers having a class of securities listed for trading on the New York Stock Exchange. Foreign currency will be held by the Fund only in connection with the purchase or sale of foreign securities. / / FOREIGN SECURITIES HAVE SPECIAL RISKS. The change in value of a foreign currency against the U.S. dollar will result in a change in the value of the securities denominated in that foreign currency. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental, economic or monetary policy in the U.S. or abroad, or other political and economic factors. More information about the risks and potential rewards of investing in foreign securities is contained in the Statement of Additional Information. 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 the practices, including limitations on their use that may help to reduce some of the risks. / / WARRANTS AND RIGHTS. Warrants basically are options to purchase stock at set prices that are valid for a limited period of time. Rights are similar to warrants but normally have a short duration and are distributed directly by the issuer to its shareholders. The Fund may invest up to 5% of its total assets in warrants or rights. That 5% limitation does not apply to warrants the Fund has acquired as part of units with other securities or that are attached to other securities. No more than 2% of the Fund's total assets may be invested in warrants that are not listed on either The -13- New York Stock Exchange or The American Stock Exchange. For further details, see "Warrants and Rights" in the Statement of Additional Information. / / LOANS OF PORTFOLIO SECURITIES. Subject to its investment policies and restrictions, the Fund may seek to increase its income by lending portfolio securities in transactions other than repurchase agreements. The Fund must receive collateral for a loan. As a matter of fundamental policy, these loans are limited to not more than 33 1/3% of the Fund's total assets (taken at market value) and are subject to other conditions described in the Statement of Additional Information. See "Loans of Portfolio Securities" in the Statement of Additional Information on securities loans. / / "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. / / 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. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, the Fund may experience costs in disposing of the collateral and may experience losses if there is any delay in doing so. As a matter of fundamental policy, the Fund will not enter into a repurchase agreement that causes more than 10% of its net assets in illiquid and restricted securities (as described below) which includes repurchase agreements having a maturity beyond seven days. / / ILLIQUID AND RESTRICTED SECURITIES. Under the policies established by the Fund's Board of Directors, 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. As a matter of fundamental policy, the Fund will not invest more than 10% of its total assets in illiquid and restricted securities (including repurchase agreements having a maturity beyond 7 day portfolio securities which do not have readily available market quotations and time deposits maturing in more than 2 days). / / HEDGING. The Fund may write covered call options on securities, stock indices and foreign currency and may purchase and sell certain kinds of futures contracts, forward contracts, and options on futures, broadly based stock indices and foreign currencies. These are all referred to as "hedging instruments." The Fund may use hedging instruments for hedging and, in the case of covered calls, non-hedging purposes as well, as described below. The Fund may write covered call options and buy and sell 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. Some of these strategies, such as selling futures and writing covered calls, hedge the Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, 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 -14- 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, defensive reasons, or to raise cash to distribute to shareholders. / / FUTURES. The Fund may buy and sell futures contracts that relate to (1) foreign currencies (these are referred to as "Forward Contracts" and are discussed below), and stock indices (these are referred to as "Stock Index Futures"). These types of Futures are described in "Hedging" in the Statement of Additional Information. The Fund engages in Futures transactions and related options only for bona fide hedging purposes. / / COVERED CALL OPTIONS AND OPTIONS ON FUTURES. The Fund may write (that is, sell) call options on securities, indices and foreign currencies for hedging or liquidity purposes and write call options on Futures for hedging and non-hedging purposes, but only if all such calls are "covered." This 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 while the call is outstanding or in the case of calls on futures, segregate appropriate liquid assets. 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). After the Fund writes a call, not more than 20% of the value of its total assets may be subject to calls. The Fund may sell covered call options that are traded on U.S. or foreign securities or commodity exchanges or which are used by the Options Clearing Corporation. In the case of foreign currency options, they may be quoted by major recognized dealers in those options. / / 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 for hedging purposes to try to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has purchased or sold, or to protect against possible losses from changes in the relative value of the U.S. dollar and a foreign currency. Normally, the Fund will not use "cross hedging," where the Fund hedges against changes in currencies other than the currency in which a security it holds is denominated. The Fund will not speculate in foreign exchange. / / HEDGING INSTRUMENTS CAN BE VOLATILE INVESTMENTS AND MAY INVOLVE SPECIAL RISKS. The use of hedging instruments requires special skills and knowledge of investment techniques that are different from what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce 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 options, futures and forward contracts are subject to special tax rules that may affect the amount, timing and character of the Fund's income and distributions. There are also special risks in particular hedging strategies. For example, if a covered call written by the Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. The use of Forward -15- Contracts may reduce the gain that would otherwise result from a change in the relationship between the U.S. dollar and a foreign currency. 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. 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, currency or commodity. The Fund may not purchase or sell physical commodities; however, the Fund may purchase and sell foreign currency in hedging transactions. This shall not prevent the Fund from selling covered call options or buying or selling futures contracts or from investing in securities or other instruments backed by physical commodities. Derivative investments used by the Fund are used in some cases for hedging purposes and in other cases to seek income. In the broadest sense, exchange-traded options and futures contracts (discussed in "Hedging," above) may be considered "derivative investments." There are special risks in investing in derivative investments. The company issuing the instrument may fail to pay the amount due on the maturity of the instrument. Also, the underlying investment or security might not perform the way the Manager expected it to perform. Markets, underlying securities and indices may move in a direction not anticipated by the Manager. Performance of derivative investments may also be influenced by interest rate and stock market changes in the U.S. and abroad. All of this can mean that the Fund will realize less principal or income from the investment than expected. Certain derivative investments held by the Fund may be illiquid. Please refer to "Illiquid and Restricted Securities." OTHER INVESTMENT RESTRICTIONS. The Fund has other investment restrictions which are "fundamental" policies. Among these fundamental policies, the Fund cannot do any of the following: / / Borrow amounts in excess of 10 percent of the Fund's total assets, taken at market value at the time of the borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes, or make investments in portfolio securities while such outstanding borrowings exceed 5 percent of the Fund's total assets. / / Invest more than 25% of its assets in securities by issuers in any single industry, provided that this limitation shall not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. For the purpose of this restriction, each utility that provides a separate service (e.g., gas, gas transmission, electric or telephone) shall be considered a separate industry. This test shall be applied on a pro forma basis using the market value of all assets immediately prior to making any investment. / / Borrow amounts in excess of 10% of its total assets, taken at market value at the time of borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes, or make investments in portfolio securities while such outstanding borrowings exceed 5 percent of its total assets. / / Invest more than 5 percent of the Fund's total assets (taken at market value at the time of each investment) in the securities (other than United States Government or Government agency securities) of any one issuer (including repurchase agreements with any one bank or dealer) or more than 15 percent of the Fund's total assets in the obligations of any one bank; and -16- (b) purchase more than either (i) 10 percent in principal amount of the outstanding debt securities of an issuer, or (ii) 10 percent of the outstanding voting securities of an issuer, except that such restrictions shall not apply to securities issued or guaranteed by the United States Government or its agencies, bank money instruments or bank repurchase agreements. / / Allow its current obligations under reverse repurchase agreements (together with borrowings) to exceed one-third of the value of its total assets (less all its liabilities other than the obligations under borrowings and such agreements). All of the percentage restrictions described above and elsewhere in this Prospectus apply only at the time the Fund purchases a security, and the Fund need not dispose of a security merely because the Fund's assets have changed or the security has increased in value relative to the size of the Fund. There are other fundamental policies discussed in the Statement of Additional Information. HOW THE FUND IS MANAGED ORGANIZATION AND HISTORY. The Fund is a diversified series of Oppenheimer Series Fund, Inc. (the "Company"). The Company was organized in 1981 as a Maryland corporation and is an open-end management investment company. Organized as a series fund, the Company presently has eight series, including the Fund. The Fund is governed by a Board of Directors, which is responsible for protecting the interests of shareholders under Maryland law. The Directors meet periodically throughout the year to oversee the Fund's activities, review its performance, and review the actions of the Manager. "Directors and Officers of the Funds" in the Statement of Additional Information names the Directors and officers of the Fund and provides more information about them. Although the Fund is not required by law to hold annual meetings, it may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Director or to take other action described in the Fund's Articles of Incorporation. The Board of Directors has the power, without shareholder approval, to divide unissued shares of the Fund into two or more classes. The Board has done so, and the Fund currently has three classes of shares, Class A, Class B and Class C. All classes invest in the same investment portfolio. 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 on matters submitted to the vote of shareholders. Shares of each class may have separate voting rights on matters in which interests of one class are different from interests of another class, and shares of a particular class vote as a class on matters that affect that class alone. Shares are freely transferrable. Please refer to "How the Funds are Managed" in the Statement of Additional Information for further information on voting of shares. THE MANAGER AND ITS AFFILIATES. The Fund is managed by the Manager, OppenheimerFunds, Inc., 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 Directors, 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. -17- The Manager has operated as an investment adviser since 1959. The Manager and its affiliates currently manage investment companies, including other Oppenheimer funds, with assets of more than $40 billion as of December 31, 1995, and with more than 2.8 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. / / PORTFOLIO MANAGEMENT. The principal Portfolio Manager of the Fund is Peter M. Antos. He is a Vice President of the Fund and the Manager and has been the senior portfolio manager of the Fund's portfolio since 1989. He is also a Chartered Financial Analyst and serves as a portfolio manager of other Oppenheimer funds. Mr. Antos was employed since 1989 by the Fund's prior investment adviser, G.R. Phelps & Co., Inc., as a Vice President and Senior Portfolio Manager, Equities, before joining Oppenheimer Funds. Mr. Michael C. Strathearn and Mr. Kenneth B. White are also Vice Presidents and portfolio managers of the Fund. Each is also a chartered Financial Analyst, and each was also employed by Connecticut Mutual Life Insurance Company, the parent of G.R. Phelps, as a Portfolio Manager prior to joining Oppenheimer Funds, Inc. on March 1, 1996. / / FEES AND EXPENSES. Under the Investment Advisory Agreement, the Fund pays the Manager the following annual fee, which declines on additional assets as the Fund grows: 0.625% of the first $300 million of aggregate net assets; 0.500% of the next $100 million; and 0.450% of net assets in excess of $400 million. The Fund's management fee for its last fiscal year was 0.625% of the average annual net assets for Class A and Class B shares (on an annualized basis). There were no Class C shares outstanding during the year. The Fund pays expenses related to its daily operations, such as custodian fees, Directors' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders through their investment. More information about the Investment Advisory Agreement and the other expenses paid by the Fund is contained in the Statement of Additional Information. There is also information about the Fund's brokerage policies and practices in "Brokerage Policies of the Funds" 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 OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as the Fund's Distributor. The Distributor also distributes the shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. / / THE TRANSFER AGENT. The Fund's Transfer Agent is OppenheimerFunds Services, a division of the Manager, which acts as the shareholder servicing agent for the Fund on an "at-cost" basis. It also acts as the shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts to the Transfer Agent at the address and toll-free number shown below in this Prospectus or on the back cover. -18- PERFORMANCE OF THE FUND EXPLANATION OF PERFORMANCE TERMINOLOGY. The Fund uses the terms "total return" to illustrate its performance. The performance of each class of shares is shown 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. These returns measure the performance of a hypothetical account in the Fund over various periods, and do not show the performance of each shareholder's account (which will vary if dividends are received in cash, or shares are sold or purchased). The Fund's performance data may help you see how well your investment has done over time and to compare it to market indices, as we have done below. It is important to understand that the Fund's total returns represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Fund's performance. The Fund's investment performance will vary over time, 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 include the payment of the current maximum initial sales charge. When total returns are shown for Class B and Class C shares, they include the effect of the contingent deferred sales charge that applies to the period for which total return is shown. When total returns are shown for a one-year period (or less) for Class C shares, they include the effect of the contingent deferred sales charge. Total returns may also be quoted at "net asset value," without including the effect of either the front-end or the appropriate contingent deferred sales charge, as applicable, and those returns would be reduced if sales charges were deducted. A B O U T Y O U R A C C O U N T HOW TO BUY SHARES CLASSES OF SHARES. The Fund offers investors three different classes of shares. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. / / CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on investments up to $1 million (up to $500,000 for purchases by OppenheimerFunds prototype 401(k) plans). If you purchase Class A shares as part of an investment of at least $1 million ($500,000 for OppenheimerFunds prototype 401(k) plans) in shares of one or more Oppenheimer -19- funds, you will not pay an initial sales charge, but if you sell any of those shares within 18 months of buying them, you may pay a contingent deferred sales charge. The amount of that sales charge will vary depending on the amount you invested. Sales charge rates are described in "Buying Class A Shares," 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 six years of buying them, you will normally pay a contingent deferred sales charge that varies depending on how long you owned your shares, as described in "Buying Class B Shares," below. / / CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time of purchase, but if you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1%, as discussed in "Buying Class C Shares," 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 and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares. 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 each class, and considered the effect of the asset-based sales charge on Class B and Class C 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 your investment each year. Of course, the actual performance of your investment cannot be predicted and will vary, based on the Fund's actual investment returns, and the operating expenses borne by each class of shares, and which class of shares you invest in. The factors discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes. / / HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. Because of the effect of class-based expenses your choice will also depend on how much you invest. For example, the reduced sales charges available for larger purchases of Class A shares may, over time, offset the effect of paying an initial sales charge on your investment (which reduces the amount of your investment dollars used to buy shares for your account), compared to the effect over time of higher class-based expenses on the shares of Class B or Class C for which no initial sales charge is paid. / / INVESTING FOR THE SHORT TERM. If you have a short term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares, because of the effect of the -20- Class B contingent deferred sales charge if you redeem in less than seven years, as well as the effect of the Class B asset-based sales charge on the investment return for that class in the short-term. Class C shares might be the appropriate choice (especially for investments of less than $100,000), because there is no initial sales charge on Class C shares, and the contingent deferred sales charge does not apply to amounts you sell after holding them one year. However, if you plan to invest more than $100,000 for the shorter term, then the more you invest and the more your investment horizon increases toward six years Class C shares might not be as advantageous as Class A shares. That is because the annual asset-based sales charge on Class C shares will have a greater economic impact on your account over the longer term than the reduced front-end sales charge available for larger purchases of Class A shares. For example, Class A might be more advantageous than Class C (as well as Class B) for investments of more than $100,000 expected to be held for 5 or 6 years (or more). For investments over $250,000 expected to be held 4 to 6 years (or more), Class A shares may become more advantageous than Class C (and B). If investing $500,000 or more, Class A may be more advantageous as your investment horizon approaches 3 years or more. And for most investors who invest $1 million or more, in most cases Class A shares will be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the Distributor normally will not accept purchase orders of $500,000 or more of Class B or $1 million or more of Class C shares from a single investor. / / INVESTING FOR THE LONGER TERM. If you are investing for the longer term, for example, for retirement, and do not expect to need access to your money for seven years or more, Class B shares may be an appropriate consideration, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charge available for larger investments in Class A shares under a Fund's Right of Accumulation. Of course all of these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, using the assumed annual performance return stated above, and you should analyze your options carefully. / / ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because some features may not be available to Class B or C shareholders, or other features (such as Automatic Withdrawal Plans) may not be advisable (because of the effect of the contingent deferred sales charge in non-retirement accounts) for Class B or Class C shareholders, you should carefully review how you plan to use your investment account before deciding which class of shares to buy. For example, share certificates are not available for Class B or Class C shares and if you are considering using your shares as collateral for a loan, this may be a factor to consider. Additionally, dividends payable to Class B and Class C shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A, such as the Class B and Class C asset-based sales charges described below and in the Statement of Additional Information. / / 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 for selling another class. It is important that investors understand that the purpose of the Class B and Class C contingent deferred sales charges and asset-based sales charges is the same as the purpose of the front-end sales charge on sales of -21- Class A shares: to reimburse 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 for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. Under pension and profit-sharing plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. There is no minimum investment requirement if you are buying shares by reinvesting dividends from the Fund or other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. / / HOW ARE SHARES PURCHASED? You can buy shares several ways --through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. WHEN YOU BUY SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES. / / BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order with the Distributor on your behalf. / / BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New Account Application and return it with a check payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment 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 to transmit funds electronically to PURCHASE SHARES, to have the Transfer Agent SEND REDEMPTION PROCEEDS, or 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. -22- / / ASSET BUILDER PLANS. You may purchase shares of the Fund (and up to four other Oppenheimer funds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. / / AT WHAT PRICES ARE SHARES SOLD? Shares are sold at the public offering price based on the net asset value (and any initial sales charge that applies) that is next determined after the Distributor receives the purchase order in Denver, Colorado. 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, IN ITS SOLE DISCRETION, MAY REJECT ANY PURCHASE ORDER FOR THE FUND'S SHARES. SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix B to this Prospectus sets forth conditions for the waiver of, or exemption from, sales charges or the special sales charge rates that apply to purchases of shares of the Fund (including purchases by exchange) by a person who was a shareholder of one of the Former Quest for Value Funds and Former Connecticut Mutual Funds (as defined in that Appendix). BUYING 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 may be net asset value. In some cases, reduced sales charges may be available, as described below. Out of the amount you invest, the Fund receives the net asset value to invest for your account. The sales charge varies depending on the amount of your purchase. A portion of the sales charge may be retained by the Distributor and allocated to your dealer as commission. Different sales charge rates and commissions applied to sales of Class A shares prior to March 18, 1996. The current sales charge rates and commissions paid to dealers and brokers are as follows: -23-
FRONT-END SALES FRONT-END SALES COMMISSION AS AMOUNT OF PURCHASE CHARGE AS PERCENTAGE CHARGE AS PERCENTAGE PERCENTAGE OF OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE - ---------------------------------------------------------------------------------- Less than $25,000 5.75% 6.10% 4.75% - ---------------------------------------------------------------------------------- $25,000 or more but less than $50,000 5.50% 5.82% 4.75% - ---------------------------------------------------------------------------------- $50,000 or more but less than $100,000 4.75% 4.99% 4.00% - ---------------------------------------------------------------------------------- $100,000 or more but less than $250,000 3.75% 3.90% 3.00% - ---------------------------------------------------------------------------------- $250,000 or more but less than $500,000 2.50% 2.56% 2.00% - ---------------------------------------------------------------------------------- $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - ----------------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws. / / CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds in the following cases: / / purchases aggregating $1 million or more, or / / purchases by an OppenheimerFunds prototype 401(k) plan that: (1) buys shares costing $500,000 or more or (2) has, at the time of purchase, 100 or more eligible participants, or (3) certifies that it projects to have annual plan purchases of $200,000 or more. The Distributor pays dealers of record commissions on those 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 purchases over $5 million. That commission will be paid only on the amount of those purchases in excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k) prototype plans) 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% either (1) of the aggregate net asset value of the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. The Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all Oppenheimer funds 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 -24- 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 Oppenheimer funds (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 and Class B shares you purchase for your individual accounts, or jointly, or for trust or custodial accounts on behalf of your children who are minors. 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 and Class B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate for current purchases of Class A shares. You can also include Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your investment in one of the Oppenheimer funds. 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 Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Distributor. 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, if you purchase Class A shares or Class A and Class B shares of the Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares purchased during that period. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. / / WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not imposed in the circumstances described below. There is an explanation of this policy in "Reduced Sales Charges" in the Statement of Additional Information. -25- WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN PURCHASERS. Class A shares purchased by the following investors are not subject to any Class A sales charges: / / the Manager or its affiliates; / / 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; / / registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; / / dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees; / / employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and 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); / / 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 (those clients may be charged a transaction fee by their dealer, broker or advisor for the purchase or sale of shares of the Fund) / / 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 administrative services. / / directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons; / / accounts for which Oppenheimer Capital is the investment adviser (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts; / / any unit investment trust that has entered into an appropriate agreement with the Distributor; / / a TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and C TRAC-2000 program on November 24, 1995; or / / qualified retirement plans that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to -26- be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, provided that such arrangements are consummated and share purchases commence by March 31, 1996. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN TRANSACTIONS. Class A shares issued or purchased in the following transactions are not subject to Class A sales charges: / / shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party; / / shares purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or one of its affiliates acts as sponsor; / / shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor; / / shares purchased and paid for with the proceeds of shares redeemed in the past 12 months from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid (this waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner); this waiver must be requested when the purchase order is placed for your shares of the Fund, and the Distributor may require evidence of your qualification for this waiver; and / / shares purchased with the proceeds of maturing principal of units of any Qualified Unit Investment Liquid Trust Series. WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: / / for retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans, including OppenheimerFunds prototype 401(k) plans (these are all referred to as "Retirement Plans"); / / to return excess contributions made to Retirement Plans; / / to make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the original account value; / / involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (see "Shareholder Account Rules and Policies," below); / / if, at the time a purchase order is placed for Class A shares that would otherwise be subject to the Class A contingent deferred sales charge, the dealer agrees in writing to accept the dealer's portion of the commission payable on the sale in installments of 1/18th of the commission per month (and no further commission will be payable if the shares are redeemed within 18 months of purchase); or -27- / / for distributions from OppenheimerFunds prototype 401(k) plans for any of the following cases or purposes: (1) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must occur after the participant's account was established); (2) hardship withdrawals, as defined in the plan; (3) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (4) to meet the minimum distribution requirements of the Internal Revenue Code; (5) to establish "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code, or (6) separation from service. / / 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 Directors authorizes such reimbursements, which it has not done as yet) 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. BUYING 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 six years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to compensate it for 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 six years, and (3) shares held the longest during the six-year period. The contingent deferred sales charge is not imposed in the circumstances described in "Waivers of Class B and Class C Sales Charges," below. 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: -28-
YEARS SINCE BEGINNING OF CONTINGENT DEFERRED SALES CHARGE MONTH IN WHICH ON REDEMPTIONS IN THAT YEAR PURCHASE ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE) - ------------------------------------------------------------------------------- 0-1 5.0% - ------------------------------------------------------------------------------- 1-2 4.0% - ------------------------------------------------------------------------------- 2-3 3.0% - ------------------------------------------------------------------------------- 3-4 3.0% - ------------------------------------------------------------------------------- 4-5 2.0% - ------------------------------------------------------------------------------- 5-6 1.0% - ------------------------------------------------------------------------------- 6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Different contingent deferred sales charges applied to redemptions of Class B shares prior to March 18, 1996. / / AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution and Service Plan, described below. The conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements - Class A, Class B and Class C Shares" in the Statement of Additional Information. BUYING CLASS C SHARES. Class C shares are sold at net asset value per share without an initial sales charge. However, if Class C shares are redeemed within 12 months of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class C contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to the Fund in connection with the sale of Class C shares. To determine whether the contingent deferred sales charge applies to a redemption, the Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 12 months, and (3) shares held the longest during the 12-month period. -29- / / DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES. The Fund has adopted Distribution and Service Plans for Class B and Class C shares to compensate the Distributor for its costs in distributing Class B and C shares and servicing accounts. Under the Plans, the Fund pays the Distributor an annual "asset-based sales charge" of 0.75% per year on Class B shares that are outstanding for six years or less and on Class C shares. The Distributor also receives a service fee of 0.25% per year. Under the Plan, both fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The asset-based sales charge allows investors to buy Class B or C shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell those shares. The Distributor uses the service fees to compensate dealers for providing personal services for accounts that hold Class B or C shares. Those services are similar to those provided under the Class A Service Plan, described above. The Distributor pays the 0.25% service fees to dealers in advance for the first year after Class B or Class C shares have been sold by the dealer and retains the service fee paid by the Fund in that year. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor currently pays sales commissions of 3.75% on the purchase price of Class B shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sales of Class B shares is therefore 4.00% of the purchase price. The Fund pays the asset-based sales charge to the Distributor for its services rendered in distributing Class B shares. Those payments, retained by the Distributor, are at a fixed rate that is not related to the Distributor's expenses. The services rendered by the Distributor include paying and financing the payment of sales commissions, service fees and other costs of distributing and selling Class B shares. The Distributor currently pays sales commissions of 0.75% of the purchase price of Class C shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sale of Class C shares is therefore 1.00% of the purchase price. The Distributor retains the asset-based sales charge during the first year Class C shares are outstanding to recoup the sales commissions it has paid, the advances of service fee payments it has made, and its financing costs and other expenses. The Distributor plans to pay the asset-based sales charge as an ongoing commission to the dealer on Class C shares that have been outstanding for a year or more. The Distributor's actual expenses in selling Class B and C shares may be more than the payments it receives from contingent deferred sales charges collected on redeemed shares and from the Fund under the Distribution and Service Plans for Class B and C shares. Therefore, those expenses may be carried over and paid in future years. If the Fund terminates its Plan, the Board of Directors may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the Plan was terminated. / / WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C contingent deferred sales charge will not be applied to shares purchased in certain types of transactions nor will it apply to Class B and Class C shares redeemed in certain circumstances as described below. The reasons for this policy are in "Reduced Sales Charges" in the Statement of Additional Information. -30- WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B and Class C contingent deferred sales charges will be waived for redemptions of shares in the following cases, if the Transfer Agent is notified that these conditions apply to the redemption: / / distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must have occurred after the account was established); / / redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder (the death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration); / / returns of excess contributions to Retirement Plans; / / distributions from IRAs (including SEP-IRAs and SAR/SEP accounts) before the participant is age 59-1/2, and distributions from 403(b)(7) custodial plans or pension or profit sharing plans before the participant is age 59-1/2 but only after the participant has separated from service, if the distributions are made in substantially equal periodic payments over the life (or life expectancy) of the participant or the joint lives (or joint 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); / / shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," below; or / / distributions from OppenheimerFunds prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet minimum distribution requirements as defined in the Internal Revenue Code; (4) to make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for separation from service. WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases: / / shares sold to the Manager or its affiliates; / / shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; and / / shares issued in plans of reorganization to which the Fund is a party. -31- 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 should 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 by sending signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. / / 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 Oppenheimer funds 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 Oppenheimer funds 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 -32- your bank account on AccountLink. You may even set up certain types of withdrawals of up to $1,500 per month by telephone. You should consult the Application and Statement of Additional Information for more details. / / AUTOMATIC EXCHANGE PLANS. You can authorize the Transfer Agent to exchange an amount you establish in advance automatically for shares of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other Oppenheimer funds 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 Class A or Class B shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the same Fund or other Oppenheimer funds without paying a sales charge. This privilege applies to Class A shares that you purchased subject to an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge when you redeemed them. This privilege does not apply to Class C shares. You must be sure to ask the Distributor for this privilege when you send your payment. 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 / / 401(k) PROTOTYPE RETIREMENT PLANS for businesses 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 by selling (redeeming) some or all of your shares on any regular business day. Your shares will be sold at the next net asset value calculated after your order is received 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. -33- / / RETIREMENT ACCOUNTS. To sell shares in an OppenheimerFunds retirement account in your name, call the Transfer Agent for a distribution request form. There are special income tax withholding requirements for distributions from retirement plans and you must submit a withholding form with your request to avoid delay. If your retirement plan account is held for you by your employer, you must arrange for the distribution request to be sent by the plan administrator or trustee. There are additional details in the Statement of Additional Information. / / CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and the Fund from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): / / You wish to redeem more than $50,000 worth of shares and receive a check / / The redemption check is not payable to all shareholders listed on the account statement / / The redemption check is not sent to the address of record on your account statement / / Shares are being transferred to a Fund account with a different owner or name / / Shares are redeemed by someone other than the owners (such as an Executor) / / WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. IF YOU ARE SIGNING AS A FIDUCIARY OR ON BEHALF OF A CORPORATION, PARTNERSHIP OR OTHER BUSINESS, 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 account statement) / / The dollar amount or number of shares to be redeemed / / Any special payment instructions / / Any share certificates for the shares you are selling / / The signatures of all registered owners exactly as the account is registered, and / / Any special requirements or documents requested by the Transfer Agent to assure proper authorization of the person asking to sell shares. -34- USE THE FOLLOWING ADDRESS FOR REQUESTS BY MAIL: OppenheimerFunds Services P.O. Box 5270, Denver, Colorado 80217 SEND COURIER OR EXPRESS MAIL REQUESTS TO: OppenheimerFunds 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 seven-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 OR WIRE. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be transferred. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank account if the bank is a member of the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire. To place a wire redemption request, call the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable the Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. To establish wire redemption privileges on an account that is already established, please contact the Transfer Agent for instructions. 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. -35- HOW TO EXCHANGE SHARES Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at net asset value per share at the time of exchange, without sales charge. To exchange shares, you must meet several conditions: / / Shares of the fund selected for exchange must be available for sale in your state of residence. / / The prospectuses of the 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 OPPENHEIMER FUNDS. For example, you can exchange Class A shares of the Fund only for Class A shares of another fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are considered to be Class A shares for this purpose. 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 names and address. Shares held under certificates may not be exchanged by telephone. You can find a list of Oppenheimer funds currently available for exchanges in the Statement of Additional Information or obtain one by calling a service representative at 1-800-525-7048. That list can change from time to time. 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 -36- the purchase of shares of the fund you are exchanging into up to seven days if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to the Fund. / / Because excessive trading can hurt fund performance and harm shareholders, the Fund reserves the right to refuse any exchange request that will disadvantage it, or to refuse multiple exchange requests submitted by a shareholder or dealer. / / The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. / / For tax purposes, exchanges of shares involve a redemption of the shares of the Fund you own and a purchase of the shares of the other fund, which may result in a taxable gain or a loss. For more information about taxes affecting exchanges, please refer to "How to Exchange Shares" in the Statement of Additional Information. / / 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 which is normally 4:00 P.M., but may be earlier on some days, on each day the Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. The Fund's Board of Directors has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained. These procedures are described more completely in the Statement of Additional Information. / / THE OFFERING OF SHARES may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Directors at any time the Board believes it is in the Fund's best interest to do so. / / TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may be modified, suspended or terminated by the Fund at any time. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions of any one owner. Telephone privileges apply to each owner of the account and the dealer representative of record for the account unless and until the Transfer Agent receives cancellation instructions from an owner of the account. / / THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data concerning transactions and has adopted other procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax identification numbers and other account data or by using PINs, and by confirming such transactions in writing. If the Transfer Agent does not use reasonable procedures it may be liable for losses due to unauthorized transactions, but otherwise neither the Transfer Agent nor the Fund will 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 -37- during periods of unusual market activity, you may not be able to complete a telephone transaction and should consider placing your order by mail. / / REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE TRANSFER AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to time, the Transfer Agent in its discretion may waive certain of the requirements for redemptions stated in this Prospectus. / / DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS BY PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Fund if the dealer performs any transaction erroneously. / / THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the value of the securities in the Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A, Class B and Class C shares. Therefore, the redemption value of your shares may be more or less than their original cost. / / PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission delaying or suspending such payments. For accounts registered in the name of a broker-dealer, payment will be forwarded within 3 business days. 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 has fewer than 100 shares. / / 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 your correct, certified Social Security or Employer Identification Number and any other certifications required by the Internal Revenue Service ("IRS") when you sign your application, or if you violate IRS regulations on tax reporting of income. / / 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 charge when redeeming certain Class A, Class B and Class C shares. -38- / / TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, the Fund will mail only one copy of each annual and semi-annual report to shareholders having the same last name and address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of those materials be sent personally to that shareholder. DIVIDENDS, CAPITAL GAINS AND TAXES DIVIDENDS. The Fund declares and pays dividends separately for Class A, Class B and Class C shares from net investment income semi-annually. Normally, dividends are paid on the last business day every dividend period, but the Board of Directors can change that date. Dividends paid on Class A shares generally are expected to be higher than for Class B and Class C shares because expenses allocable to Class B and Class C shares will generally be higher. CAPITAL GAINS. The Fund may make distributions annually in December out of any net short-term or long-term capital gains. Long-term capital gains will be separately identified in the tax information your Fund sends you after the end of the year. Distributions of short-term capital gains are treated as ordinary income for tax purposes. There can be no assurance that the Fund will pay any capital gains distributions in a particular year. DISTRIBUTION OPTIONS. When you open your account, specify on your application how you want to receive your distributions. For OppenheimerFunds retirement accounts, all distributions are reinvested. For other accounts, you have four options: / / REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of the Fund. / / REINVEST CAPITAL GAINS ONLY. You can elect to reinvest long-term capital gains in the Fund while receiving dividends by check or sent to your bank account on AccountLink. / / RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check for all dividends and long-term capital gains distributions or have them sent to your bank on AccountLink. / / REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMERFUNDS ACCOUNT. You can reinvest all distributions in another Oppenheimer funds 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. The Fund's distributions from long-term capital gains are taxable to shareholders as long-term capital gains, no matter how long you held your shares. Dividends paid by the Fund from short-term capital gains and net investment income, including certain not realized foreign exchange gains, are taxable as ordinary income. These dividends and distributions are subject to Federal income tax and may be subject to state or local taxes. Your distributions are taxable as described above, whether you reinvest them in additional shares or take them in cash. Corporate shareholders may be entitled to the corporate dividends received deduction for some portion of the Fund's distributions treated as ordinary income, subject to applicable limitations under the Internal Revenue Code. Every year the Fund will send you and the IRS a statement showing the aggregate amount and character of taxable distributions you received for in the previous year. -39- / / "BUYING A DIVIDEND". When the 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 and repurchases, including redemptions for exchanges, may produce a taxable gain or a loss, which generally will be a capital gain or loss for shareholders who hold shares of the Fund as capital assets. Such a gain or loss is the difference between your tax basis, which is usually the price you paid for the shares, and the proceeds you received when you sold them. Special tax rules may apply to certain redemptions preceded or followed by investments in the Fund or another Oppenheimer fund. / / RETURNS OF CAPITAL. In certain cases distributions made by the Fund may be considered a return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. A return of capital will reduce your tax basis in shares of the Fund but will not be taxable except to the extent it exceeds such tax basis. / / FOREIGN TAXES. The Fund may be subject to foreign withholding taxes or other foreign taxes on income (possibly including capital gains) on certain of its foreign investments, if any. These taxes may be reduced or eliminated pursuant to an income tax treaty in some cases. The Fund does not expect to qualify to pass such foreign taxes and any related tax deductions or credits through to its shareholders. The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code. Provided that the Fund so qualifies, it will not be required to pay any federal income tax on its net investment income and net realized capital gains that it distributes to its shareholders in accordance with certain timing requirements. This information is only a summary of certain federal tax information about your investment. Tax-exempt or tax-deferred investors, foreign investors, and investors subject to special tax rules (such as certain banks and securities dealers) may have different tax consequences not described above. More tax 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. -40- APPENDIX A: DESCRIPTION OF RATINGS CATEGORIES OF RATING SERVICES DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS Aaa: Bonds 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 rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as "high-grade" bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of "Aaa" securities. A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds rated "Baa" are considered medium grade obligations, that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated "Caa" are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated "C" can be regarded as having extremely poor prospects of ever attaining any real investment standing. DESCRIPTION OF STANDARD & POOR'S BOND RATINGS AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from "AAA" issues only in small degree. A: Bonds rated "A" have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the "A" category. BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "CC" the highest degree. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. A-2 APPENDIX B SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS The initial and contingent sales charge rates and waivers for Class A, Class B and Class C shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund, Quest for Value Small Capitalization Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds merged into various Oppenheimer funds on November 24, 1995. The funds listed above are referred to in this Prospectus as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of the Fund (i) acquired by such shareholder pursuant to an exchange of shares of one of the Oppenheimer funds that was one of the Former Quest for Value Funds or (ii) received by such shareholder pursuant to the merger of any of the Former Quest for Value Funds into an Oppenheimer fund on November 24, 1995. CLASS A SALES CHARGES / / REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST SHAREHOLDERS / / PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT PLANS. The following table sets forth the initial sales charge rates for Class A shares purchased by a "Qualified Retirement Plan" through a single broker, dealer or financial institution, or by members of "Associations" formed for any purpose other than the purchase of securities if that Qualified Retirement Plan or that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single employer. B-1 FRONT-END SALES FRONT-END SALES CHARGE AS A CHARGE AS A COMMISSION AS NUMBER OF ELIGIBLE PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF EMPLOYEES OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ------------------------------------------------------------------------------ 9 or fewer 2.50% 2.56% 2.00% - ------------------------------------------------------------------------------ At least 10 but not more than 49 2.00% 2.04% 1.60% For purchases by Qualified Retirement plans and Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described on pages to of this Prospectus. Purchases made under this arrangement qualify for the lower of the sales charge rate in the table based on the number of eligible employees in a Qualified Retirement Plan or members of an Association or the sales charge rate that applies under the Rights of Accumulation described above in the Prospectus. In addition, purchases by 401(k) plans that are Qualified Retirement Plans qualify for the waiver of the Class A initial sales charge if they qualified to purchase shares of any of the Former Quest For Value Funds by virtue of projected contributions or investments of $1 million or more each year. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations, or as eligible employees in Qualified Retirement Plans also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Fund's Distributor. / / SPECIAL CLASS A CONTINGENT DEFERRED SALES CHARGE RATES Class A shares of the Fund purchased by exchange of shares of other Oppenheimer funds that were acquired as a result of the merger of Former Quest for Value Funds into those Oppenheimer funds, and which shares were subject to a Class A contingent deferred sales charge prior to November 24, 1995 will be subject to a contingent deferred sales charge at the following rates: if they are redeemed within 18 months of the end of the calendar month in which they were purchased, at a rate equal to 1.0% if the redemption occurs within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six months. Class A shares of any of the Former Quest for Value Funds purchased without an initial sales charge on or before November 22, 1995 will continue to be subject to the applicable contingent deferred sales charge in effect as of that date as set forth in the then-current prospectus for such fund. / / WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS Class A shares of the Fund purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: / / Shareholders of the Fund who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. / / Shareholders of the Fund who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. B-2 / / WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS The Class A contingent deferred sales charge will not apply to redemptions of Class A shares of the Fund purchased by the following investors who were shareholders of any Former Quest for Value Fund: / / Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. / / Participants in Qualified Retirement Plans that purchased shares of any of the Former Quest For Value Funds pursuant to a special "strategic alliance" with the distributor of those funds. The Fund's Distributor will pay a commission to the dealer for purchases of Fund shares as described above in "Class A Contingent Deferred Sales Charge." CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE WAIVERS / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged, if those shares were purchased prior to March 6, 1995: in connection with (i) distributions to participants or beneficiaries of plans qualified under Section 401(a) of the Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation plans under Section 457 of the Code, and other employee benefit plans, and returns of excess contributions made to each type of plan, (ii) withdrawals under an automatic withdrawal plan holding only either Class B or C shares if the annual withdrawal does not exceed 10% of the initial value of the account, and (iii) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995 BUT PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, B or C shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such fund merged, if those shares were purchased on or after March 6, 1995, but prior to November 24, 1995: (1) distributions to participants or beneficiaries from Individual Retirement Accounts under Section 408(a) of the Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made either (a) to an individual participant as a result of separation from service or (b) following the death or disability (as defined in the Code) of the participant or beneficiary; (2) returns of excess contributions to such retirement plans; (3) redemptions other than from retirement plans following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); (4) withdrawals under an automatic withdrawal plan (but only for Class B or C shares) where the annual withdrawals do not exceed 10% of the initial value of the account; and (5) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, B or C shares of the Fund described in this section if within 90 days B-3 after that redemption, the proceeds are invested in the same Class of shares in the Fund or another Oppenheimer fund. SPECIAL DEALER ARRANGEMENTS. Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and that were transferred to an OppenheimerFunds prototype 401(k) plan shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000 as to any one plan. Dealers who sold Class C shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and (i) the shares held by those plans were exchanged for Class A shares, or (ii) the plan assets were transferred to an OppenheimerFunds prototype 401(k) plan, shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000. SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER CONNECTICUT MUTUAL FUNDS Certain of the sales charge waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Capital Appreciation Account and CMIA LifeSpan Balanced Account (the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds. CLASS A SALES CHARGE WAIVERS Additional Class A shares of the Fund may be purchased without a sales charge, provided that the Class A shares of the Fund were acquired prior to March 1, 1996, by: (1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase; (2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; (3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; (4) NASD registered representatives whose employer consents to such purchases, and by the spouses and immediate family members of such representatives; (5) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the Fund's prior distributor, and its affiliated companies; (6) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; (7) any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which was beyond the applicable surrender charge period and which was used to fund a qualified plan, who exchanged the variable annuity contract for Class A shares of the Fund; and (8) an institution acting as a fiduciary on behalf of an individual B-4 or individuals, where such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to a CDSC. CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS The contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of the Fund and exchanges of Class A or Class B shares of the Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 1, 1996 or (ii) were acquired by exchange from an Oppenheimer Fund that was a Former Connecticut Mutual Fund and the shares of such Former Connecticut Mutual Fund were purchased prior to March 1, 1996: (1) by the estate of the deceased shareholder; (2) upon the disability of the shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (Code); (3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; (4) as tax-free returns of excess contributions to such retirement or employee benefit plans; (5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment management company; (6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; (7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; (8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to a Systematic Withdrawal Plan but limited to no more than 12% of the original value annually; and (9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. B-5 OPPENHEIMER DISCIPLINED VALUE FUND Two World Trade Center New York, New York 10048-0203 1-800-525-7048 INVESTMENT ADVISOR OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 DISTRIBUTOR OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 CUSTODIAN OF PORTFOLIO SECURITIES State Street Bank & Trust Company 225 Franklin Street Boston, Massachusetts 02110 INDEPENDENT AUDITORS Arthur Andersen LLP One Financial Plaza Hartford, Connecticut 06103 LEGAL COUNSEL NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, OPPENHEIMERFUNDS, INC., OPPENHEIMERFUNDS DISTRIBUTOR, INC. OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE. ____________________ *PRINTED ON RECYCLED PAPER CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Oppenheimer LifeSpan Growth Fund, Oppenheimer LifeSpan Balanced Fund and Oppenheimer LifeSpan Income Fund. Cross-Reference Sheet Showing Location in Prospectus and Statement of Additional Information of Information Required by Items of the Registration Form Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 1. Cover Page....................... Cover Page. 2. Synopsis......................... About The Funds -- A Brief Overview of the Fund. 3. Condensed Financial Information.................... About The Funds -- Financial Highlights. 4. General Description of Registrant..................... Cover Page; About The Funds -- How The Fund Is Managed - - Organization and History. 5. Management of the Fund........... About The Funds -- How the Funds are Managed. 6. Capital Stock and Other Securities..................... About The Funds -- Investment Objective and Policies. 7. Purchase of Securities Being Offered.................. About Your Account -- How to Buy Shares; Special Sales Charge Arrangements for Certain Persons; Buying Class A Shares; Buying Class B Shares; Buying Class C Shares. Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 8. Redemption or Repurchase......... About Your Account -- How to Buy Shares; Special Investor Services; How to Sell Shares; How to Exchange Shares; Shareholder Account Rules and Policies. 9. Pending Legal Proceedings........ Not Applicable. 10. Cover Page....................... Cover Page. 11. Table of Contents................ Cover Page. 12. General Information and History........................ Cover Page; How The Funds are Managed -- Organization and History. 13. Investment Objectives and Policy......................... About The Funds -- Investment Objectives and Policies. 14. Management of the Fund........... About The Funds -- How the Funds are Managed. 15. Control Persons and Principal Holders of Securities.......... About The Funds -- How the Funds are Managed. 16. Investment Advisory and Other Services................. About The Funds -- How the Funds are Managed; The Manager, the Subadviser and Their Affiliates; The Distributor; The Transfer Agent. 17. Brokerage Allocation and Other Practices................ About the Funds -- Brokerage Policies of the Funds. 18. Capital Stock and Other Securities..................... About the Funds -- How the Funds are Managed -- Organization and History. - 2 - Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 19. Purchase, Redemption and Pricing of Securities Being Offered.... About Your Accounts -- How to Buy Shares; How to Sell Shares; How to Exchange Shares. 20. Tax Status....................... About Your Account -- Dividends, Capital Gains and Taxes. 21. Underwriters..................... About The Funds -- How the Funds are Managed -- The Manager, the Subadvisers and Their Affiliates; About Your Account -- How To Buy Shares. 22. Calculation of Performance Data........................... About The Funds -- Performance of the Funds; About Your Account -- Dividends, Capital Gains and Taxes. 23. Financial Statements............. Financial Information About the Funds -- Independent Auditors' Report -- Financial Statements. - 3 - OPPENHEIMER LIFESPAN GROWTH FUND LIFESPAN BALANCED FUND LIFESPAN INCOME FUND PROSPECTUS DATED MAY 1, 1996 Oppenheimer Series Fund, Inc. (the "Company") is an open-end investment company consisting of eight separate mutual funds, three of which are offered in this prospectus (individually, a "Fund" and collectively, the "Funds"): OPPENHEIMER LIFESPAN GROWTH FUND ("Growth Fund") seeks long-term capital appreciation. Growth Fund invests in a strategically allocated portfolio consisting primarily of stocks. Current income is not a primary consideration. OPPENHEIMER LIFESPAN BALANCED FUND ("Balanced Fund") seeks a blend of capital appreciation and income. Balanced Fund invests in a strategically allocated portfolio of stocks and bonds with a slightly stronger emphasis on stocks. OPPENHEIMER LIFESPAN INCOME FUND ("Income Fund") seeks high current income, with opportunities for capital appreciation. Income Fund invests in a strategically allocated portfolio consisting primarily of bond instruments. Please refer to "Investment Policies and Strategies" for more information about the types of securities the Funds invest in and the risks of investing in the Funds. This Prospectus explains concisely what you should know before investing in the Funds. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about each Fund in the May 1, 1996 Statement of Additional Information. For a free copy, call OppenheimerFunds Services, the Funds' Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission ("SEC") and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). (Oppenheimer funds logo) SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF 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. CONTENTS A B O U T T H E F U N D S EXPENSES BRIEF OVERVIEW OF THE FUNDS FINANCIAL HIGHLIGHTS INVESTMENT OBJECTIVES AND POLICIES HOW THE FUNDS ARE MANAGED PERFORMANCE OF THE FUNDS A B O U T Y O U R A C C O U N T HOW TO BUY SHARES Class A Shares Class B Shares Class C Shares SPECIAL INVESTOR SERVICES AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans HOW TO SELL SHARES By Mail By Telephone HOW TO EXCHANGE SHARES SHAREHOLDER ACCOUNT RULES AND POLICIES DIVIDENDS, CAPITAL GAINS AND TAXES APPENDIX A: DESCRIPTION OF SECURITIES RATINGS APPENDIX B: SPECIAL SALES CHARGE ARRANGEMENTS 2 A B O U T T H E F U N D S EXPENSES Each 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 a Fund and the share of a Fund's business operating expenses that you will bear indirectly. The numbers below are based on the Funds' expenses during its last fiscal period ended December 31, 1995. / / SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of a Fund. Please refer to "About Your Account" starting on page ___ for an explanation of how and when these charges apply.
CLASS A CLASS B CLASS C SHARES SHARES SHARES - ---------------------------------------------------------------------------- Maximum Sales 5.75% None None Charge on Purchases (as a % of offering price) - ---------------------------------------------------------------------------- Sales Charge on None None None Reinvested Dividends - ---------------------------------------------------------------------------- Deferred Sales None(1) 5% in the 1% if Charge (as a % first year, shares are of the lower declining redeemed of the original to 1% in the within 12 purchase price sixth year and months of or redemption eliminated purchase(2) proceeds) thereafter(2) - ---------------------------------------------------------------------------- Exchange Fee None None None - ---------------------------------------------------------------------------- Redemption Fee None(3) None(3) None(3)
(1) If you invest $1 million or more ($500,000 or more for purchases by OppenheimerFunds prototype 401(k) plans) 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 -- Buying Class A Shares," below. (2) See "How to Buy Shares -- Buying Class B Shares," and "Buying Class C Shares" below, for more information on the contingent deferred sales charges. (3) There is a $10 transaction fee for redemption proceeds paid by Federal Funds wire, but not for redemptions paid by check or ACH transfer through AccountLink. 3 / / ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and represent the Fund's expenses in operating its business. For example, a Fund pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is referred to in this Prospectus as the "Manager"). The rates of the Manager's fees are set forth in "How the Funds are Managed," below. A Fund has other regular expenses for services, such as transfer agent fees, custodial fees paid to the bank that holds the Fund's portfolio securities, audit fees and legal expenses. Those expenses are detailed in a Fund's Financial Statements in the Statement of Additional Information. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
CLASS A CLASS B CLASS C SHARES SHARES SHARES - ------------------------------------------------------------------------- Management Fees Growth Fund 0.85% 0.85% 0.85% Balanced Fund 0.85% 0.85% 0.85% Income Fund 0.75% 0.75% 0.75% - ------------------------------------------------------------------------- 12b-1 Plan Fees Growth Fund 0.25% 1.00% 1.00% Balanced Fund 0.25% 1.00% 1.00% Income Fund 0.25% 1.00% 1.00% - ------------------------------------------------------------------------- Other Expenses Growth Fund 0.45% 0.45% 0.45% Balanced Fund 0.45% 0.45% 0.45% Income Fund 0.50% 0.50% 0.50% - ------------------------------------------------------------------------- Total Fund Operating Expenses Growth Fund 1.55% 2.30% 2.30% Balanced Fund 1.55% 2.30% 2.30% Income Fund 1.50% 2.25% 2.25%
The numbers for the Class A and Class B shares in the chart above are based on the Fund's expenses for its last fiscal period ended December 31, 1995. These amounts are shown as a percentage of the average net assets of each class of each Fund's shares for that year. Class A and Class B shares were not publicly offered before May 1, 1995 and October 1, 1995, respectively. Therefore, the Annual Fund Operating Expenses shown are based on expenses for the period from May 1, 1995 or October 1, 1995 (Inception for Class A or Class B shares, respectively) until December 31, 1995. Class C shares were not publicly offered during the fiscal period ended December 31, 1995. Accordingly, the Annual Fund Operating Expenses for Class C shares are estimates based upon amounts that would have been payable if Class C shares had been outstanding during the period from May 1, 1995 to December 31, 1995. The actual expenses for each class of shares in future years may be more or less than the numbers in the chart, depending on a number of factors, including the actual amount of a Fund's assets represented by each class of shares. The "12b-1 Distribution Plan Fees" for Class A shares are the Service Plan Fees (which can be up to a maximum of 0.25% of average annual net assets of that class). For Class B and Class C shares, 12b-1 Plan Fees include the Service Plan Fees (which can be up to a maximum of 0.25%) and an annual asset-based sales charges of 0.75%. These plans are described in greater detail in "How to Buy Shares." 4 / / 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 each Fund, and each Fund's annual return is 5%, and that its operating expenses for each class are the ones shown in the Annual Fund Operating Expenses table 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 and 3 years:
1 YEAR 3 YEARS - ---------------------------------------------------------------------- Class A Shares Growth Fund $72 $104 Balanced Fund $72 $104 Income Fund $72 $102 - ---------------------------------------------------------------------- Class B Shares Growth Fund $73 $112 Balanced Fund $73 $112 Income Fund $73 $110 - ---------------------------------------------------------------------- Class C Shares Growth Fund $34 $72 Balanced Fund $34 $72 Income Fund $33 $70 If you did not redeem your investment, it would incur the following expenses: Class A Shares Growth Fund $72 $104 Balanced Fund $72 $104 Income Fund $72 $102 - ---------------------------------------------------------------------- Class B Shares Growth Fund $23 $72 Balanced Fund $23 $72 Income Fund $23 $70 - ---------------------------------------------------------------------- Class C Shares Growth Fund $23 $72 Balanced Fund $23 $72 Income Fund $23 $70
Because of the effect of the asset-based sales charge and the contingent deferred sales charge on Class B and Class C shares, long-term Class B and Class C shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations. For Class B shareholders, the automatic conversion of Class B shares into Class A shares is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares" for more information. THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT ARE NOT MEANT TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS OF THE FUNDS, WHICH MAY BE GREATER OR LESSER THAN THOSE SHOWN. 5 A BRIEF OVERVIEW OF THE FUNDS Some of the important facts about each 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 in a Fund. Keep the Prospectus for reference after you invest, particularly for information about your account, such as how to sell or exchange shares. / / WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES? Each Fund has its own investment objective: GROWTH FUND seeks long-term capital appreciation. Current income is not a primary consideration. BALANCED FUND seeks a blend of capital appreciation and income. INCOME FUND seeks high current income, with opportunities for capital appreciation. / / WHAT DO THE FUNDS INVEST IN? Each Fund is an asset allocation fund and seeks to achieve its investment objective by allocating its assets among two broad classes of investments -- stocks and bonds. The STOCK CLASS includes equity securities of all types. The BOND CLASS includes all varieties of fixed-income instruments. The Manager will diversify each Fund's stock class by allocating the Fund's stock portfolio among four STOCK COMPONENTS: international stocks, value/growth stocks, growth and income stocks and small-capitalized growth stocks (small cap). Each stock component is also permitted to invest a portion of its assets in bonds when increased flexibility in portfolio management is required to enhance appreciation or income. The Manager will diversify a Fund's bond class by allocating a Fund's bond portfolio among three BOND COMPONENTS: government and corporate bonds, high yield/high risk bonds (also called "junk bonds") and short-term bonds. There is no requirement that the Manager allocate a Fund's assets among all stock or bond components at all times. These stock and bond components have been selected because the Manager believes that this additional level of asset diversification will provide each Fund with the potential for higher returns with lower overall volatility. Each Fund's normal allocation is shown in the chart on page below. The Funds' investments are more fully explained in "Investment Objectives and Policies," starting on page __. / / WHO MANAGES THE FUNDS? The Funds' investment advisor is OppenheimerFunds, Inc., which (including a subsidiary) advises investment company portfolios having over $40 billion in assets at December 31, 1995. The Funds' Board of Directors, elected by shareholders, oversees the investment advisor and the portfolio manager. The Manager is paid an advisory fee by each Fund, based on its net assets. The Manager has engaged three Sub-Advisers --Babson-Stewart Ivory International ("Babson-Stewart"), BEA Associates ("BEA") and Pilgrim Baxter & Assoc. Ltd. ("Pilgrim") -- to manage the assets in the international stocks component, the small cap stocks component and the high yield/high risk bonds component of each Fund, respectively. The Manager will manage the remaining components using its own investment management personnel. Please refer to "How the Funds are Managed," starting on page ____ for more information about the Manager, the Sub-Advisers and their fees. / / HOW RISKY ARE THE FUNDS? All investments carry risks to some degree. Allocating assets among different types of investments allows each Fund to take advantage of opportunities wherever they may occur, but also subjects the Fund to the risks of a given 6 investment type. Stock values fluctuate in response to the activities of individual companies and general market economic conditions. The value of bonds fluctuates based on changes in interest rates and in the credit quality of the issuer. A Fund's investments in foreign securities are subject to additional risks associated with investing abroad, such as the effect of currency rate changes on stock values. Non-investment grade securities may have speculative characteristics and be subject to a greater risk of default than investment grade securities. These changes affect the value of a Fund's investments and its share prices for each class of its shares. In the OppenheimerFunds spectrum, Growth Fund, a stock fund, is generally more volatile than Balanced Fund, an income and growth fund, which in turn is generally more volatile than Income Fund, a [moderately risky] income fund. While the Manager tries to reduce risks by diversifying investments, by carefully researching securities before they are purchased for a portfolio and in some cases by using hedging techniques, there is no guarantee of success in achieving a Fund's objective and your shares may be worth more or less than their original cost when you redeem them. Please refer to "Investment Objectives and Policies" starting on page ___ for a more complete discussion of each Fund's investment risks. / / 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" beginning on page ___ for more details. / / WILL I PAY A SALES CHARGE TO BUY SHARES? Each Fund has three classes of shares. Each class of shares has the same investment portfolio, but different expenses. Class A shares are offered with a front-end sales charge, starting at 5.75% and reduced for larger purchases. Class B and Class C shares are offered without front-end sales charges, but may be subject to a contingent deferred sales charge if redeemed within 6 years or 12 months, respectively, of purchase. There is also an annual asset-based sales charge on Class B and Class C shares. Please review "How To Buy Shares" starting on page ___ for more details, including a discussion about factors you and your financial advisor should consider in determining 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 ___. Each Fund also offers exchange privileges to other Oppenheimer funds, described in "How to Exchange Shares" on page ____. / / HOW HAVE THE FUNDS PERFORMED? Each Fund measures its performance by quoting average annual total return and cumulative total return, which measure historical performance. Those returns can be compared to the total returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. Please remember that past performance does not guarantee future results. FINANCIAL HIGHLIGHTS The following information for the fiscal year ended December 31, 1995 has been derived from audited financial statements together with the auditors' report for the year ended December 31, 1995 which is included in the Statement of Additional Information. The tables on the following pages present selected financial information about the Funds, including per share data and expense ratios and other data based on each Fund's respective average net assets. Class C shares were not publicly offered during the period shown, and consequently, no information on Class C shares is included in the tables on the following pages or in the Funds' financial statements. 7
FINANCIAL HIGHLIGHTS CLASS A(c) ------------------------------------- PERIOD ENDED DECEMBER 31, 1995* ------------------------------------- CAPITAL DIVERSIFIED APPRECIATION BALANCED INCOME FUND FUND FUND ---- ---- ---- PER SHARE OPERATING DATA: Net asset value, beginning of period $10.00 $10.00 $10.00 - ----------------------------------------------------------------------------------------- Income (loss from investment operations -- -- -- Net investment income (loss) .16 .24 .37 Net realized and unrealized gain (loss on investments and foreign currency transactions 1.63 1.29 .73 ---- ---- --- Total income (loss) from investment operations 1.79 1.53 1.10 - ----------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.17) (.25) (.36) Distributions from net realized gain on investments and foreign currency transactions (.23) (.23) (.04) ----- ----- ----- Total dividends and distributions to shareholders (.40) (.48) (.40) - ----------------------------------------------------------------------------------------- Net asset value, end of period $11.39 $11.05 $10.70 ------ ------ ------ ------ ------ ------ - ----------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(b) 18.02% 15.33% 11.22% - ----------------------------------------------------------------------------------------- Ratios/Supplemental Data: - ----------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $34,368 $41,861 $24,619 - ----------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 2.32%(a) 3.47%(a) 5.35%(a) Expenses 1.55%(a) 1.55%(a) 1.50%(a) - ----------------------------------------------------------------------------------------- Portfolio turnover rate 71.77%(a) 76.26%(a) 45.78%(a) - -----------------------------------------------------------------------------------------
* G.R. Phelps & Co. managed the Funds during this period. (a) Annualized (b) Total returns do not include the effect of sales charges. (c) For the period from May 1, 1995 (Inception) to December 31, 1995 8
FINANCIAL HIGHLIGHTS CLASS B(c) ------------------------------------- PERIOD ENDED DECEMBER 31, 1995* ------------------------------------- CAPITAL DIVERSIFIED APPRECIATION BALANCED INCOME FUND FUND FUND ---- ---- ---- PER SHARE OPERATING DATA: Net asset value, beginning of period $11.14 $10.95 $10.45 - ----------------------------------------------------------------------------------------- Income (loss from investment operations -- -- -- Net investment income (loss) .03 .05 .12 Net realized and unrealized gain (loss on investments and foreign currency transactions .56 .45 .32 ---- ---- --- Total income (loss) from investment operations .59 .50 .44 - ----------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.03) (.06) (.11) Distributions from net realized gain on investments and foreign currency transactions (.23) (.23) (.04) ----- ----- ----- Total dividends and distributions to shareholders (.26) (.29) (.15) - ----------------------------------------------------------------------------------------- Net asset value, end of period $11.47 $11.16 $10.74 ------ ------ ------ ------ ------ ------ - ----------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(b) 5.34% 4.49% 4.30% - ----------------------------------------------------------------------------------------- Ratios/Supplemental Data: - ----------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $561 $441 $192 - ----------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 1.70%(a) 3.01%(a) 5.23%(a) Expenses 2.30%(a) 2.30%(a) 2.25%(a) - ----------------------------------------------------------------------------------------- Portfolio turnover rate 71.77%(a) 76.26%(a) 45.78%(a) - -----------------------------------------------------------------------------------------
* G.R. Phelps & Co. managed the Funds during this period. (a) Annualized (b) Total returns do not include the effect of sales charges. (c) For the period from October 1, 1995 (Inception) to December 31, 1995 9 INVESTMENT OBJECTIVES AND POLICIES OBJECTIVES. Each Fund has its own investment objective: GROWTH FUND seeks long-term capital appreciation. Current income is not a primary consideration. BALANCED FUND seeks a blend of capital appreciation and income. INCOME FUND seeks high current income, with opportunities for capital appreciation. INVESTMENT POLICIES AND STRATEGIES. Each Fund is an asset allocation fund and seeks to achieve its investment objective by allocating its assets among two broad classes of investments -- stocks and bonds. The STOCK CLASS includes equity securities of all types. The BOND CLASS includes all varieties of fixed-income instruments. Allocating assets among different types of investments allows each Fund to take advantage of opportunities wherever they may occur, but also subjects the Fund to the risks of a given investment type. Stock values fluctuate in response to the activities of individual companies and general market economic conditions. The value of bonds fluctuates based on changes in interest rates and in the credit quality of the issuer. The Manager has the ability to allocate a Fund's assets within specified ranges. A Fund's NORMAL ALLOCATION indicates the benchmark for its combination of investments in each asset class over time. As market and economic conditions change, however, the Manager may adjust the asset mix between the stock and bond classes within a normal asset allocation range as long as the relative risk and return characteristics of the three Funds remain distinct and each Fund's investment objective is preserved. The Manager will review normal allocations between the stock and bond classes quarterly and will rebalance, if necessary, at that time. Additional adjustments may be made if an asset allocation shift of 5% or more is warranted. The Manager will diversify each Fund's stock class by allocating the Fund's stock portfolio among four STOCK COMPONENTS: international stocks, value/growth stocks, growth and income stocks and small-capitalized growth stocks (small cap). Each stock component is also permitted to invest a portion of its assets in bonds when the Manager or relevant Sub-Adviser determines that increased flexibility in portfolio management is required to enhance appreciation or income. The Manager will diversify a Fund's bond class by allocating a Fund's bond portfolio among three BOND COMPONENTS: government and corporate bonds, high yield/high risk bonds (also called "junk bonds") and short-term bonds. There is no requirement that the Manager allocate a Fund's assets among all stock or bond components at all times. These stock and bond components have been selected because the Manager believes that this additional level of asset diversification will provide each Fund with the potential for higher returns with lower overall volatility. Each Fund's normal allocation is shown in the chart below. 10
- ------------------------------------------------------------------------------------------------ Growth Fund Balanced Fund Income Fund ------------------- ------------------- ------------------- Normal Normal Normal Asset Class Allocation Range Allocation Range Allocation Range - ----------- ---------- ----- ---------- ----- ---------- ----- STOCKS 80% 70-90% 60% 50-70% 25% 15-35% COMPONENT International 20% 15-25% 15% 5-20% 0% 0% Value/Growth 20% 15-30% 15% 10-25% 0% 0% Growth/Income 20% 15-30% 15% 10-25% 25% 15-35% Small Cap 20% 15-25% 15% 5-20% 0% 0% BONDS 20% 10-30% 40% 30-50% 75% 65-85% COMPONENT Government/Corporate 10% 5-15% 15% 10-25% 35% 30-34% High Yield/High Risk Bonds 10% 5-15% 15% 5-20% 15% 5-20% Short Term Bonds 0% 0% 10% 5-20% 25% 15-30%
All percentage limitations are applied at the time of purchase. The Manager may rebalance the asset allocations quarterly to realign them in response to market conditions. Once the Manager has determined the weighting of the general asset classes and the components of each Fund, the Manager or the relevant Sub-Adviser will then select the individual securities to be included in each component. Each Sub-Adviser will manage the portion of a Fund's assets in the particular component assigned to it by the Manager. As of the date of this Prospectus, the Manager has assigned the management of the components as follows: Sub-Adviser Component of Investments ----------- -------------------------------------- Babson-Stewart International Stocks Pilgrim Small Cap Stocks BEA High Yield/High Risk Bonds The Manager will manage the remaining components using its own investment management personnel. See "How the Fund is Managed -- The Manager, the Sub-Advisers and Their Affiliates and -- Portfolio Managers" for additional information. / / THE STOCK COMPONENT. Each Fund will invest those assets which are allocated to the stock class among four components each of which invests principally in equity securities but which differ with respect to capitalization, country and investment style as described below: / / INTERNATIONAL COMPONENT. This component seeks long-term growth of capital primarily through a diversified portfolio of marketable international equity securities. The international component intends to allocate investments among several countries (usually between 8-12), primarily those included in the Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index and Canada. In addition, the component may invest up to 25% of its assets in stocks and bonds of companies based in emerging countries. Stocks are purchased on the basis of fundamental and valuation criteria. Global themes, identifying attractive economic sectors and industries; country analysis, assessing opportunities through quantitative and qualitative analysis; and unique situations, are used to identify companies with exceptional growth opportunities. Issues are sold because of changing fundamentals, 11 overvaluation, performance issues, or better relative opportunities. The component may also, consistent with the provisions of the Investment Company Act, invest in the securities of closed-end investment companies that invest in foreign securities. A portion of the international component's investments may be held in corporate bonds and government securities of foreign issuers and cash and short-term instruments. / / VALUE/GROWTH COMPONENT. This component seeks to achieve long-term growth of capital by investing primarily in common stocks with low price-earnings ratios and better than anticipated earnings. Realization of current income is not a primary consideration. Stocks with low price-earnings ratios and favorable earnings surprises are identified by the Manager who uses fundamental securities analysis to select individual stocks for purchase in this component. When the price earnings ratio of a stock held by the value/growth component moves significantly above the multiple of the overall stock market, or the company reports a meaningful earnings disappointment, the stock becomes a candidate for sale. Up to 15% of the component's assets may be invested in international stocks, whose issuers generally have a substantial portion of their business in the United States, and in ADRs. A portion of the component's assets may be held in cash and in short-term investments. / / GROWTH/INCOME COMPONENT. This component seeks to enhance each Fund's total return through capital appreciation and dividend income by investing primarily in common stocks with low price-earnings ratios, better-than-anticipated earnings and better than market average dividend yields. Stocks with low price-earnings ratios (below the price-earnings ratio of the S&P 500 Index), favorable earnings surprises and above-average yields are identified by the Manager who uses fundamental securities analysis to select individual stocks for purchase in this component. When the price-earnings ratio of a stock held by the component moves significantly above the multiple of the overall stock market, or the company reports a meaningful earnings disappointment, or when the yield drops significantly below the market yield, stocks in this component will normally be sold. Up to 15% of the component's assets may be invested in international stocks, whose issuers generally have a substantial portion of their business in the United States, and in ADRs. A portion of the component's investments may be held in investment grade or below investment grade convertible securities, corporate bonds and U.S. Government securities, cash and short-term instruments. / / SMALL CAP COMPONENT. This component seeks long-term growth of capital by investing primarily in stocks of companies with relatively small market capitalizations, typically between $250 million to $1.5 billion. Current income is a secondary consideration. When selecting individual securities for the component's portfolio, the Sub-Adviser seeks companies which have an outlook for strong growth in earnings and the potential for significant capital appreciation, particularly in industry segments that are experiencing rapid growth. Securities will be sold when the Sub-Adviser believes that anticipated appreciation is no longer probable and that alternative investments offer superior appreciation prospects, or the risk of a decline in market price is too great. Historical results tend to confirm the benefits of investing in companies with small capitalizations. Capitalization is the aggregate value of a company's stock, or its price per share times the number of shares outstanding. A portion of the component's investments may also be held in cash and short-term instruments. / / THE BOND COMPONENTS. Each Fund will invest those assets which are allocated to the bond class among three components, each of which invests in an array of fixed-income securities as described below: / / GOVERNMENT/CORPORATE COMPONENT. This component seeks current income and the potential for capital appreciation by investment primarily in fixed-income debt securities, including investment grade corporate debt obligations of foreign and U.S. issuers and securities issued by the U.S. Government and its agencies and instrumentalities and by foreign governments. 12 Although the component may invest in securities with maturities across the entire slope of the yield curve, including long bonds (10+ years), intermediate notes (3 to 10 years) and short term notes (1 to 3 years), the Manager expects to maintain characteristics of an intermediate average maturity and duration. In assessing maturity, the Manager may take into account prepayment features. The Manager's investment strategy includes the purchase of bonds that are underpriced relative to other debt securities having similar risk profiles. The Manager evaluates a broad array of factors, including maturity, creditworthiness, cash flow certainty and interest rate volatility, and examines yield relationships in relation to trends in the economy, the financial and commodity markets and interest rates. The component may also invest a portion of its assets in cash and short-term instruments. / / HIGH YIELD/HIGH RISK BOND COMPONENT. This component seeks to earn as high a level of current income as is consistent with the risks associated with high yield investments. The component's assets are invested primarily in bonds that are rated BB or lower by S&P or Ba or lower by Moody's Investor Service, Inc. ("Moody's") or, if not rated, that are deemed by the Sub-Adviser to be of comparable quality. This component may invest in bonds that are in default. Bonds in default are not making interest or principal payments on the date due. The Sub-Adviser employs an active sector rotational style utilizing all sectors of the high yield market, with an emphasis on diversification to control risk. The Sub-Adviser typically favors higher quality companies in the non-investment grade market, senior debt over junior debt, and secured over unsecured credits. The Sub-Adviser will screen individual securities for such characteristics as minimum yield and issue size, issue liquidity and financial and operational strength. In-depth credit research will then be conducted to arrive at a core group of securities within the high yield universe from which the component will be constructed. Continuous credit monitoring and adherence to sell disciplines associated with both price appreciation and depreciation will be utilized to achieve the overall yield and price objectives of the component. The component may also invest a portion of its assets in cash and short-term instruments. / / SHORT-TERM BOND COMPONENT. This component seeks to obtain a high level of current income consistent with prudent investment risk and preservation of capital by investing primarily in debt obligations of foreign and U.S. issuers and securities issued by the U.S. Government and its agencies and instrumentalities and by foreign governments. This component will invest primarily in fixed-income securities generally maturing within five years of date of purchase, or with prepayment or similar features which, in the view of the Manager, give the instrument an average life of five years. It is anticipated that the average dollar weighted maturity of the component will generally range between two and three years. The Manager's investment management process incorporates analysis of an issuer's debt service capability, financial flexibility and liquidity, as well as the fundamental trends and the outlook for an issuer and its industry. Credit risk management is also an important factor, particularly in the Manager's internal fixed-income analysis. The Manager conducts intensive credit research, and carefully selects individual issues and broadly diversifies portfolio holdings by industry sector and issuer. The Manager believes that determination of an issuer's attractiveness relative to alternative issues and/or valuations within the marketplace are important considerations in its investment decision-making. The component may also invest a portion of its assets in cash and money market securities. / / CAN A FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? Each Fund has an investment objective, described above, as well as investment policies it follows to try to achieve its objective. Additionally, a Fund uses certain investment techniques and strategies in carrying out those investment policies. A Fund's investment policies and practices are not "fundamental" unless this Prospectus or the Statement of Additional Information says that a particular policy is "fundamental." A Fund's investment objective is not a fundamental policy. Fund shareholders will be given 30 days' advance written notice of a change to a Fund's investment objective. 13 Fundamental policies are those that cannot be changed without the approval of a "majority" of a 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). A Fund's Board of Directors may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. / / INVESTMENT RISKS. Because changes in securities market prices can occur at any time, there is no assurance that the Funds will achieve their investment objectives, and when you redeem your shares, they may be worth more or less than what you paid for them. / / STOCK INVESTMENT RISKS. Each Fund may invest in common stocks, preferred stocks, convertible securities, warrants and other equity securities of domestic or foreign companies of any size. At times, the stock markets can be volatile, and stock prices can change substantially. This market risk will affect a Fund's net asset values per share, which will fluctuate as the values of the Fund's portfolio securities change. Not all stock prices change uniformly or at the same time, not all stock markets move in the same direction at the same time, and other factors can affect a particular stock's prices (for example, poor earnings reports by an issuer, loss of major customers, major litigation against an issuer, or changes in government regulations affecting an industry). Not all of these factors can be predicted. Each Fund attempts to limit market risks by diversifying its investments, that is, by not holding a substantial amount of stock of any one company and by not investing too great a percentage of a Fund's assets in any one company. Because of the types of securities the Growth Fund and Balanced Fund invest in and the investment techniques these Funds use, these Funds are designed for investors who are investing for the longer-term and who are willing to accept greater risks of loss of their investment in hope of achieving capital appreciation. These Funds are not intended for investors seeking assured income and preservation of capital. Investing for capital appreciation entails the risk of loss of all or part of your investment. / / RISKS OF DEBT SECURITIES. In addition to credit risks, described below, debt securities are subject to changes in their value due to changes in prevailing interest rates. When prevailing interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. Changes in the value of securities held by a Fund mean that the Fund's share prices can go up or down when interest rates change, because of the effect of the change on the value of the Fund's portfolio of debt securities. Credit risk relates to the ability of the issuer of a debt security to make interest or principal payments on the security as they become due. Generally, higher-yielding, lower-rated bonds (which a Fund may hold) are subject to greater credit risk than higher-rated bonds. See "Other Investment Techniques and Strategies -- Investing in Lower-Grade Securities." / / FOREIGN SECURITIES HAVE SPECIAL RISKS. There are special risks in investing in foreign securities and in securities issued by companies and governments located in emerging market countries. Because each Fund may purchase securities denominated in foreign currencies or traded primarily in foreign markets, a change in the value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of those foreign securities. Foreign issuers are not required to use generally-accepted accounting principles that apply to U.S. issuers. If foreign securities are not registered for sale in the U.S. under U.S. securities laws, the issuer does not have to comply with the disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by other factors, including exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in 14 settlement of transactions, changes in governmental, economic or monetary policy in the U.S. or abroad, or other political and economic factors. In addition, it is generally more difficult to obtain court judgements outside the U.S. if a Fund were to sue a foreign issuer or broker. Additional costs may be incurred because foreign brokerage commissions are generally higher than U.S. rates, and there are additional custodial costs associated with holding securities abroad. More information about the risks and potential rewards of investing in foreign securities, particularly those of emerging countries, is contained in "Other Investment Techniques and Strategies -- Investing in Emerging Markets" and in the Statement of Additional Information. / / PORTFOLIO TURNOVER. A change in the securities held by a Fund is known as "portfolio turnover." The Funds ordinarily do not engage in short-term trading to try to achieve their objectives. Growth Fund's and Income Fund's portfolio turnover rate is not expected to exceed 75%. The portfolio turnover rates of the fixed income portion and the equity portion of the Balanced Fund are expected to be 70% and 85%, respectively. The "Financial Highlights," above, show the Funds' portfolio turnover rates during past fiscal years. Portfolio turnover affects brokerage costs, dealer markups and other transaction costs, and results in a Fund's realization of capital gains or losses for tax purposes. It may also affect the ability of a Fund to qualify as a "regulated investment company" under the Internal Revenue Code and avoid being taxed on amounts distributed as dividends and capital gains to shareholders. Each Fund qualified as such in its fiscal period ended December 31, 1995 and intends to do so in the future, although it reserves the right not to qualify. OTHER INVESTMENT TECHNIQUES AND STRATEGIES. The Funds may also use the investment techniques and strategies described below, which involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations on their use that may help to reduce some of the risks. / / INVESTING IN LOWER-RATED SECURITIES. Each Fund can invest in high-yield, below grade debt securities (including both rated and unrated securities). These "lower-grade" securities are commonly known as "junk bonds." They generally offer higher income potential than investment grade securities. "Lower-grade" securities have a rating below "BBB" by Standard & Poor's or "Baa" by Moody's or similar ratings by other domestic or foreign rating organizations, or they are not rated by a nationally-recognized rating organization but the Manager or Sub-Adviser judges them to be comparable to lower-rated securities. A Fund may invest in securities rated as low as "D" by Standard & Poor's or "C" by Moody's. Appendix A to this Prospectus describes the rating categories of Moody's and Standard & Poor's. All corporate debt securities (whether foreign or domestic) are subject to some degree of credit risk. High yield, lower-grade securities, whether rated or unrated, often have speculative characteristics and 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. For foreign lower-grade debt securities, these risks are in addition to the risks of investing in foreign securities, described in "Investment Risks," above. These risks mean that a Fund may not achieve the expected income from lower-grade securities, and that a Fund's net asset value per share may be affected by declines in value of these securities. 15 / / INVESTING IN EMERGING MARKET COUNTRIES. Babson-Stewart, as the Sub-Adviser to the international component, may invest a portion of a Fund's assets in companies located in emerging countries. The Sub-Adviser considers emerging countries to include any country that is defined as an emerging or developing economy by the International Bank for Reconstruction and Development, the International Finance Committee, The United Nations or its authorities, or the MSCI Emerging Markets Index. Investments in emerging market countries may involve risks in addition to those identified above for investments in foreign securities. Securities issued by emerging market countries and by companies located in those countries may be subject to extended settlement periods, whereby a Fund might not receive principal and/or income on a timely basis and its net asset values could be affected. Emerging market countries may have smaller, less well-developed markets and exchanges; there may be a lack of liquidity for emerging market securities; interest rates and foreign currency exchange rates may be more volatile; sovereign limitations on foreign investments may be more likely to be imposed; there may be significant balance of payment deficits; and their economies and markets may respond in a more volatile manner to economic changes than those of developed countries. / / U.S. GOVERNMENT SECURITIES. Certain U.S. Government Securities, including U.S. Treasury bills, notes and bonds, and mortgage participation certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae") are supported by the full faith and credit of the U.S. Government, which in general terms means that the U.S. Treasury stands behind the obligation to pay principal and interest. Ginnie Mae certificates are one type of mortgage-related U.S. Government Security a Fund may invest in. Other mortgage-related U.S. Government Securities the Funds invest in that are issued or guaranteed by federal agencies or government-sponsored entities are not supported by the full faith and credit of the U.S. Government. Those securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported only by the credit of the instrumentality, such as Federal National Mortgage Association ("Fannie Mae") or the Student Loan Marketing Association and obligations supported by the discretionary authority of the U.S. Government to repurchase certain obligations of U.S. Government agencies or instrumentalities such as the Federal Land Banks and the Federal Home Loan Banks. Other U.S. Government Securities a Fund may invest in are collateralized mortgage obligations ("CMOs"). The value of U.S. Government Securities will fluctuate until they mature depending on prevailing interest rates. Because the yields on U.S. Government Securities are generally lower than on corporate debt securities, when a Fund holds U.S. Government Securities it may attempt to increase the income it can earn from them by writing covered call options against them, when market conditions are appropriate. Writing covered calls is explained below, under "Hedging." / / SHORT-TERM DEBT SECURITIES. The Fund will invest in high quality, short-term money market instruments such as U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company); short-term debt obligations of corporate issuers; and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of banks and savings loan associations. / / MORTGAGE-BACKED SECURITIES, CMOS AND REMICS. Certain mortgage-backed securities, whether issued by the U.S. Government or by private issuers, "pass-through" to investors the interest and principal payments generated by a pool of mortgages assembled for sale by government agencies. Pass-through mortgage-backed securities entail the risk that principal may be repaid at any time because of prepayments on the underlying mortgages. That may result in greater price and yield volatility than traditional fixed-income securities that have a fixed maturity and interest rate. -16- Each Fund may also invest in CMOs, which generally are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities, and in real estate mortgage investment conduits ("REMICs"). Payment of the interest and principal generated by the pool of mortgages on CMOs and REMICs are passed through to the holders as the payments are received. CMOs and REMICs are issued with a variety of classes or series which have different maturities. Certain CMOs and REMICs may be more volatile and less liquid than other types of mortgage-related securities, because of the possibility of the prepayment of principal due to prepayments on the underlying mortgage loans. The Funds do not intend to acquire "residual" interests in REMICs. Each Fund may also invest in CMOs and REMICs that are "stripped." That means that the security is divided into two parts, one of which receives some or all of the principal payments (and is known as a "P/O") and the other which receives some or all of the interest (and is known as an "I/O"). P/Os and I/Os are generally referred to as "derivative investments," discussed further below. The yield to maturity on the class that receives only interest is extremely sensitive to the rate of payment of the principal on the underlying mortgages. Principal prepayments increase that sensitivity. Stripped securities that pay "interest only" are therefore subject to greater price volatility when interest rates change, and they have the additional risk that if the underlying mortgages are prepaid, a Fund will lose the anticipated cash flow from the interest on the prepaid mortgages. That risk is increased when general interest rates fall, and in times of rapidly falling interest rates, a Fund might receive back less than its investment. The value of "principal only" securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Private-issuer stripped securities are generally purchased and sold by institutional investors through investment banking firms. At present, established trading markets have not yet developed for these securities. Therefore, most private-issuer stripped securities may be deemed "illiquid." If a Fund holds illiquid stripped securities, the amount it can hold will be subject to the Fund's investment policy limiting investments in illiquid securities to 15% of the Fund's net assets. / / ASSET-BACKED SECURITIES. A Fund may invest in "asset-backed" securities. These represent interests in pools of consumer loans and other trade receivables, similar to mortgage-backed securities. 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 one of the Funds. These securities may be 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. / / INVERSE FLOATING RATE INSTRUMENTS. The Funds may invest in inverse floating rate debt instruments ("inverse floaters"), including leveraged inverse floaters and inverse floating rate mortgage-backed securities, such as inverse floating rate "interest only" stripped Mortgage-backed securities. The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. -17- / / ADRS, EDRS AND GDRS. Each Fund may invest in ADRs, EDRs and GDRs. ADRs are receipts issued by a U.S. bank or trust company which evidence ownership of underlying securities of foreign corporations. ADRs are traded on domestic exchanges or in the U.S. over-the-counter market and, generally, are in registered form. To the extent a Fund acquires ADRs through banks which do not have a contractual relationship with the foreign issuer of the security underlying the ADR to issue and service such ADRs, there may be an increased possibility that the Fund would not become aware of and be able to respond in a timely manner to corporate actions such as stock splits or rights offerings involving the foreign issuer. In addition, the lack of information may result in inefficiencies in the valuation of such instruments. A Fund may also invest in EDRs and GDRs, which are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in non-U.S. securities markets. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security. / / EURODOLLARS AND YANKEE DOLLARS. The Funds may also invest in obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investment in securities of U.S. banks, including potential unfavorable political and economic developments, different tax provisions, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest. / / WARRANTS AND RIGHTS. Warrants basically are options to purchase stock at set prices that are valid for a limited period of time. Rights are similar to warrants but normally have a short duration and are distributed directly by the issuer to its shareholders. A Fund may invest up to 5% of its total assets in warrants or rights. That 5% limitation does not apply to warrants a Fund has acquired as part of units with other securities or that are attached to other securities. No more than 2% of a Fund's total assets may be invested in warrants that are not listed on either The New York Stock Exchange or The American Stock Exchange. For further details, see "Warrants and Rights" in the Statement of Additional Information. / / SMALL, UNSEASONED COMPANIES. Each Fund may invest in securities of small, unseasoned companies. These are companies that have been in operation less than three years, including the operations of any predecessors. Securities of these companies may have limited liquidity (which means that a Fund may have difficulty selling them at an acceptable price when it wants to) and the price of these securities may be volatile. See "Investing in Small, Unseasoned Companies" in the Statement of Additional Information for a further discussion of the risks involved in such investments. / / LOANS OF PORTFOLIO SECURITIES. To attempt to increase its income or raise cash for liquidity purposes, each Fund may lend its portfolio securities, other than repurchase transactions, to brokers, dealers and other financial institutions. A Fund must receive collateral for a loan. As a matter of fundamental policy, these loans are limited to not more than 33 1/3% of the Fund's total assets (taken at market value) and are subject to other conditions described in the Statement of Additional Information. See "Loans of Portfolio Securities" in the Statement of Additional Information on securities loans. / / "WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. There may be a risk of loss to a Fund if the value of the security declines prior to the settlement date. / / REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. In a repurchase transaction, a Fund buys a security and simultaneously sells it to the vendor for -18- delivery at a future date. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, a Fund may experience costs in disposing of the collateral and may experience losses if there is any delay in doing so. / / ILLIQUID AND RESTRICTED SECURITIES. Under the policies established by the Funds' Board of Directors, the Manager determines the liquidity of certain of the Funds' 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. A Fund will not invest more than 15% of its total assets in illiquid and restricted securities (including repurchase agreements having a maturity beyond 7 days, portfolio securities which do not have readily available market quotations and time deposits maturing in more than 2 days). / / HEDGING. Each Fund may write covered call options or securities, stock or bond indices and foreign currency and may purchase and sell certain kinds of futures contracts, forward contracts, and options on futures, broadly-based stock or bond indices and foreign currency, or enter into interest rate swap agreements. These are all referred to as "hedging instruments." A Fund may use hedging instruments for non-hedging purposes as described below. A Fund may write covered call options and buy and sell 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 and writing covered calls, hedge a Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, tend to increase a Fund's exposure to the securities market. Forward contracts are used to try to manage foreign currency risks on a Fund's foreign investments. Foreign currency options are used to try to protect against declines in the dollar value of foreign securities a 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 a Fund for liquidity purposes, defensive reasons, or to raise cash to distribute to shareholders. / / FUTURES. A Fund may buy and sell futures contracts for hedging and non-hedging purposes that relate to (1) foreign currencies (these are referred to as "Forward Contracts" and are discussed below), (2) financial indices, such as U.S. or foreign government securities indices, corporate debt securities indices or equity securities indices (these are referred to as Financial Futures), and (3) interest rates (these are referred to as Interest Rate Futures). These types of Futures are described in "Hedging" in the Statement of Additional Information. / / COVERED CALL OPTIONS AND OPTIONS ON FUTURES. A Fund may write (that is, sell) call options on securities, indices and foreign currencies for hedging purposes and write call options on Futures for hedging and non-hedging purposes but only if they are "covered." This means a Fund must own the security subject to the call while the call is outstanding or segregate appropriate liquid assets. Calls on Futures must be covered by securities or other liquid assets a Fund owns and segregates to enable it to satisfy its obligations if the call is exercised. When a 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 a 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). -19- A Fund may purchase put options on Futures. Buying a put on an investment gives a Fund the right to sell the investment at a set price to a seller of a put on that investment. A Fund may sell a put on Futures, but only if the puts are covered by segregated liquid assets. A Fund may sell covered call options that are traded on U.S. or foreign securities or commodity exchanges or are traded in the over-the-counter markets. In the case of foreign currency options, they may be quoted by major recognized dealers in those options. Options traded in the over-the-counter market may be "illiquid," and therefore may be subject to a Fund's restrictions on illiquid investments. / / 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. A Fund uses them to try to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has purchased or sold, or to protect against possible losses from changes in the relative value of the U.S. dollar and a foreign currency. A 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. No Fund will speculate in foreign exchange. / / INTEREST RATE SWAPS. A Fund may enter into interest rate swaps both for hedging and to seek to increase total return. In an interest rate swap, a Fund and another party exchange their right to receive, or their obligation to pay, interest on a security. For example, they may swap a right to receive floating rate interest payments for fixed rate payments. A Fund enters into swaps only on a net basis, which means the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. A Fund will segregate liquid assets (such as cash or U.S. Government securities) to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive, and it will adjust that amount daily, as needed. / / HEDGING INSTRUMENTS CAN BE VOLATILE INVESTMENTS AND MAY INVOLVE SPECIAL RISKS. The use of hedging instruments requires special skills and knowledge of investment techniques that are different from what is required for normal portfolio management. If the Manager or a Sub-Adviser uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce a Fund's return. A Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Options trading involves the payment of premiums, and options, futures and forward contracts are subject to special tax rules that may affect the amount, timing and character of a Fund's income and distributions. There are also special risks in particular hedging strategies. For example, if a covered call written by a Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. In writing puts, there is a risk that a Fund may be required to buy the underlying security at a disadvantageous price. The use of Forward Contracts may reduce the gain that would otherwise result from a change in the relationship between the U.S. dollar and a foreign currency. Interest rate swaps are subject to the risk that the other party will fail to meet its obligations (or that the underlying issuer will fail to pay on time), as well as interest rate risks. A 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. 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, currency or commodity. A Fund may not purchase or sell physical -20- commodities; however, a Fund may purchase and sell foreign currency in hedging transactions. This shall not prevent a Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities. Derivative investments used by a Fund are used in some cases for hedging purposes and in other cases to seek income. In the broadest sense, exchange-traded options and futures contracts (discussed in "Hedging," above) may be considered "derivative investments." "Index-linked" or commodity-linked" notes are debt securities of companies that call for interest payments and/or payment on the maturity of the note in different terms than the typical note where the borrower agrees to pay a fixed sum on the maturity of the note. Principal and/or interest payments on an index-linked note depend on the performance of one or more market indices, such as the S&P 500 Index or a weighted index of commodity futures, such as crude oil, gasoline and natural gas. A Fund may invest in "debt exchangeable for common stock" of an issuer or "equity-linked" debt securities of an issuer. At maturity, the principal amount of the debt security is exchanged for common stock of the issuer or is payable in an amount based on the issuer's common stock price at the time of maturity. In either case there is a risk that the amount payable at maturity will be less than the expected principal amount of the debt. There are special risks in investing in derivative investments. The company issuing the instrument may fail to pay the amount due on the maturity of the instrument. Also, the underlying investment or security might not perform the way the Manager or relevant Sub-Adviser expected it to perform. Markets, underlying securities and indices may move in a direction not anticipated by the Manager or relevant Sub-Adviser. Performance of derivative investments may also be influenced by interest rate and stock market changes in the U.S. and abroad. All of this can mean that a Fund will realize less principal or income from the investment than expected. Certain derivative investments held by a Fund may be illiquid. Please refer to "Illiquid and Restricted Securities." OTHER INVESTMENT RESTRICTIONS. The Funds have other investment restrictions which are "fundamental" policies. Among these fundamental policies, a Fund cannot do any of the following: / / Borrow money, except for emergency or extraordinary purposes including (i) from banks for temporary or short-term purposes or for the clearance of transactions in amounts not to exceed 33 1/3% of the value of the Fund's total assets (including the amount borrowed) taken at market value, (ii) in connection with the redemption of Fund shares or to finance failed settlements of portfolio trades without immediately liquidating portfolio securities or other assets; and (iii) in order to fulfill commitments or plans to purchase additional securities pending the anticipated sale of other portfolio securities or assets, but only if after each such borrowing there is asset coverage of at least 300% as defined in the Investment Company Act. For purposes of this investment restriction, reverse repurchase agreements, mortgage dollar rolls, short sales, futures contracts, options on futures contracts, securities or indices and forward commitment transactions shall not constitute borrowing. / / Make loans, except that the Fund (1) may lend portfolio securities in accordance with the Fund's investment policies up to 33 1/3% of the Fund's total assets taken at market value, (2) enter into repurchase agreements, and (3) purchase all or a portion of an issue of publicly distributed bonds, debentures or other similar obligations. / / Purchase the securities of issuers conducting their principal activity in the same industry if, immediately after such purchase, the value of its investments in such industry would exceed 25% of its total assets taken at market value at the time of such investment. This -21- limitation does not apply to investments in obligations of the U.S. Government or any of its agencies, instrumentalities or authorities. / / With respect to 75% of total assets, purchase securities of an issuer (other than the U.S. Government, its agencies, instrumentalities or authorities), if: (a) such purchase would cause more than 5% of the Fund's total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. All of the percentage restrictions described above and elsewhere in this Prospectus apply only at the time a Fund purchases a security, and a Fund need not dispose of a security merely because the Fund's assets have changed or the security has increased in value relative to the size of the Fund. There are other fundamental policies discussed in the Statement of Additional Information. HOW THE FUNDS ARE MANAGED ORGANIZATION AND HISTORY. The Company was organized in 1981 as a Maryland corporation. The Company is an open-end management investment company. Organized as a series fund, the Company presently has eight series, each of which is diversified. The Company is governed by a Board of Directors, which is responsible for protecting the interests of shareholders under Maryland law. The Directors meet periodically throughout the year to oversee each Fund's activities, review its performance, and review the actions of the Manager. "Directors and Officers of the Fund" in the Statement of Additional Information names the Directors and officers of the Funds and provides more information about them. Although the Funds are not required by law to hold annual meetings, they may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Director or to take other action described in the Company's Articles of Incorporation. The Board of Directors has the power, without shareholder approval, to divide unissued shares of the Company into two or more classes. The Board has done so, and each Fund currently has three classes of shares, Class A, Class B and Class C. All classes invest in the same investment portfolio. 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 on matters submitted to the vote of shareholders. Shares of each class may have separate voting rights on matters in which interests of one class are different from interests of another class, and shares of a particular class vote as a class on matters that affect that class alone. Shares are freely transferrable. Please refer to "How the Funds are Managed" in the Statement of Additional Information for further information on voting of shares. THE MANAGER, THE SUB-ADVISERS AND THEIR AFFILIATES. The Funds are managed by the Manager, OppenheimerFunds, Inc., which supervises each Fund's investment program and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Directors, under separate Investment Advisory Agreements for each Fund which state the Manager's responsibilities and its fees. The Agreements set forth the fees paid by a Fund to the Manager, and describes the expenses that a Fund is responsible to pay to conduct its business. -22- The Manager has operated as an investment adviser since 1959. The Manager and its affiliates currently manage investment companies, including other Oppenheimer funds, with assets of more than $40 billion as of December 31, 1995, and with more than a 2.8 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. The Manager has engaged three Sub-Advisers to provide day-to-day portfolio management for certain components of the Funds. Babson-Stewart, One Memorial Drive, Cambridge, MA 02142, the Sub-Adviser to the international component, was originally established in 1987. As of September 30, 1995, Babson-Stewart had approximately $917 million in assets under management. BEA Associates, Citicorp Center, 153 East 53rd Street, 57th Floor, New York, NY 10022, the Sub-Adviser to the high yield/high risk bond component, has been providing fixed-income and equity management services to institutional clients since 1984. As of June 30, 1995, BEA Associates, together with its global affiliate, had $28.9 billion in assets under management. Pilgrim Baxter, 1255 Drummers Lane, Wayne, PA 19087, the Sub-Adviser to the small cap component, was established in 1982 to provide specialized equity management for institutional investors including other investment companies. As of May 31, 1995, Pilgrim Baxter had over $4 billion in assets under management. Each Sub-Adviser is responsible for choosing the investments of its respective component for each Fund and its duties and responsibilities are set forth in its respective contract with the Manager. The Manager, not the Funds, pay the Sub-Advisers. / / PORTFOLIO MANAGERS. The Manager supervises each Fund's investment program through the Asset Allocation Committee, which consists of four members who meet quarterly to evaluate, among other things, the asset allocation between each Fund's classes and components. The Portfolio Managers of each component are listed below.
- ---------------------------------------------------------------------------------------------------------------------- COMPONENT PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS) - ------------------ ----------------------------- -------------------------------------------------------------- International (Babson-Stewart) Value/Growth Peter M. Antos, C.F.A. Vice President and Senior Portfolio Manager, Equities (the Manager) -- G.R. Phelps & Co. ("G.R. Phelps") (1989-Present) Michael C. Strathearn, C.F.A. Portfolio Manager, Equities -- Connecticut Mutual Life Insurance Company ("CML") (1988-Present) Kenneth B. White, C.F.A. Portfolio Manager, Equities -- CML (1982-Present); Senior Investment Officer; Equities -- CML (1987-1992) Growth/Income Michael C. Strathearn, C.F.A. Portfolio Manager, Equities -- CML (1988-Present) (the Manager) Peter M. Antos, C.F.A. Vice President and Senior Portfolio Manager, Equities -- G.R. Phelps (1989-Present) Stephen F. Libera, C.F.A. Vice President and Senior Portfolio Manager, Fixed Income -- G.R. Phelps (1985-Present)
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Small Cap Gary L. Pilgrim Director, Member of Executive Committee, President and (Pilgrim Baxter) Chief Investment Officer, Pilgrim Baxter (1985-Present) John F. Force Portfolio Manager/Analyst, Pilgrim Baxter (since 1993); and Vice President/Portfolio Manager, Fiduciary Management Associates (1989-1993) James M. Smith Portfolio Manager/Analyst, Pilgrim Baxter (since 1993); Senior Vice President/Portfolio Manager, Selected Financial Services (1992-1993); and Vice President, Sears Investment Management Company (prior to 1992) Michael D. Jones Portfolio Manager/Analyst, Pilgrim Baxter (since 1995); Vice President/Portfolio Manager, Bank of New York (1990-1995) Government David Rosenberg Portfolio Manager, Oppenheimer Funds, Inc. (1994-Present); Securities/ Senior Portfolio Manager, Delaware Investment Advisers Corporate Bonds (1986-1994) (the Manager) High Yield Bonds Richard J. Lindquist Managing Director and High Yield Portfolio Manager, BEA (BEA Associates) Associates (1995); CS First Boston (1989-1995) Short-Term Bond David Rosenberg Portfolio Manager, Oppenheimer Funds, Inc. (1994-Present); (the Manager) Senior Portfolio Manager, Delaware Investment Advisers (1986-1994)
/ / FEES AND EXPENSES. Under separate Investment Advisory Agreements with each Fund, Growth Fund, Balanced Fund and Income Fund pay the Manager an annual fee equal to 0.85%, 0.85% and 0.75%, respectively, of the respective Fund's average daily net asset value up to $250 million and 0.75%, 0.75% and 0.65%, respectively, on such assets over $250 million. While higher than advisory fees paid by most mutual funds, these fees are comparable to those paid by mutual funds with similar objectives and investment strategies. Under its Investment Subadvisory Agreement with Babson-Stewart, the Manager pays Babson-Stewart a monthly fee which declines as the average daily net assets of that portion of Growth Fund and Balanced Fund allocated to Babson-Stewart grow: 0.75% of the first $10 million of average daily net assets allocated to Babson-Stewart, 0.625% of the next $15 million, 0.50% of the next $25 million and 0.375% of such assets in excess of $50 million. The portion of the net assets of all Funds allocated to Babson-Stewart will not be aggregated in applying these breakpoints. Under its Investment Subadvisory Agreement with BEA, the Manager pays BEA a quarterly fee which declines as the combined average daily net assets of each Fund allocated to BEA grow: 0.45% of the first $25 million of combined average daily net assets allocated to BEA, 0.40% of the next $25 million, 0.35% of the next $50 million and 0.25% of the such assets in excess of $100 million. Under its Investment Subadvisory Agreement with Pilgrim, the Manager pays Pilgrim a monthly fee equal to 0.60% of the combined average daily net assets of the Funds allocated to Pilgrim. For purposes of calculating the fee payable to BEA and Pilgrim, the net asset -24- values of that portion of the assets of each Fund subadvised by BEA and Pilgrim are aggregated with that portion of the net asset value of the assets of Panorama Series Fund I, Inc. managed by BEA and Pilgrim, respectively. Each Fund pays expenses related to its daily operations, such as custodian fees, Directors' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of a 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 Agreements and the other expenses paid by the Funds is contained in the Statement of Additional Information. There is also information about the Funds' brokerage policies and practices in "Brokerage Policies of the Funds" in the Statement of Additional Information. That section discusses how brokers and dealers are selected for the Funds' portfolio transactions. When deciding which brokers to use, the Manager is permitted by the Investment Advisory Agreements to consider whether brokers have sold shares of the Funds or any other funds for which the Manager serves as investment adviser. / / THE DISTRIBUTOR. A Fund's shares are sold through dealers and brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as each Fund's Distributor. The Distributor also distributes the shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. / / THE TRANSFER AGENT. Each Fund's transfer agent is OppenheimerFunds Services, a division of the Manager, which acts as the shareholder servicing agent for each Fund on an "at-cost" basis. It also acts as the shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts, to the Transfer Agent at the address and toll-free number shown below in this Prospectus or on the back cover. PERFORMANCE OF THE FUNDS EXPLANATION OF PERFORMANCE TERMINOLOGY. Each Fund uses the terms "total return" to illustrate its performance. The performance of each class of shares is shown 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. These returns measure the performance of a hypothetical account in a Fund over various periods, and do not show the performance of each shareholder's account (which will vary if dividends are received in cash, or shares are sold or purchased). A Fund's performance data may help you see how well your investment has done over time and to compare it to market indices, as we have done below. It is important to understand that a Fund's total returns represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare a Fund's performance. A Fund's investment performance will vary over time, 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 a Fund's performance. Total return is the change in value of a hypothetical investment in a 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 -25- year in a period that would produce the cumulative total return over the entire period. However, average annual total returns do not show a Fund's actual year-by-year performance. When total returns are quoted for Class A shares, they include the payment of the current maximum initial sales charge. When total returns are shown for Class B and Class C shares, they include the effect of the contingent deferred sales charge that applies to the period for which total return is shown. When total returns are shown for a one-year period (or less) for Class C shares, they include the effect of the contingent deferred sales charge. Total returns may also be quoted at "net asset value," without including the effect of either the front-end or the appropriate contingent deferred sales charge, as applicable, and those returns would be reduced if sales charges were deducted. A B O U T Y O U R A C C O U N T HOW TO BUY SHARES CLASSES OF SHARES. Each Fund offers investors three different classes of shares. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. / / CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on investments up to $1 million (up to $500,000 for purchases by OppenheimerFunds prototype 401(k) plans). If you purchase Class A shares as part of an investment of at least $1 million ($500,000 for OppenheimerFunds prototype 401(k) plans) in shares of one or more Oppenheimer funds, you will not pay an initial sales charge, but if you sell any of those shares within 18 months of buying them, you may pay a contingent deferred sales charge. The amount of that sales charge will vary depending on the amount you invested. Sales charge rates are described in "Buying Class A Shares," 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 six years of buying them, you will normally pay a contingent deferred sales charge that varies depending on how long you owned your shares, as described in "Buying Class B Shares," below. / / CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time of purchase, but if you sell your shares within 12 months of buying them, you will normally pay a contingent deferred sales charge of 1%, as discussed in "Buying Class C Shares," below. WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that a 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. A 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 and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares. 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 a Fund. We used the sales charge rates that apply to each class, and considered the effect of the asset-based sales charge on Class B and Class C expenses (which, like all expenses, will affect your investment return). For the sake of comparison, we have assumed that there is a -26- 10% rate of appreciation in your investment each year. Of course, the actual performance of your investment cannot be predicted and will vary, based on a Fund's actual investment returns, and the operating expenses borne by each class of shares, and which class of shares you invest in. The factors discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes. / / HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. Because of the effect of class-based expenses your choice will also depend on how much you invest. For example, the reduced sales charges available for larger purchases of Class A shares may, over time, offset the effect of paying an initial sales charge on your investment (which reduces the amount of your investment dollars used to buy shares for your account), compared to the effect over time or higher class-based expenses on the shares of Class B or Class C for which no initial sales charge is paid. / / INVESTING FOR THE SHORT TERM. If you have a short term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares, because of the effect of the Class B contingent deferred sales charge if you redeem in less than seven years, as well as the effect of the Class B asset-based sales charge on the investment return for that class in the short-term. Class C shares might be the appropriate choice (especially for investments of less than $100,000), because there is no initial sales charge on Class C shares, and the contingent deferred sales charge does not apply to amounts you sell after holding them one year. However, if you plan to invest more than $100,000 for the shorter term, then the more you invest and the more your investment horizon increases toward six years Class C shares might not be as advantageous as Class A shares. That is because the annual asset-based sales charge on Class C shares will have a greater economic impact on your account over the longer term than the reduced front-end sales charge available for larger purchases of Class A shares. For example, Class A might be more advantageous than Class C (as well as Class B) for investments of more than $100,000 expected to be held for 5 or 6 years (or more). For investments over $250,000 expected to be held 4 to 6 years (or more), Class A shares may become more advantageous than Class C (and B). If investing $500,000 or more, Class A may be more advantageous as your investment horizon approaches 3 years or more. And for most investors who invest $1 million or more, in most cases Class A shares will be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the Distributor normally will not accept purchase orders of $500,000 or more of Class B or $1 million or more of Class C shares from a single investor. / / INVESTING FOR THE LONGER TERM. If you are investing for the longer term, for example, for retirement, and do not expect to need access to your money for seven years or more, Class B shares may be an appropriate consideration, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charge available for larger investments in Class A shares under a Fund's Right of Accumulation. Of course all of these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, using the assumed annual performance return stated above, and you should analyze your options carefully. -27- / / ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because some features may not be available to Class B or C shareholders, or other features (such as Automatic Withdrawal Plans) may not be advisable (because of the effect of the contingent deferred sales charge in non-retirement accounts) for Class B or Class C shareholders, you should carefully review how you plan to use your investment account before deciding which class of shares to buy. For example, share certificates are not available for Class B or Class C shares and if you are considering using your shares as collateral for a loan, this may be a factor to consider. Additionally, dividends payable to Class B and Class C shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A, such as the Class B and Class C asset-based sales charges described below and in the Statement of Additional Information. / / 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 for selling another class. It is important that investors understand that the purpose of the Class B and Class C contingent deferred sales charges and asset-based sales charges are the same as the purpose of the front-end sales charge on sales of Class A shares: to reimburse 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 for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. Under pension and profit-sharing plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. There is no minimum investment requirement if you are buying shares by reinvesting dividends from a Fund or other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. / / HOW ARE SHARES PURCHASED? You can buy shares several ways --through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. WHEN YOU BUY SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES. / / BUYING SHARES THROUGH YOUR DEALER. Your dealer will place your order with the Distributor on your behalf. / / BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New Account Application and return it with a check payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment 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 -28- institution that is an Automated Clearing House (ACH) member to transmit funds electronically to PURCHASE SHARES, to have the Transfer Agent SEND REDEMPTION PROCEEDS, or 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 a Fund (and up to four other Oppenheimer funds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. / / AT WHAT PRICES ARE SHARES SOLD? Shares are sold at the public offering price based on the net asset value (and any initial sales charge that applies) that is next determined after the Distributor receives the purchase order in Denver, Colorado. 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, IN ITS SOLE DISCRETION, MAY REJECT ANY PURCHASE ORDER FOR FUND SHARES. SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix B to this Prospectus sets forth conditions for the waiver of, or exemption from, sales charges or the special sales charge rates that apply to purchases of Fund shares (including purchases by exchange) by a person who was a shareholder of one of the Former Quest for Value Funds and Former Connecticut Mutual Funds (as defined in that Appendix). BUYING 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 may be net asset value. In some cases, reduced sales charges may be available, as described below. Out of the amount you invest, a 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. Different sales charge rates and commissions applied to sales of Class A shares prior to March 18, 1996. The current sales charge rates and commissions paid to dealers and brokers are as follows: -29-
FRONT-END SALES FRONT-END SALES COMMISSION AS AMOUNT OF PURCHASE CHARGE AS PERCENTAGE CHARGE AS PERCENTAGE PERCENTAGE OF OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE - ------------------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 4.75% - ------------------------------------------------------------------------------------------ $25,000 or more but less than $50,000 5.50% 5.82% 4.75% - ------------------------------------------------------------------------------------------ $50,000 or more but less than $100,000 4.75% 4.99% 4.00% - ------------------------------------------------------------------------------------------ $100,000 or more but less than $250,000 3.75% 3.90% 3.00% - ------------------------------------------------------------------------------------------ $250,000 or more but less than $500,000 2.50% 2.56% 2.00% - ------------------------------------------------------------------------------------------ $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - ------------------------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws. / / CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds in the following cases: / / purchases aggregating $1 million or more, or / / purchases by an OppenheimerFunds prototype 401(k) plan that: (1) buys shares costing $500,000 or more or (2) has, at the time of purchase, 100 or more eligible participants, or (3) certifies that it projects to have annual plan purchases of $200,000 or more. The Distributor pays dealers of record commissions on those 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 purchases over $5 million. That commission will be paid only on the amount of those purchases in excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k) prototype plans) 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% either (1) of the aggregate net asset value of the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. The Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all Oppenheimer funds you purchased subject to the Class A contingent deferred sales charge. In determining whether a contingent deferred sales charge is payable, a 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 a Fund's Exchange Privilege (described below). However, if the shares acquired by exchange are -30- 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 Oppenheimer funds (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 and Class B shares you purchase for your individual accounts, or jointly, or for trust or custodial accounts on behalf of your children who are minors. 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 and Class B shares of a Fund and other Oppenheimer funds to reduce the sales charge rate for current purchases of Class A shares. You can also include Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your investment in one of the Oppenheimer funds. 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 Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Distributor. 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, if you purchase Class A shares or Class A and Class B shares of a Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares purchased during that period. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. / / WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not imposed in the circumstances described below. There is an explanation of this policy in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN PURCHASERS. Class A shares purchased by the following investors are not subject to any Class A sales charges: / / the Manager or its affiliates; / / 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 a Fund, the Manager and its affiliates, and retirement plans established by them for their employees; / / registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; -31- / / dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees; / / employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and 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); / / dealers, brokers or registered investment advisers that have entered into an agreement with the Distributor providing specifically for the use of shares of a Fund in particular investment products made available to their clients (those clients may be charged a transaction fee by their dealer, broker or advisor for the purchase or sale of Fund shares) / / 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 administrative services. / / directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons; / / accounts for which Oppenheimer Capital is the investment adviser (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts; / / any unit investment trust that has entered into an appropriate agreement with the Distributor; / / a TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and C TRAC-2000 program on November 24, 1995; or / / qualified retirement plans that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, provided that such arrangements are consummated and share purchases commence by March 31, 1996. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN TRANSACTIONS. Class A shares issued or purchased in the following transactions are not subject to Class A sales charges: / / shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which a Fund is a party; / / shares purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or one of its affiliates acts as sponsor; / / shares purchased by the reinvestment of dividends or other distributions reinvested from a Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor; -32- / / shares purchased and paid for with the proceeds of shares redeemed in the past 12 months from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid (this waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner); this waiver must be requested when the purchase order is placed for your Fund shares, and the Distributor may require evidence of your qualification for this waiver; and / / shares purchased with the proceeds of maturing principal of units of any Qualified Unit Investment Liquid Trust Series. WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: / / for retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans, including OppenheimerFunds prototype 401(k) plans (these are all referred to as "Retirement Plans"); / / to return excess contributions made to Retirement Plans; / / to make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the original account value; / / involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (see "Shareholder Account Rules and Policies," below); / / if, at the time a purchase order is placed for Class A shares that would otherwise be subject to the Class A contingent deferred sales charge, the dealer agrees in writing to accept the dealer's portion of the commission payable on the sale in installments of 1/18th of the commission per month (and no further commission will be payable if the shares are redeemed within 18 months of purchase); or / / for distributions from OppenheimerFunds prototype 401(k) plans for any of the following cases or purposes: (1) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must occur after the participant's account was established); (2) hardship withdrawals, as defined in the plan; (3) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (4) to meet the minimum distribution requirements of the Internal Revenue Code; (5) to establish "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code, or (6) separation from service. / / SERVICE PLAN FOR CLASS A SHARES. Each 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 each 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 a Fund's Board of Directors authorizes such reimbursements, which no Fund Board has done as yet) for its other expenditures under the Plan. Services to be provided include, among others, answering customer inquiries about a Fund, assisting in establishing and maintaining accounts in a Fund, making a Fund's investment plans -33- available and providing other services at the request of a 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. BUYING 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 six years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to compensate it for providing distribution-related services to a Fund in connection with the sale of Class B shares. To determine whether the contingent deferred sales charge applies to a redemption, a Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over six years, and (3) shares held the longest during the six-year period. The contingent deferred sales charge is not imposed in the circumstances described in "Waivers of Class B and Class C Sales Charges," below. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule:
YEARS SINCE BEGINNING OF CONTINGENT DEFERRED SALES CHARGE MONTH IN WHICH ON REDEMPTIONS IN THAT YEAR PURCHASE ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE) - --------------------------------------------------------------------------- 0-1 5.0% - --------------------------------------------------------------------------- 1-2 4.0% - --------------------------------------------------------------------------- 2-3 3.0% - --------------------------------------------------------------------------- 3-4 3.0% - --------------------------------------------------------------------------- 4-5 2.0% - --------------------------------------------------------------------------- 5-6 1.0% - --------------------------------------------------------------------------- 6 and following None
In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Different contingent deferred sales charges applied to redemptions of Class B shares prior to March 18, 1996. / / AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution and Service Plan, described below. The conversion is based on the relative -34- net asset value of the two classes, and no sales load or other charge is imposed. When Class B shares convert, any other Class B shares that were acquired by the reinvestment of dividends and distributions on the converted shares will also convert to Class A shares. The conversion feature is subject to the continued availability of a tax ruling described in "Alternative Sales Arrangements -Class A, Class B and Class C Shares" in the Statement of Additional Information. BUYING CLASS C SHARES. Class C shares are sold at net asset value per share without an initial sales charge. However, if Class C shares are redeemed within 12 months of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class C contingent deferred sales charge is paid to the Distributor to reimburse its expenses of providing distribution-related services to a Fund in connection with the sale of Class C shares. To determine whether the contingent deferred sales charge applies to a redemption, a Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over 12 months, and (3) shares held the longest during the 12-month period. / / DISTRIBUTION AND SERVICE PLANS FOR CLASS B AND CLASS C SHARES. The Fund has adopted Distribution and Service Plans for Class B and Class C shares to compensate the Distributor for its costs in distributing Class B and C shares and servicing accounts. Under the Plans, a 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 and on Class C shares. The Distributor also receives a service fee of 0.25% per year. Under each Plan, both fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The asset-based sales charge allows investors to buy Class B or C shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell those shares. The Distributor uses the service fees to compensate dealers for providing personal services for accounts that hold Class B or C shares. Those services are similar to those provided under the Class A Service Plan, described above. The Distributor pays the 0.25% service fees to dealers in advance for the first year after Class B or Class C shares have been sold by the dealer and retains the service fee paid by a Fund in that year. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor currently pays sales commissions of 3.75% on the purchase price of Class B shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sales of Class B shares is therefore 4.00% of the purchase price. A Fund pays the asset-based sales charge to the Distributor for its services rendered in distributing Class B shares. Those payments, retained by the Distributor, are at a fixed rate that is not related to the Distributor's expenses. The services rendered by the Distributor include paying and financing the payment of sales commissions, service fees and other costs of distributing and selling Class B shares. The Distributor currently pays sales commissions of 0.75% of the purchase price of Class C shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sale of Class C shares is therefore 1.00% of the purchase -35- price. The Distributor retains the asset-based sales charge during the first year Class C shares are outstanding to recoup the sales commissions it has paid, the advances of service fee payments it has made, and its financing costs and other expenses. The Distributor plans to pay the asset-based sales charge as an ongoing commission to the dealer on Class C shares that have been outstanding for a year or more. The Distributor's actual expenses in selling Class B and C shares may be more than the payments it receives from contingent deferred sales charges collected on redeemed shares and from a Fund under the Distribution and Service Plans for Class B and C shares. Therefore, those expenses may be carried over and paid in future years. If a Fund terminates its Plan, the Board of Directors may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the Plan was terminated. / / WAIVERS OF CLASS B AND CLASS C SALES CHARGES. The Class B and Class C contingent deferred sales charges will not be applied to shares purchased in certain types of transactions nor will it apply to Class B and Class C shares redeemed in certain circumstances as described below. The reasons for this policy are in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B and Class C contingent deferred sales charges will be waived for redemptions of shares in the following cases, if the Transfer Agent is notified that these conditions apply to the redemption: / / distributions to participants or beneficiaries from Retirement Plans, if the distributions are made (a) under an Automatic Withdrawal Plan after the participant reaches age 59-1/2, as long as the payments are no more than 10% of the account value annually (measured from the date the Transfer Agent receives the request), or (b) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must have occurred after the account was established); / / redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder (the death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration); / / returns of excess contributions to Retirement Plans; / / distributions from IRAs (including SEP-IRAs and SAR/SEP accounts) before the participant is age 59-1/2, and distributions from 403(b)(7) custodial plans or pension or profit sharing plans before the participant is age 59-1/2 but only after the participant has separated from service, if the distributions are made in substantially equal periodic payments over the life (or life expectancy) of the participant or the joint lives (or joint 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); / / shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," below; or / / distributions from OppenheimerFunds prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet minimum distribution requirements as defined in the Internal Revenue Code; (4) -36- to make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for separation from service. WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases: / / shares sold to the Manager or its affiliates; / / shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; and / / shares issued in plans of reorganization to which a Fund is a party. 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 should 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 by sending signature-guaranteed instructions to the Transfer Agent. AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to your dealer representative of record unless and until the Transfer Agent receives written instructions terminating or changing those privileges. After you establish AccountLink for your account, any change of bank account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all shareholders who own the account. / / 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 a 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 Oppenheimer funds account you have already established by calling the special PhoneLink number. Please refer to "How to Exchange Shares," below, for details. -37- / / SELLING SHARES. You can redeem shares by telephone automatically by calling the PhoneLink number and a 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. Each Fund has several plans that enable you to sell shares automatically or exchange them to another Oppenheimer funds 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 to exchange an amount you establish in advance automatically for shares of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other Oppenheimer funds 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 Class A or Class B shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the same Fund or other Oppenheimer funds without paying a sales charge. This privilege applies to Class A shares that you purchased subject to an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge when you redeemed them. This privilege does not apply to Class C shares. You must be sure to ask the Distributor for this privilege when you send your payment. 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 / / 401(K) PROTOTYPE RETIREMENT PLANS for businesses Please call the Distributor for the OppenheimerFunds plan documents, which contain important information and applications. -38- HOW TO SELL SHARES You can arrange to take money out of your account by selling (redeeming) some or all of your shares on any regular business day. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. Each 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 Funds from fraud, certain redemption requests must be in writing and must include a signature guarantee in the following situations (there may be other situations also requiring a signature guarantee): / / You wish to redeem more than $50,000 worth of shares and receive a check / / The redemption check is not payable to all shareholders listed on the account statement / / The redemption check is not sent to the address of record on your account statement / / Shares are being transferred to a Fund account with a different owner or name / / Shares are redeemed by someone other than the owners (such as an Executor) / / WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. IF YOU ARE SIGNING AS A FIDUCIARY OR ON BEHALF OF A CORPORATION, PARTNERSHIP OR OTHER BUSINESS, 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 / / Your Fund's name / / Your Fund account number (from your account statement) / / The dollar amount or number of shares to be redeemed / / Any special payment instructions / / Any share certificates for the shares you are selling -39- / / The signatures of all registered owners exactly as the account is registered, 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: OppenheimerFunds Services P.O. Box 5270, Denver, Colorado 80217 SEND COURIER OR EXPRESS MAIL REQUESTS TO: OppenheimerFunds 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 seven-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 OR WIRE. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be transferred. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank account if the bank is a member of the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire. To place a wire redemption request, call the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable a Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. To establish wire redemption privileges on an account that is already established, please contact the Transfer Agent for instructions. 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. -40- HOW TO EXCHANGE SHARES Shares of a Fund may be exchanged for shares of certain Oppenheimer funds at net asset value per share at the time of exchange, without sales charge. To exchange shares, you must meet several conditions: / / Shares of the fund selected for exchange must be available for sale in your state of residence. / / The prospectuses of your 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 OPPENHEIMER FUNDS. For example, you can exchange Class A shares of a Fund only for Class A shares of another fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are considered to be Class A shares for this purpose. 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 names and address. Shares held under certificates may not be exchanged by telephone. You can find a list of Oppenheimer funds currently available for exchanges in the Statement of Additional Information or obtain one by calling a service representative at 1-800-525-7048. That list can change from time to time. 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 up to seven days if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to a Fund. -41- / / Because excessive trading can hurt fund performance and harm shareholders, a 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. / / A Fund may amend, suspend or terminate the exchange privilege at any time. Although a Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. / / For tax purposes, exchanges of shares involve a redemption of the shares of the Fund you own and a purchase of the shares of the other fund, which may result in a taxable gain or a loss. For more information about taxes affecting exchanges, please refer to "How to Exchange Shares" in the Statement of Additional Information. / / 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 which is normally 4:00 P.M., but may be earlier on some days, on each day the Exchange is open by dividing the value of a Fund's net assets attributable to a class by the number of shares of that class that are outstanding. Each Fund's Board of Directors has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained. These procedures are described more completely in the Statement of Additional Information. / / THE OFFERING OF SHARES may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Directors at any time the Board believes it is in a Fund's best interest to do so. / / TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may be modified, suspended or terminated by a Fund at any time. If an account has more than one owner, a 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 neither the Transfer Agent nor a Fund will 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 -42- obtaining their clients' permission to perform those transactions and are responsible to their clients who are shareholders of the Funds if the dealer performs any transaction erroneously. / / THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the value of the securities in a Fund's portfolio fluctuates, and the redemption price, which is the net asset value per share, will normally be different for Class A, Class B and Class C shares. Therefore, the redemption value of your shares may be more or less than their original cost. / / PAYMENT FOR REDEEMED SHARES is made ordinarily in cash and forwarded by check or through AccountLink (as elected by the shareholder under the redemption procedures described above) within 7 days after the Transfer Agent receives redemption instructions in proper form, except under unusual circumstances determined by the Securities and Exchange Commission delaying or suspending such payments. For accounts registered in the name of a broker-dealer, payment will be forwarded within 3 business days. 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 a Fund if the account has fewer than 100 shares. / / UNDER UNUSUAL CIRCUMSTANCES, shares of a Fund may be redeemed "in kind," which means that the redemption proceeds will be paid with securities from a 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 a 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 income. / / A 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 charge when redeeming certain Class A, Class B and Class C shares. / / TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, a Fund will mail only one copy of each annual and semi-annual report to shareholders having the same last name and address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of those materials be sent personally to that shareholder. DIVIDENDS, CAPITAL GAINS AND TAXES DIVIDENDS. Each Fund declares dividends separately for Class A, Class B and Class C shares from net investment income each regular business day. Growth Fund and Balanced Fund pay those dividends to shareholders semi-annually, and Income Fund pays those dividends to shareholders monthly. Normally, dividends are paid on the last business day every dividend period, but the Board of Directors can change that date. Distributions may be made monthly from any net short-term capital gains a Fund realizes in selling securities. Dividends paid on Class A shares generally are expected to be higher than for Class B and Class C shares because expenses allocable to Class B and Class C shares will generally be higher. -43- CAPITAL GAINS. Each Fund may make distributions annually in December out of any net short-term or long-term capital gains. Long-term capital gains will be separately identified in the tax information your Fund sends you after the end of the year. Distributions of capital gains are treated as ordinary income for tax purposes. There can be no assurance that your 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 YOUR FUND. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of your Fund. / / REINVEST CAPITAL GAINS ONLY. You can elect to reinvest long-term capital gains in your 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 OPPENHEIMER FUNDS ACCOUNT. You can reinvest all distributions in another Oppenheimer funds 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 a Fund. A Fund's distributions from long-term capital gains are taxable to shareholders as long-term capital gains, no matter how long you held your shares. Dividends paid by a Fund from short-term capital gains and net investment income are taxable as ordinary income. These dividends and distributions are subject to Federal income tax and may be subject to state or local taxes. Your distributions are taxable as described above, whether you reinvest them in additional shares or take them in cash. Corporate shareholders may be entitled to the corporate dividends received deduction for some portion of a Fund's distributions treated as ordinary income, subject to applicable limitations under the Internal Revenue Code. Every year your 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 your 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 and repurchases, including redemptions for exchanges, may produce a taxable gain or a loss, which generally will be a capital gain or loss for shareholders who hold their Fund shares as capital assets. Such a gain or loss is the difference between your tax basis, which is usually the price you paid for the shares, and the proceeds you received when you sold them. Special tax rules may apply to certain redemptions preceded or followed by investments in the same Fund or another Oppenheimer fund. / / RETURNS OF CAPITAL. In certain cases distributions made by your Fund may be considered a return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. A return of capital will reduce your tax basis in your Fund shares but will not be taxable except to the extent it exceeds such tax basis. / / FOREIGN TAXES. Each Fund may be subject to foreign withholding taxes or other foreign taxes on income (possibly including capital gains) on certain of its foreign investments, if any. These taxes may be reduced or eliminated pursuant to an income tax treaty in some cases. -44- The Funds do not expect to qualify to pass such foreign taxes and any related tax deductions or credits through to their shareholders. The Funds have qualified and intend to continue to qualify as regulated investment companies under the Internal Revenue Code. Provided that a Fund so qualifies, it will not be required to pay any federal income tax on its net investment income and net realized capital gains that it distributes to its shareholders in accordance with certain timing requirements. This information is only a summary of certain federal tax information about your investment. Tax-exempt or tax-deferred investors, foreign investors, and investors subject to special tax rules (such as certain banks and securities dealers) may have different tax consequences not described above. More tax 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 a Fund on your particular tax situation. -45- APPENDIX A: DESCRIPTION OF RATINGS CATEGORIES OF RATING SERVICES DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS Aaa: Bonds 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 rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as "high- grade" bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of "Aaa" securities. A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds rated "Baa" are considered medium grade obligations, that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated "Caa" are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated "C" can be regarded as having extremely poor prospects of ever attaining any real investment standing. DESCRIPTION OF STANDARD & POOR'S BOND RATINGS AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from "AAA" issues only in small degree. A: Bonds rated "A" have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the "A" category. BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal A-1 in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "CC" the highest degree. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. A-2 APPENDIX B SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS The initial and contingent sales charge rates and waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund, Quest for Value Small Capitalization Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds merged into various Oppenheimer funds on November 24, 1995. The funds listed above are referred to in this Prospectus as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of the Fund (i) acquired by such shareholder pursuant to an exchange of shares of one of the Oppenheimer funds that was one of the Former Quest for Value Funds or (ii) received by such shareholder pursuant to the merger of any of the Former Quest for Value Funds into an Oppenheimer fund on November 24, 1995. CLASS A SALES CHARGES // REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST SHAREHOLDERS // PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT PLANS. The following table sets forth the initial sales charge rates for Class A shares purchased by a "Qualified Retirement Plan" through a single broker, dealer or financial institution, or by members of "Associations" formed for any purpose other than the purchase of securities if that Qualified Retirement Plan or that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single employer. FRONT-END SALES FRONT-END SALES CHARGE AS A CHARGE AS A COMMISSION AS NUMBER OF ELIGIBLE PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF EMPLOYEES OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE ________________________________________________________________________________ 9 or fewer 2.50% 2.56% 2.00% ________________________________________________________________________________ At least 10 but not more than 49 2.00% 2.04% 1.60% For purchases by Qualified Retirement plans and Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described on pages to of this Prospectus. Purchases made under this arrangement qualify for the lower of the sales charge rate in the table based on the number of eligible employees in a Qualified Retirement Plan or members of an B-1 Association or the sales charge rate that applies under the Rights of Accumulation described above in the Prospectus. In addition, purchases by 401(k) plans that are Qualified Retirement Plans qualify for the waiver of the Class A initial sales charge if they qualified to purchase shares of any of the Former Quest For Value Funds by virtue of projected contributions or investments of $1 million or more each year. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations, or as eligible employees in Qualified Retirement Plans also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Fund's Distributor. // SPECIAL CLASS A CONTINGENT DEFERRED SALES CHARGE RATES Class A shares of the Fund purchased by exchange of shares of other Oppenheimer funds that were acquired as a result of the merger of Former Quest for Value Funds into those Oppenheimer funds, and which shares were subject to a Class A contingent deferred sales charge prior to November 24, 1995 will be subject to a contingent deferred sales charge at the following rates: if they are redeemed within 18 months of the end of the calendar month in which they were purchased, at a rate equal to 1.0% if the redemption occurs within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six months. Class A shares of any of the Former Quest for Value Funds purchased without an initial sales charge on or before November 22, 1995 will continue to be subject to the applicable contingent deferred sales charge in effect as of that date as set forth in the then-current prospectus for such fund. // WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS Class A shares of the Fund purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: // Shareholders of the Fund who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. // Shareholders of the Fund who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. // WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS The Class A contingent deferred sales charge will not apply to redemptions of Class A shares of the Fund purchased by the following investors who were shareholders of any Former Quest for Value Fund: // Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. // Participants in Qualified Retirement Plans that purchased shares of any of the Former Quest For Value Funds pursuant to a special "strategic alliance" with the distributor of those funds. The Fund's Distributor will pay a commission to the dealer for purchases of Fund shares as described above in "Class A Contingent Deferred Sales Charge." B-2 CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS // WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A or B shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged, if those shares were purchased prior to March 6, 1995: in connection with (i) distributions to participants or beneficiaries of plans qualified under Section 401(a) of the Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation plans under Section 457 of the Code, and other employee benefit plans, and returns of excess contributions made to each type of plan, (ii) withdrawals under an automatic withdrawal plan holding only Class B shares if the annual withdrawal does not exceed 10% of the initial value of the account, and (iii) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. // WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995 BUT PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A or B shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such fund merged, if those shares were purchased on or after March 6, 1995, but prior to November 24, 1995: (1) distributions to participants or beneficiaries from Individual Retirement Accounts under Section 408(a) of the Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made either (a) to an individual participant as a result of separation from service or (b) following the death or disability (as defined in the Code) of the participant or beneficiary; (2) returns of excess contributions to such retirement plans; (3) redemptions other than from retirement plans following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); (4) withdrawals under an automatic withdrawal plan (but only for Class B shares) where the annual withdrawals do not exceed 10% of the initial value of the account; and (5) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A or B shares of the Fund described in this section if within 90 days after that redemption, the proceeds are invested in the same Class of shares in the Fund or another Oppenheimer fund. SPECIAL DEALER ARRANGEMENTS. Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and that were transferred to an OppenheimerFunds prototype 401(k) plan shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000 as to any one plan. SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER CONNECTICUT MUTUAL FUNDS Certain of the sales charge waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of B-3 Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Capital Appreciation Account and CMIA LifeSpan Balanced Account (the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds. CLASS A SALES CHARGE WAIVERS Additional Class A shares of the Fund may be purchased without a sales charge, provided that the Class A shares of the Fund were acquired prior to March 1, 1996, by: (1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase; (2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; (3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; (4) NASD registered representatives whose employer consents to such purchases, and by the spouses and immediate family members of such representatives; (5) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the Fund's prior distributor, and its affiliated companies; (6) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; (7) any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which was beyond the applicable surrender charge period and which was used to fund a qualified plan, who exchanged the variable annuity contract for Class A shares of the Fund; and (8) an institution acting as a fiduciary on behalf of an individual or individuals, where such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to a CDSC. CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS The contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of the Fund and exchanges of Class A or Class B shares of the Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 1, 1996 or (ii) were acquired by exchange from an Oppenheimer Fund that was a Former Connecticut Mutual Fund and the shares of such Former Connecticut Mutual Fund were purchased prior to March 1, 1996: (1) by the estate of the deceased shareholder; (2) upon the disability of the shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (Code); (3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; (4) as tax-free returns of excess contributions to such retirement or employee benefit plans; (5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, B-4 authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment management company; (6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; (7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; (8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to a Systematic Withdrawal Plan but limited to no more than 12% of the original value annually; and (9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. B-5 OPPENHEIMER LIFESPAN GROWTH FUND OPPENHEIMER LIFESPAN BALANCED FUND OPPENHEIMER LIFESPAN INCOME FUND Two World Trade Center New York, New York 10048-0203 1-800-525-7048 INVESTMENT ADVISOR OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 DISTRIBUTOR OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 CUSTODIAN OF PORTFOLIO SECURITIES State Street Bank & Trust Company 225 Franklin Street Boston, Massachusetts 02110 INDEPENDENT AUDITORS Arthur Andersen LLP One Financial Plaza Hartford, Connecticut 06103 LEGAL COUNSEL NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS, OPPENHEIMERFUNDS, INC., OPPENHEIMERFUNDS DISTRIBUTOR, INC. OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE. ____________________ *PRINTED ON RECYCLED PAPER CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Liquid Account, Government Securities Account, and Income Account. Cross-Reference Sheet Showing Location in Prospectus and Statement of Additional Information of Information Required by Items of the Registration Form
Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 1. Cover Page....................... Cover Page. 2. Synopsis......................... About The Funds -- A Brief Overview of the Fund. 3. Condensed Financial Information.................... About The Funds -- Financial Highlights. 4. General Description of Registrant..................... Cover Page; About The Funds -- How The Fund Is Managed - - Organization and History. 5. Management of the Fund........... About The Funds -- How the Funds are Managed. 6. Capital Stock and Other Securities..................... About The Funds -- Investment Objective and Policies. 7. Purchase of Securities Being Offered.................. About Your Account -- How to Buy Shares; Special Sales Charge Arrangements for Certain Persons; Buying Class A Shares; Buying Class B Shares. 8. Redemption or Repurchase......... About Your Account -- How to Buy Shares; Special Investor Services; How to Sell Shares; How to Exchange Shares; Shareholder Account Rules and Policies.
Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 9. Pending Legal Proceedings........ Not Applicable. 10. Cover Page....................... Cover Page. 11. Table of Contents................ Cover Page. 12. General Information and History........................ Cover Page; How The Funds are Managed -- Organization and History. 13. Investment Objectives and Policy......................... About The Funds -- Investment Objectives and Policies. 14. Management of the Fund........... About The Funds -- How the Funds are Managed. 15. Control Persons and Principal Holders of Securities.......... About The Funds -- How the Funds are Managed. 16. Investment Advisory and Other Services................. About The Funds -- How the Funds are Managed; The Manager, the Subadviser and Their Affiliates; The Distributor; The Transfer Agent. 17. Brokerage Allocation and Other Practices................ About the Funds -- Brokerage Policies of the Funds. 18. Capital Stock and Other Securities..................... About the Funds -- How the Funds are Managed -- Organization and History. 19. Purchase, Redemption and Pricing of Securities Being Offered.... About Your Accounts -- How to Buy Shares; How to Sell Shares; How to Exchange Shares. 20. Tax Status....................... About Your Account -- Dividends, Capital Gains and Taxes.
- 2 -
Location in Prospectus Form N-1A Item Number or Statement of Additional and Caption Information --------------------- -------------------------- 21. Underwriters..................... About The Funds -- How the Funds are Managed -- The Manager, the Subadvisers and Their Affiliates; About Your Account -- How To Buy Shares. 22. Calculation of Performance Data........................... About The Funds -- Performance of the Funds; About Your Account -- Dividends, Capital Gains and Taxes. 23. Financial Statements............. Financial Information About the Funds -- Independent Auditors' Report -- Financial Statements.
- 3 - CONNECTICUT MUTUAL LIQUID ACCOUNT GOVERNMENT SECURITIES ACCOUNT INCOME ACCOUNT PROSPECTUS DATED MAY 1, 1996 Oppenheimer Series Fund, Inc. (the "Company") is an open-end investment company consisting of eight separate mutual funds, three of which are offered in this prospectus (individually, a "Fund" and collectively, the "Funds"): CONNECTICUT MUTUAL LIQUID ACCOUNT ("Liquid Fund") seeks as high a level of current income as is consistent with preservation of capital and maintenance of liquidity by investing in money market instruments. AN INVESTMENT IN THE LIQUID FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE LIQUID FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO. CONNECTICUT MUTUAL INCOME ACCOUNT ("Income Fund") seeks high current income consistent with prudent investment risk and preservation of capital. Income Fund seeks to achieve its objective by investing primarily in corporate debt securities with remaining maturities of five years or less or mortgage debt securities with prepayment features which, in the judgment of the investment advisor, will result in payment of interest and principal such that the effective maturity of the securities is five years or less. CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT ("Government Securities Fund") seeks a high level of current income with a high degree of safety of principal by investing primarily (at least 65% of its total assets under normal market conditions) in U.S. Government securities and U.S. Government related securities. U.S. Government securities are high quality instruments issued, or guaranteed as to principal and interest, by the U.S. Treasury or by an agency or instrumentality of the U.S. Government. Please refer to "Investment Policies and Strategies" for more information about the types of securities the Funds may invest in and the risks of investing in the Funds. This Prospectus explains concisely what you should know before investing in the Funds. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about each Fund in the May 1, 1996 Statement of Additional Information. For a free copy, call OppenheimerFunds Services, the Funds' Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the address on the back cover. The Statement of Additional Information has been filed with the Securities and Exchange Commission ("SEC") and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). (Oppenheimer funds logo) SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF 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. 2 CONTENTS A B O U T T H E F U N D S EXPENSES BRIEF OVERVIEW OF THE FUNDS FINANCIAL HIGHLIGHTS INVESTMENT OBJECTIVES AND POLICIES HOW THE FUNDS ARE MANAGED PERFORMANCE OF THE FUNDS A B O U T Y O U R A C C O U N T HOW TO BUY SHARES Shares of Liquid Fund Class A Shares Class B Shares SPECIAL INVESTOR SERVICES AccountLink Automatic Withdrawal and Exchange Plans Reinvestment Privilege Retirement Plans HOW TO SELL SHARES By Mail By Telephone By Wire (Liquid Fund only) By Check Writing HOW TO EXCHANGE SHARES SHAREHOLDER ACCOUNT RULES AND POLICIES DIVIDENDS, CAPITAL GAINS AND TAXES APPENDIX A: DESCRIPTION OF SECURITIES RATINGS APPENDIX B: CREDIT QUALITY DISTRIBUTION APPENDIX C: SPECIAL SALES CHARGE ARRANGEMENTS 3 A B O U T T H E F U N D S EXPENSES Each 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 of each Fund (other than Liquid Fund) 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 a Fund and the share of a Fund's business operating expenses that you will bear indirectly. The numbers below are based on the Funds' expenses during its last fiscal year ended December 31, 1995. / / SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares of a Fund. The Liquid Fund has no sales charges to buy shares. Please refer to "About Your Account" starting on page ___ for an explanation of how and when these charges apply.
INCOME FUND AND GOVERNMENT SECURITIES FUND ------------------------------ LIQUID FUND CLASS A CLASS B SHARES SHARES SHARES - ----------------------------------------------------------------------------------- Maximum Sales None 4.75% None Charge on Purchases (as a % of offering price) - ----------------------------------------------------------------------------------- Sales Charge on None None None Reinvested Dividends - ----------------------------------------------------------------------------------- Deferred Sales None(1) None(2) 5% in the Charge (as a % first year, of the lower declining of the original to 1% in the purchase price sixth year and or redemption eliminated proceeds) thereafter(3) - ----------------------------------------------------------------------------------- Exchange Fee None None None - ----------------------------------------------------------------------------------- Redemption Fee None(4) None(4) None(4)
(1) Shares of Liquid Fund acquired by exchange from Class A or Class B shares of any other fund, which are subject to a CDSC will be subject to a CDSC if redeemed. The CDSC will be at a rate equal to the CDSC rate on the original shares when exchanged. (2) If you invest $1 million or more ($500,000 or more for purchases by OppenheimerFunds prototype 401(k) plans) 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 "Buying Shares -- Buying Class A Shares," below. 4 (3) See "How to Buy Shares -- Buying Class B Shares" below, for more information on the contingent deferred sales charges. (4) There is a $10 transaction fee for redemption proceeds paid by Federal Funds wire, but not for redemptions paid by check or ACH transfer through AccountLink or, with respect to shares of Liquid Fund or Class A shares of Income Fund and Government Securities Fund, for which check writing privileges are used (see "How to Sell Shares"). / / ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and represent the Fund's expenses in operating its business. For example, a Fund pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is referred to in this Prospectus as the "Manager"). The rates of the Manager's fees are set forth in "How the Funds are Managed," below. A Fund has other regular expenses for services, such as transfer agent fees, custodial fees paid to the bank that holds the Fund's portfolio securities, audit fees and legal expenses. Those expenses are detailed in a Fund's Financial Statements in the Statement of Additional Information. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
GOVERNMENT INCOME FUND SECURITIES FUND --------------------- --------------------- LIQUID CLASS A CLASS B CLASS A CLASS B FUND SHARES SHARES SHARES SHARES - -------------------------------------------------------------------------------------------- Management Fees .50% .625% .625% .625% .625% - -------------------------------------------------------------------------------------------- 12b-1 Plan Fees .00% .25% 1.00% .25% 1.00% - -------------------------------------------------------------------------------------------- Other Expenses .46% .315% .315% .355% .355% - -------------------------------------------------------------------------------------------- Total Fund Operating Expenses .96% 1.19% 1.94% 1.23% 1.98%
The numbers for Liquid Fund and Class A shares in the chart above are based on the Fund's expenses in its last fiscal year. These amounts are shown as a percentage of the average net assets of Liquid Fund and each class of each of the other Fund's shares for that year. Class B shares of Income Fund and Government Securities Fund were not publicly offered before October 1, 1995. Therefore, the Annual Fund Operating Expenses shown are based on expenses for the period from October 1, 1995 until December 31, 1995. The actual expenses for shares of Liquid Fund and each class of shares of each of the other Funds in future years may be more or less than the numbers in the chart, depending on a number of factors, including the actual amount of a Fund's assets represented by each class of shares. The "12b-1 Distribution Plan Fees" for shares of Class A shares of Income Fund and Government Securities Fund are the Service Plan Fees (which can be up to a maximum of 0.25% of average annual net assets of that class). For Class B shares, 12b-1 Plan Fees include the Service Plan Fees (which can be up to a maximum of 0.25%) and an annual asset-based sales charge of 0.75%. These plans are described in greater detail in "How to Buy Shares." 5 / / 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 shares of Liquid Fund and in each class of shares of each of the other Funds, and each Fund's annual return is 5%, and that its operating expenses are the ones shown in the Annual Fund Operating Expenses table above. If you were to redeem your shares at the end of each period shown below, your investment would incur the following expenses by the end of each period shown:
1 YEAR 3 YEARS 5 YEARS 10 YEARS* - --------------------------------------------------------------------- Liquid Fund $11 $ 34 $ 58 $129 - --------------------------------------------------------------------- Class A Shares Income Fund $59 $ 83 $110 $185 Government Securities Fund $59 $ 85 $112 $189 - --------------------------------------------------------------------- Class B Shares Income Fund $70 $101 $125 $207 Government Securities Fund $70 $102 $127 $211
If you did not redeem your investment, it would incur the following expenses: Class B Shares Income Fund $20 $ 61 $105 $207 Government Securities Fund $20 $ 62 $107 $211 - --------------------------------------------------------------------- * The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because the Fund automatically converts your Class B shares into Class A shares after 6 years. Because of the effect of the asset-based and the contingent deferred sales charge on Class B shares, long-term Class B shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations. For Class B shareholders, the automatic conversion of Class B shares into Class A shares is designed to minimize the likelihood that this will occur. Please refer to "How to Buy Shares" for more information. THESE EXAMPLES SHOW THE EFFECT OF EXPENSES ON AN INVESTMENT, BUT ARE NOT MEANT TO STATE OR PREDICT ACTUAL OR EXPECTED COSTS OR INVESTMENT RETURNS OF THE FUNDS, WHICH MAY BE GREATER OR LESSER THAN THOSE SHOWN. A BRIEF OVERVIEW OF THE FUNDS Some of the important facts about each 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 in a Fund. Keep the Prospectus for reference after you invest particularly for information about your account, such as how to sell or exchange shares. 6 / / WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND WHAT DO THE FUNDS INVEST IN? The LIQUID FUND'S investment objective is to seek as high a level of current income as is consistent with preservation of capital and maintenance of liquidity by investing in money market instruments. The INCOME FUND'S investment objective is to seek high current income consistent with prudent investment risk and preservation of capital by investing primarily in corporate debt securities with remaining maturities of five years or less or mortgage debt securities with prepayment features which, in the judgment of the investment advisor, will result in payment of interest and principal such that the effective maturity of the securities is five years or less. The GOVERNMENT SECURITIES FUND'S investment objective is to seek a high level of current income with a high degree of safety of principal by investing primarily (at least 65% of its total assets under normal market conditions) in U.S. Government securities and U.S. Government related securities. The Funds' investments are more fully explained in "Investment Objectives and Policies," starting on page __. / / WHO MANAGES THE FUNDS? The Fund's investment adviser is OppenheimerFunds, Inc., which (including a subsidiary) advises investment company portfolios having over $40 billion in assets at December 31, 1995. The portfolio managers are as follows: For LIQUID FUND, Carol Wolf; and for INCOME FUND and GOVERNMENT SECURITIES FUND, David Rosenberg. The Funds' Board of Directors, elected by shareholders, oversees the investment advisor. The Manager is paid an advisory fee by each Fund, based on its net assets. Please refer to "How the Funds are Managed," starting on page ____ for more information about the Manager and its fees. / / HOW RISKY ARE THE FUNDS? All investments carry risks to some degree. Money market funds, like Liquid Fund, are in general relatively conservative investments. The Liquid Fund attempts to maintain a stable share price of $1.00, but there is no guarantee it will do so. U.S. Government securities and other debt securities in which Government Securities Fund and Income Fund invest may be affected by changes in interest rates. When prevailing interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term securities. In the OppenheimerFunds spectrum, Income Fund, a short-term bond fund, and Government Securities Fund, a government securities fund, are generally more volatile than Liquid Fund, a money market fund. While the Manager tries to reduce risks by diversifying investments, by carefully researching securities before they are purchased for a portfolio and in some cases by using hedging techniques, there is no guarantee of success in achieving a Fund's objective and your shares may be worth more or less than their original cost when you redeem them. Please refer to "Investment Objectives and Policies" starting on page ___ for a more complete discussion of each Fund's investment risks. / / 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 an Automatic Investment Plan under AccountLink. You can buy shares of Liquid Fund by using Federal Funds wires. Please refer to "How To Buy Shares" beginning on page ___ for more details. / / WILL I PAY A SALES CHARGE TO BUY SHARES? Shares of Liquid Fund are sold at net asset value, without a sales charge. Normally, the net asset value of the Liquid Fund is $1.00 per share. There can be no assurance, however, that Liquid Fund's net asset value will not vary. Income Fund and Government Securities Fund each have two classes of shares. Each class of shares has the same investment portfolio, but different expenses. Class A shares are offered with a front-end sales charge, starting at 4.75% and reduced for larger purchases. Class B shares are offered without front-end sales charges, but may be subject to a contingent deferred sales charge if redeemed within five 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, 7 including a discussion about factors you and your financial advisor should consider in determining 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. Shares of Liquid Fund and Class A shares of the other Funds may be redeemed by writing a check against your current account. Shares of Liquid Fund may also be redeemed by wire to a previously designated bank account. Please refer to "How To Sell Shares" on page ___. Each Fund also offers exchange privileges to other Oppenheimer funds, described in "How to Exchange Shares" on page ____. / / HOW HAVE THE FUNDS PERFORMED? Liquid Fund measures its performance by quoting its yield and compounded effective yield, which measure historical performance. Each of the other Funds measures its performance by quoting a yield, dividend yield, average annual total return and cumulative total return. Those returns can be compared to the yields or total returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. Please remember that past performance does not guarantee future results. FINANCIAL HIGHLIGHTS The following information for the fiscal year ended December 31, 1995 has been derived from audited financial statements together with the auditors' report for the year ended December 31, 1995 which is included in the Statement of Additional Information. The tables on the following pages present selected financial information about the Funds, including per share data and expense ratios and other data based on each Fund's respective average net assets. 8
FINANCIAL HIGHLIGHTS* LIQUID FUND YEARS ENDED DECEMBER 31, ------------------------------------------------------------- PER SHARE OPERATING DATA: 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) .0499 .0334 .0227 .0287 .0522 .0731 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations .0499 .0334 .0227 .0287 .0522 .0731 - ------------------------------------------------------------------------------------------------------------------------------ Dividends and distributions to shareholders: Dividends from net investment income (.0499) (.0334) (.0227) (.0287) (.0522) (.0731) Distributions from net realized gain on investments and foreign currency transactions -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions to shareholders (.0499) (.0334) (.0227) (.0287) (.0522) (.0731) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- - ------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 5.11% 3.40% 2.30% 2.89% 5.31% 7.53% - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $75,808 $63,946 $76,620 $67,549 $69,932 $84,387 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income (loss) 4.99% 3.34% 2.27% 2.87% 5.22% 7.31% Expenses .96% .93% .95% 1.02% 1.01% 1.06% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate n/a n/a n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS* LIQUID FUND YEARS ENDED DECEMBER 31, ----------------------------------------- PER SHARE OPERATING DATA: 1989 1988 1987 1986 ---- ---- ---- ---- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 - ---------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .0822 .0664 .0581 .0588 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions -- -- -- -- ------- ------- ------- ------- Total income (loss) from investment operations .0822 .0664 .0581 .0588 - ---------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.0822) (.0664) (.0581) (.0588) Distributions from net realized gain on investments and foreign currency transactions -- -- -- -- ------- ------- ------- ------- Total dividends and distributions to shareholders (.0812) (.0664) (.0581) (.0588) - ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 ------- ------- ------- ------- ------- ------- ------- ------- - ---------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 8.53% 6.82% 5.97% 6.03% - ---------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $87,264 $73,921 $68,908 $74,111 - ---------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 8.22% 6.64% 5.81% 5.88% Expenses 1.06% 1.04% 1.00% 1.00% - ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate n/a n/a n/a n/a - ----------------------------------------------------------------------------------------------------------
- ------------------------- * G.R. Phelps & Co. managed the Fund during these periods. 9
FINANCIAL HIGHLIGHTS* INCOME FUND -- CLASS A SHARES YEARS ENDED DECEMBER 31, ----------------------------------------------------------- PER SHARE OPERATING DATA: 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- Net asset value, beginning of period $9.14 $9.86 $9.75 $9.91 $9.44 $9.79 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .67 .68 .65 .79 .81 .94 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions .37 (.72) .11 (.16) .47 (.35) ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations 1.04 (.04) .76 .63 1.28 .59 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.66) (.68) (.65) (.79) (.81) (.94) Distributions from net realized gain on investments and foreign currency transactions -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions to shareholders (.66) (.68) (.65) (.79) (.81) (.94) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.52 $9.14 $9.86 $9.75 $9.91 $9.44 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- - ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 11.77% (0.42)% 7.97% 6.60% 14.22% 6.33% - ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $33,127 $46,547 $48,636 $38,675 $22,839 $19,809 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 6.97% 7.16% 6.56% 8.09% 8.44% 9.78% Expenses .63% .63% .63% .63% 1.12% 1.24% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 57.08% 62.88% 145.94% 109.47% 50.44% 90.20% - ---------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS* INCOME FUND -- CLASS A SHARES YEARS ENDED DECEMBER 31, ----------------------------- PER SHARE OPERATING DATA: 1989 1988 1987 1986 ---- ---- ---- ---- Net asset value, beginning of period $9.77 $9.97 $11.04 $10.55 - -------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .88 .84 .76 .83 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions .02 (.19) (.56) .57 ------- ------- ------- ------- Total income (loss) from investment operations .90 .65 .20 1.40 - -------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.88) (.85) (.76) (.83) Distributions from net realized gain on investments and foreign currency transactions -- -- (.51) (.08) ------- ------- ------- ------- Total dividends and distributions to shareholders (.88) (.85) (1.27) (.91) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.79 $9.77 $9.97 $11.04 ------- ------- ------- ------- ------- ------- ------- ------- - -------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 9.56% 6.70% 2.03% 13.54% - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $18,705 $16,789 $15,367 $14,620 - -------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 8.93% 8.43% 7.32% 7.69% Expenses 1.27% 1.24% 1.27% 1.29% - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 52.95% 150.04% 231.39% 164.13% - --------------------------------------------------------------------------------------------------------
- ------------------------- * G.R. Phelps & Co. managed the Fund during these periods. (a) Annual total returns do not include the effect of sales charges. 10
FINANCIAL HIGHLIGHTS* (CONT'D.) INCOME FUND -- CLASS B SHARES(c) PERIOD ENDED DECEMBER 31, 1995 ----------------- PER SHARE OPERATING DATA: Net asset value, beginning of period $ 9.46 - ----------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .13 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions .10 ------ Total income (loss) from investment operations .23 - ----------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.13) Distributions from net realized gain on investments and foreign currency transactions -- ------ Total dividends and distributions to shareholders (.13) - ----------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.56 ------ ------ - ----------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(b) 2.41% - ----------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $59 - ----------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 1.43%(a) Expenses 1.63%(a) - ----------------------------------------------------------------------------------------------------- Portfolio turnover rate 57.08% - -----------------------------------------------------------------------------------------------------
- ------------------------- * G.R. Phelps & Co. managed the Fund during this period. (a) Annualized. (b) Total returns do not include the effect of sales charges. (c) For the period from October 1, 1995 (inception) through December 31, 1995. 11
FINANCIAL HIGHLIGHTS* GOVERNMENT SECURITIES FUND -- CLASS A SHARES YEARS ENDED DECEMBER 31, ----------------------------------------------------------- PER SHARE OPERATING DATA: 1995 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- Net asset value, beginning of period $9.76 $10.91 $11.19 $11.36 $10.68 $10.58 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .72 .69 .70 .77 .85 .84 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions .97 (1.14) .36 (.12) .68 .10 ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations 1.69 (.45) 1.06 .65 1.53 .94 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.72) (.69) (.70) (.77) (.85) (.84) Distributions from net realized gain on investments and foreign currency transactions -- (.01) (.64) (.05) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions to shareholders (.72) (.70) (1.34) (.82) (.85) (.84) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.73 $9.76 $10.91 $11.19 $11.36 $10.68 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- - ---------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 17.90% (4.18)% 9.56% 6.07% 15.03% 9.44% - ---------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $49,829 $60,162 $77,596 $67,612 $55,332 $47,524 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 6.93% 6.71% 6.03% 6.92% 7.83% 8.07% Expenses .98% .91% .93% 1.01% 1.07% 1.16% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50.64% 156.90% 224.02% 131.79% 27.50% 44.19% - ---------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS* GOVERNMENT SECURITIES FUND -- CLASS A SHARES YEARS ENDED DECEMBER 31, ----------------------------------------------------------- PER SHARE OPERATING DATA: 1989 1988 1987 1986 ---- ---- ---- ---- Net asset value, beginning of period $10.06 $10.17 $10.90 $10.73 - -------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .84 .84 .84 .92 Net realized and unrealized gain (loss) on investment, options written and foreign currency transactions .52 (.05) (.52) .28 ------- ------- ------- ------- Total income (loss) from investment operations 1.36 .79 .32 1.20 - -------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.84) (.85) (.84) (.92) Distributions from net realized gain on investments and foreign currency transactions -- (.05) (.21) (.11) ------- ------- ------- ------- Total dividends and distributions to shareholders (.84) (.90) (1.05) (1.03) - -------------------------------------------------------------------------------------------------------- Net asset value, end of period 10.58 $10.06 $10.17 $10.90 ------- ------- ------- ------- ------- ------- ------- ------- - ------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(a) 14.10% 7.99% 3.33% 11.66% - -------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $41,561 $35,910 $24,703 $22,947 - -------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 8.14% 8.27% 8.12% 8.92% Expenses 1.19% 1.16% 1.24% 1.27% - -------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68.14% 175.50% 207.67% 111.68% - --------------------------------------------------------------------------------------------------------
* G.R. Phelps & Co. managed the Fund during these periods. (a) Annual total returns do not include the effect of sales charges. 12
FINANCIAL HIGHLIGHTS* (CONT'D.) GOVERNMENT SECURITIES FUND -- CLASS B SHARES(c) PERIOD ENDED DECEMBER 31, 1995 ----------------- PER SHARE OPERATING DATA: Net asset value, beginning of period $10.45 - ------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .12 Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions .32 ------ Total income (loss) from investment operations .44 - ------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.12) ------ Distributions from net realized gain on investments and foreign currency transactions -- ------ Total dividends and distributions to shareholders (.12) - ------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.77 ------ ------ - ------------------------------------------------------------------------------------------------------------- RETURN, AT NET ASSET VALUE(b) 4.20% - ------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $74 - ------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income (loss) 1.36%(a) Expenses 1.98%(a) - ------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50.64% - -------------------------------------------------------------------------------------------------------------
- ------------------------- * G.R. Phelps & Co. managed the Fund during this period. (a) Annualized. (b) Total returns do not include the effect of sales charges. (c) For the period from October 1, 1995 (inception) through December 31, 1995. 13 INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVE AND POLICIES -- LIQUID FUND. The Liquid Fund seeks as high a level of current income as is consistent with preservation of capital and maintenance of liquidity by investing in money market instruments. Money market instruments are high quality, short-term securities that present minimal credit risk. They consist of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, commercial paper of U.S. and non-U.S., issuers and certificates of deposit, banker's acceptances, bank deposits of U.S. and non-U.S. banks (including Eurodollar and Yankee dollar deposits) and short-term corporate debt securities. These instruments are denominated in U.S. dollars and may carry fixed or variable interest rates. These instruments are described further under the caption "Other Investment Techniques and Strategies." The Fund seeks to maintain a constant net asset value of $1.00 per share by investing in securities having an actual or effective maturity of 365 days or less and maintaining a dollar-weighted average portfolio maturity of 90 days or less. There can be no assurance, however, that the Fund will be able to maintain a stable price per share of $1.00. The Fund may purchase only money market instruments that are within the two highest rating categories of the major rating agencies (E.G., Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group ("Standard & Poor's"). The Fund will not invest more than 5% of its total assets in securities that, although of high quality, have not been rated in the highest short-term rating category or, if unrated, have not been judged by the Manager to be of equivalent quality. Within this 5% limitation, the Fund will not invest more than 1% of its total assets, or $1 million, whichever is greater, in securities (other than U.S. Government securities) of any single issuer. The Fund intends to hold its investments until maturity, but may sell them prior to maturity for a number of reasons, including: to shorten or lengthen the average maturity of the Fund's portfolio; to increase yield; to maintain the quality of the portfolio; or to maintain a stable share value. Securities in which the Liquid Fund invests will generally not yield as high a level of current income as lower quality and longer-term securities. Such lower quality and longer-term securities, however, may have less liquidity and greater credit and interest rate risk. AN INVESTMENT IN THE LIQUID FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. INVESTMENT OBJECTIVE AND POLICIES -- INCOME FUND. The Income Fund seeks high current income consistent with prudent investment risk and preservation of capital. The Fund seeks to achieve its objective by investing primarily in corporate debt securities with remaining maturities of five years or less or mortgage debt securities with prepayment features which in the judgment of the Manager will result in the payment of interest and principal such that the effective maturity is five years or less. The Fund anticipates maintaining an average dollar-weighted portfolio maturity of generally between two and three years. By restricting the maturities of the Fund's investments, the potential for dramatic changes in the value of the Fund's investments should be reduced, and the value of the Fund's shares should remain more stable than that of a longer-term bond fund. Investors should be mindful, however, that the value of the Fund's shares fluctuates based on changes in interest rates and in the credit quality of the issuers represented in its portfolio. The Fund invests at least 75% of its total assets in: U.S. Government and U.S. Government-related securities (as defined below in "Investment Objective and Policies -- Government Securities Fund"), dollar-denominated foreign government and corporate securities and short-term investments. These investments must be rated at least investment grade by a major rating agency at the time of purchase, or, if unrated, be judged by the Manager to be of 14 comparable credit quality, except that the Fund's investments in short-term investments must be rated, or judged to be the equivalent of, "Prime." Some of these investments in the lowest investment grade category may have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher grade securities. The Income Fund will not dispose of a debt security merely because of a downward change in the credit rating of that security assigned by a major credit agency. The Fund may invest the remainder of its total assets (up to 25% under normal circumstances) in debt securities and preferred stocks rated below investment grade and unrated debt securities determined by the Manager to be of comparable credit quality commonly called junk bonds. Unrated debt securities will not exceed 10% of the Fund's total assets. Debt securities having low credit quality involve greater price volatility and risk of loss of principal and income than higher quality securities. To the extent the Fund invests in lower quality debt securities, its net asset value may be subject to greater fluctuation. For a description of these and other risks associated with lower quality debt securities, see "Other Investment Techniques and Strategies -- Investing in Lower-Rated Securities." Refer to Appendix A for a description of certain rating categories. In addition, Appendix B provides a summary of ratings assigned to debt holdings (not including money market instruments) of the Fund. These percentages are historical and do not necessarily indicate the current or future debt holdings of the Fund. The Fund may invest up to 20% of its total assets in mortgage dollar rolls. The Fund may also invest up to 5% of its total assets in inverse floating rate instruments. See "Other Investment Techniques and Strategies --Inverse Floating Rate Instruments and -- Mortgage Dollar Rolls." Consistent with the foregoing policies, the Fund may invest up to 5% of its total assets in non-dollar denominated securities of foreign issuers, including issuers in developing countries. These investments are subject to special risks. See "Other Investment Techniques and Strategies-- Foreign Securities." INVESTMENT OBJECTIVE AND POLICIES -- GOVERNMENTAL SECURITIES FUND. The Government Securities Fund seeks a high level of current income with a high degree of safety of principal by investing primarily (at least 65% of its total assets under normal market conditions) in U.S. Government securities and U.S. Government-related securities. U.S. Government securities are high quality instruments issued, or guaranteed as to principal and interest, by the U.S. Treasury or by an agency or instrumentality of the U.S. Government. These may include bills, notes and bonds of the U.S. Treasury, mortgage participation certificates guaranteed by the Government National Mortgage Association (Ginnie Mae Certificates), or obligations of the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association. U.S. Government-related securities are obligations that are fully collateralized or otherwise secured by U.S. Government securities. U.S. Government securities and U.S. Government-related securities may include pools of consumer loans or mortgages, such as collateralized mortgage obligations (CMOs). The Fund's investments in privately issued CMOs will be limited to those rated within the two highest rating categories by a nationally recognized rating agency. CMOs are derivative securities; for a discussion of derivative securities, see "Other Investment Techniques and Strategies -- Derivative Investments." The U.S. Government and U.S. Government-related securities in which the Fund will invest may have fixed or floating rates of interest. U.S. Government and U.S. Government-related securities do not generally involve the credit risks associated with corporate debt securities. As a result, the Fund's yield is generally lower than the yield of most general purpose fixed-income funds, which assume certain credit risks in exchange for higher potential yield. Like corporate debt securities, however, the value of U.S. Government and U.S. Government-related securities, and thus the Fund's net asset value, 15 generally fluctuates inversely with changes in interest rates. The Manager may seek to take advantage of market developments and yield disparities by shortening average maturity in anticipation of rising interest rates and by lengthening average maturity in anticipation of declining interest rates. The Fund may also invest up to 20% of its total assets in mortgage dollar rolls. The Fund may invest up to 5% of its total assets in inverse floating rate instruments. Additional characteristics and risks associated with the securities in which the Fund invests and the investment techniques it uses are described under "Other Investment Techniques and Strategies -- U.S. Government Securities, -- Mortgage-Backed Securities and CMOs and -- Mortgage Dollar Rolls." Under normal circumstances, the Fund may invest the remainder of its assets (up to 35%) in investment grade debt obligations of private issuers. Although the Government Securities Fund invests primarily in U.S. Government and U.S. Government related securities which generally have less credit risk than other securities, AN INVESTMENT IN THE GOVERNMENT SECURITIES FUND IS NOT INSURED OR GUARANTEED. / / CAN A FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? Each Fund has an investment objective, described above, as well as investment policies it follows to try to achieve its objective. Additionally, a Fund uses certain investment techniques and strategies in carrying out those investment policies. A Fund's investment policies and practices are not "fundamental" unless this Prospectus or the Statement of Additional Information says that a particular policy is "fundamental." A Fund's investment objective is not a fundamental policy. Fund shareholders will be given 30 days' advance written notice of a change to a Fund's investment objective. Fundamental policies are those that cannot be changed without the approval of a "majority" of a 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). A Fund's Board of Directors may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. / / PORTFOLIO TURNOVER. A change in the securities held by a Fund is known as "portfolio turnover." Income Fund and Government Securities Fund may take advantage of short-term differentials in yields when short-term trading is consistent with their objectives of seeking income. While short-term trading increases portfolio turnover, the Funds incur little or no brokerage costs for U.S. Government securities. The portfolio turnover rates of Income Fund and Government Securities Fund were 57.08% and 50.64%, respectively for the fiscal year ended December 31, 1995. The "Financial Highlights," above, show the Funds' (other than Liquid Fund's) portfolio turnover rates during past fiscal years. High portfolio turnover may affect the ability of a Fund to qualify as a "regulated investment company" under the Internal Revenue Code and avoid being taxed on amounts distributed as dividends and capital gains to shareholders. Each Fund qualified as such in its fiscal period ended December 31, 1995 and intends to do so in the future, although it reserves the right not to qualify. OTHER INVESTMENT TECHNIQUES AND STRATEGIES. The Funds may also use the investment techniques and strategies described below, which involve certain risks. The Statement of Additional Information contains more detailed information about these practices, including limitations on their use that may help to reduce some of the risks. 16 / / DEBT SECURITIES. Each Fund may purchase debt securities consisting of corporate debt obligations, U.S. Government securities, municipal obligations, mortgage-backed and asset-backed securities, adjustable rate securities, stripped securities, custodial receipts for Treasury certificates, zero coupon bonds, equipment trust certificates, loan participation notes, structured notes and money market instruments. Debt securities are subject to changes in their value due to changes in prevailing interest rates. When prevailing interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. Changes in the value of securities held by a Fund mean that the Fund's share prices can go up or down when interest rates change, because of the effect of the change on the value of the Fund's portfolio of debt securities. Credit risk relates to the ability of the issuer of a debt security to make interest or principal payments on the security as they become due. Generally, higher-yielding, lower-rated bonds (which Income Fund may hold) are subject to greater credit risk than higher-rated bonds. / / INVESTING IN LOWER-RATED SECURITIES (INCOME FUND ONLY). The domestic and foreign debt securities Income Fund can invest in may include high-yield, "lower-grade" debt securities (including both high-yielding rated and unrated securities), commonly known as "junk bonds," 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 or "Baa" by Moody's or similar ratings by other rating organizations. "Lower-grade" debt securities 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. Income Fund may not invest in securities rated below "B" by Standard & Poor's or Moody's. The Manager may retain securities whose ratings fall below B after purchase until the Manager determines that disposing of such securities is in the best interests of the Fund. Appendix B to this Prospectus describes the rating categories. 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 ("credit risk"). All corporate debt securities (whether foreign or domestic) are subject to some degree of credit risk. For foreign lower-grade debt securities, these risks are in addition to the risks of investing in foreign securities, described below. These risks mean that Income Fund may not achieve the expected income from lower-grade securities, and that Income Fund's net asset value per share may be affected by declines in value of these securities. The Manager does not rely on credit ratings assigned by rating agencies in assessing investment opportunities in such bonds. Ratings by credit agencies focus on safety of principal and interest payments and do not evaluate market risks. In addition, ratings by credit agencies may not be changed by the agencies in a timely manner to reflect subsequent economic events. By carefully selecting individual issues and diversifying portfolio holdings by industry sector and issuer, the Manager believes that the default risk of lower rated securities can be reduced. Emphasis on credit risk management involves the Manager's own internal analysis to determine the debt service capability, financial flexibility and liquidity of an issuer, as well as the fundamental trends and outlook for the issuer and its industry. The Manager's rating helps it determine the attractiveness of specific issues relative to the valuation by the market place of similarly rated credits. 17 / / FOREIGN SECURITIES (INCOME FUND ONLY). Consistent with its investment objective and policies, Income Fund may purchase equity and debt securities issued or guaranteed by foreign companies or foreign governments or their agencies. The Fund may purchase securities in any country, developed or underdeveloped. Investments in securities of issuers in underdeveloped countries generally involve more risk and may be considered highly speculative. As a matter of fundamental policy, Income Fund may not invest more than 10% of its total assets in foreign securities, except the following securities, in which the Fund may invest up to 25% of its total assets: foreign equity and debt securities (i) issued, assumed or guaranteed by foreign governments or their political subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic issuers, including Eurodollar securities, and (iii) issued, assumed or guaranteed by foreign issuers having a class of securities listed for trading on the NYSE. Foreign currency will be held by Income Fund only in connection with the purchase or sale of foreign securities. / / FOREIGN SECURITIES HAVE SPECIAL RISKS. For example, foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by changes in foreign currency rates, exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental, economic or monetary policy in the U.S. or abroad, or other political and economic factors. More information about the risks and potential rewards of investing in foreign securities is contained in the Statement of Additional Information. / / WARRANTS AND RIGHTS (INCOME FUND ONLY). Warrants are options to purchase stock at set prices that are valid for a limited period of time. Rights are similar to warrants but normally have a short duration and are distributed directly by the issuer to its shareholders. Income Fund may invest up to 5% of its total assets in warrants or rights. That 5% limitation does not apply to warrants Income Fund has acquired as part of units with other securities or that are attached to other securities. No more than 2% of Income Fund's total assets may be invested in warrants that are not listed on either The New York Stock Exchange or The American Stock Exchange. For further details, see "Warrants and Rights" in the Statement of Additional Information. / / U.S. GOVERNMENT SECURITIES (ALL FUNDS). Each Fund may purchase U.S. Government Securities. Certain U.S. Government Securities, including U.S. Treasury bills, notes and bonds, and mortgage participation certificates guaranteed by the Government National Mortgage Association ("Ginnie Mae") are supported by the full faith and credit of the U.S. Government, which in general terms means that the U.S. Treasury stands behind the obligation to pay principal and interest. Ginnie Mae certificates are one type of mortgage-related U.S. Government Security a Fund may invest in. Other mortgage-related U.S. Government Securities the Funds invest in that are issued or guaranteed by federal agencies or government-sponsored entities are not supported by the full faith and credit of the U.S. Government. Those securities include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported only by the credit of the instrumentality, such as Federal National Mortgage Association ("Fannie Mae") or the Student Loan Marketing Association and obligations supported by the discretionary authority of the U.S. Government to repurchase certain obligations of U.S. Government agencies or instrumentalities such as the Federal Land Banks and the Federal Home Loan Banks. Other U.S. Government Securities a Fund may invest in are collateralized mortgage obligations ("CMOs"). The value of U.S. Government Securities will fluctuate depending on prevailing interest rates. Because the yields on U.S. Government Securities are generally lower than on corporate debt securities, when a Fund holds U.S. Government Securities it may attempt to increase the income it can earn from them by writing covered call options against them, when market conditions are appropriate. Writing covered calls is explained below, under "Hedging." 18 / / MORTGAGE-BACKED SECURITIES AND CMOS (ALL FUNDS). Certain mortgage-backed securities, whether issued by the U.S. Government or by private issuers, "pass-through" to investors the interest and principal payments generated by a pool of mortgages assembled for sale by government agencies including the Federal Housing Administration, the Farmers Home Administration or the Veterans Administration. Pass-through mortgage-backed securities entail the risk that principal may be repaid at any time because of prepayments on the underlying mortgages. That may result in greater price and yield volatility than traditional fixed-income securities that have a fixed maturity and interest rate. Each Fund (other than Liquid Fund) may also invest in CMOs, which generally are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities. Payment of the interest and principal generated by the pool of mortgages relating to the CMOs are passed through to the holders as the payments are received. CMOs are issued with a variety of classes or series which have different maturities. Certain CMOs may be more volatile and less liquid than other types of mortgage-related securities, because of the possibility of the prepayment of principal due to prepayments on the underlying mortgage loans. Each Fund (other than Liquid Fund) may also invest in CMOs that are "stripped." That means that the security is divided into two parts, one of which receives some or all of the principal payments (and is known as a "P/O") and the other which receives some or all of the interest (and is known as an "I/O"). P/Os and I/Os are generally referred to as "derivative investments," discussed further below. The yield to maturity on the class that receives only interest is extremely sensitive to the rate of payment of the principal on the underlying mortgages. Principal prepayments increase that sensitivity. Stripped securities that pay "interest only" are therefore subject to greater price volatility when interest rates change, and they have the additional risk that if the underlying mortgages are prepaid, a Fund will lose the anticipated cash flow from the interest on the prepaid mortgages. That risk is increased when general interest rates fall, and in times of rapidly falling interest rates, a Fund might receive back less than its investment. The value of "principal only" securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Private-issuer stripped securities are generally purchased and sold by institutional investors through investment banking firms. At present, established trading markets have not yet developed for these securities. Therefore, most private-issuer stripped securities may be deemed "illiquid." If a Fund holds illiquid stripped securities, the amount it can hold will be subject to the Fund's investment policy limiting investments in illiquid securities to 10% of the Fund's net assets. / / ASSET-BACKED SECURITIES (INCOME FUND AND GOVERNMENT SECURITIES FUND). Income Fund and Government Securities Fund may invest in "asset-backed" securities. These represent interests in pools of consumer loans and other trade receivables, similar to mortgage-backed securities. 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 one of the Funds. These securities may be 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. 19 / / INVERSE FLOATING RATE INSTRUMENTS (INCOME FUND AND GOVERNMENT SECURITIES FUND). Income Fund and Government Securities Fund may invest in inverse floating rate debt instruments ("inverse floaters"), including leveraged inverse floaters and inverse floating rate mortgage-backed securities, such as inverse floating rate "interest only" stripped mortgage-backed securities. The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. / / MORTGAGE DOLLAR ROLLS (INCOME FUND AND GOVERNMENT SECURITIES FUND). Income Fund and Government Securities Fund may each invest up to 20% of their respective assets in mortgage dollar rolls. In a mortgage dollar roll, the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the Fund foregoes principal and interest paid on the mortgage-backed securities. The Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. A "covered roll" is a specific type of dollar roll for which there is an offsetting cash position or a cash equivalent security position which matures on or before the forward settlement date of the dollar roll transaction. All rolls entered into by the Fund will be covered rolls. Covered rolls are not treated as a borrowing or other senior security and will be excluded from the calculation of the Fund's borrowings and other senior securities. The Manager is also permitted to purchase mortgage-backed securities and to sell such securities without regard to the length of time held in separate transactions that do not constitute dollar rolls. For financial reporting and tax purposes, the Fund treats mortgage rolls as two separate transactions: one involving the purchase of securities and a separate transaction involving a sale. The Funds do not currently intend to enter into mortgage dollar roll transactions that are accounted for as a financing. / / SHORT-TERM DEBT SECURITIES. Each Fund may in the judgment of the Manager hold cash or invest without limit in money market instruments. Only the Income Fund may invest in money market instruments denominated in foreign currency. The high quality, short-term money market instruments in which a Fund may invest include U.S. Treasury and agency obligations; commercial paper (short-term, unsecured, negotiable promissory notes of a domestic or foreign company); short-term obligations of corporate issuers; and certificates of deposit and bankers' acceptances (time drafts drawn on commercial banks usually in connection with international transactions) of domestic or foreign banks and savings and loan associations. The Income Fund will only purchase money market instruments denominated in a foreign currency within the limitations described under "Foreign Securities" and whose issuers have at least one billion dollars (U.S.) of assets. The Funds may also invest in obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investment in securities of U.S. banks, including potential unfavorable political and economic developments, different tax provisions, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest. / / LOANS OF PORTFOLIO SECURITIES (ALL FUNDS). Subject to its investment policies and restrictions, each Fund may seek to increase its income by lending portfolio securities. A Fund must receive collateral for a loan. These loans are limited to not more than 33 1/3% of the Fund's total assets and are subject to other conditions described in the Statement of Additional 20 Information. See "Loans of Portfolio Securities" in the Statement of Additional Information on securities loans. / / "WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS (ALL FUNDS EXCEPT LIQUID FUND). Each Fund (other than Liquid Fund) may purchase securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. There may be a risk of loss to a Fund if the value of the security declines prior to the settlement date. / / REPURCHASE AGREEMENTS (ALL FUNDS). Each Fund may enter into repurchase agreements. In a repurchase transaction, a Fund buys a security and simultaneously sells it to the vendor for delivery at a future date. Repurchase agreements must be fully collateralized. However, if the vendor fails to pay the resale price on the delivery date, a Fund may experience costs in disposing of the collateral and may experience losses if there is any delay in doing so. / / ILLIQUID AND RESTRICTED SECURITIES (ALL FUNDS). Under the policies established by each Fund's Board of Directors, 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. A Fund will not invest more than 10% of its total assets in illiquid and restricted securities. / / HEDGING (ALL FUNDS OTHER THAN LIQUID FUND). A Fund may write covered call options on securities, bond indices and, in the case of Income Fund, foreign currency and may purchase and sell certain kinds of futures contracts, forward contracts and options on futures, broadly-based bond indices and, in the case of Income Fund, foreign currencies, or enter into interest rate swap agreements. These are all referred to as "hedging instruments." A Fund may use hedging instruments for hedging, and, in the case of covered calls, non-hedging purposes as described below. A Fund may write covered call options and buy and sell futures and, in the case of Income Fund, buy and sell 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 and writing covered calls, hedge a Fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures, tend to increase a Fund's exposure to the securities market. Forward contracts are used by Income Fund to try to manage foreign currency risks on Income Fund's foreign investments. Foreign currency options are also used by Income Fund to try to protect against declines in the dollar value of foreign securities Income 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 a Fund for liquidity purposes, defensive reasons, or to raise cash to distribute to shareholders. / / FUTURES. A Fund may buy and sell futures contracts that relate to (1) foreign currencies (Income Fund only), (2) financial indices, including, in the case of Income Fund, foreign government securities indices (these are referred to as Financial Futures), and (3) interest rates (these are referred to as Interest Rate Futures). These types of Futures are described in "Hedging" in the Statement of Additional Information. 21 / / COVERED CALL OPTIONS AND OPTIONS ON FUTURES. A Fund may write (that is, sell) call options on securities, indices and, in the case of Income Fund, foreign currencies for hedging purposes and write call options on Futures for hedging and non-hedging purposes, but only if all such calls are "covered." This means the Fund must own the security subject to the call while the call is outstanding or segregate appropriate liquid assets. When a 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). After the Fund writes a call, not more than 20% of the value of its total assets may be subject to calls. A Fund may sell covered call options that are traded on U.S. or, in the case of Income Fund, foreign securities or commodity exchanges or which are used by the Options Clearing Corporation. In the case of foreign currency options, they may be quoted by major recognized dealers in those options. / / FORWARD CONTRACTS (INCOME FUND ONLY). Forward Contracts are foreign currency exchange contracts. They are used to buy or sell foreign currency for future delivery at a fixed price. Income Fund uses them to try to "lock in" the U.S. dollar price of a security denominated in a foreign currency that the Fund has purchased or sold, or to protect against possible losses from changes in the relative value of the U.S. dollar and a foreign currency. Normally, Income Fund will not engage in "cross hedging," where the Fund hedges against changes in currencies other than the currency in which a security it holds is denominated. Income Fund will not speculate in foreign exchange. / / INTEREST RATE SWAPS. A Fund may enter into interest rate swaps both for hedging and to seek to increase total return. In an interest rate swap, a Fund and another party exchange their right to receive, or their obligation to pay, interest on a security. For example, they may swap a right to receive floating rate interest payments for fixed rate payments. A Fund enters into swaps only on a net basis, which means the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. A Fund will segregate liquid assets (such as cash or U.S. Government Securities) to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive, and it will adjust that amount daily, as needed. / / HEDGING INSTRUMENTS CAN BE VOLATILE INVESTMENTS AND MAY INVOLVE SPECIAL RISKS. The use of hedging instruments requires special skills and knowledge of investment techniques that are different from what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce a Fund's return. A Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Options trading involves the payment of premiums, and options, futures and forward contracts are subject to special tax rules that may affect the amount, timing and character of a Fund's income and distributions. There are also special risks in particular hedging strategies. For example, if a covered call written by a Fund is exercised on an investment that has increased in value, the Fund will be required to sell the investment at the call price and will not be able to realize any profit if the investment has increased in value above the call price. 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. Interest rate swaps are subject to the risk that the other party will fail to meet its obligations (or that the underlying issuer will fail to pay on time), as well as interest rate risks. A Fund could be obligated to pay more under its swap agreements 22 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 (OTHER THAN LIQUID FUND). 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, currency or commodity. A Fund may not purchase or sell physical commodities; however, Income Fund may purchase and sell foreign currency in hedging transactions. This shall not prevent a Fund from selling covered call options and buying or selling futures contracts or from investing in securities or other instruments backed by physical commodities. Derivative investments used by a Fund are used in some cases for hedging purposes and in other cases to seek income. In the broadest sense, exchange-traded options and futures contracts (discussed in "Hedging," above) may be considered "derivative investments." A Fund may invest in different types of derivatives. "Index-linked" or "commodity-linked" notes are debt securities of companies that call for interest payments and/or payment on the maturity of the note in different terms than the typical note where the borrower agrees to pay a fixed sum on the maturity of the note. Principal and/or interest payments on an index-linked note depend on the performance of one or more market indices, such as the S&P 500 Index or a weighted index of commodity futures, such as crude oil, gasoline and natural gas. A Fund may invest in "debt exchangeable for common stock" of an issuer or "equity-linked" debt securities of an issuer. At maturity, the principal amount of the debt security is exchanged for common stock of the issuer or is payable in an amount based on the issuer's common stock price at the time of maturity. In either case there is a risk that the amount payable at maturity will be less than the expected principal amount of the debt. There are special risks in investing in derivative investments. The company issuing the instrument may fail to pay the amount due on the maturity of the instrument. Also, the underlying investment or security might not perform the way the Manager expected it to perform. Markets, underlying securities and indices may move in a direction not anticipated by the Manager. Performance of derivative investments may also be influenced by interest rate and stock market changes in the U.S. and abroad. All of this can mean that a Fund will realize less principal or income from the investment than expected. Certain derivative investments held by a Fund may be illiquid. Please refer to "Illiquid and Restricted Securities." OTHER INVESTMENT RESTRICTIONS. Each Fund has investment restrictions which are "fundamental" policies. Among these fundamental policies, Income Fund cannot do any of the following: / / Borrow amounts in excess of 10% of the Fund's total assets, taken at market value at the time of the borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes, or make investments in portfolio securities while such outstanding borrowings exceed 5% of the Fund's total assets. / / (a) Invest more than 5% of the Fund's total assets (taken at market value at the time of each investment) in the securities (other than United States Government or Government agency securities) of any one issuer (including repurchase agreements with any one bank or dealer) or more than 15% of the Fund's total assets in the obligations of any one bank; and (b) purchase more than either (i) 10% in principal amount of the outstanding debt securities of an issuer, or (ii) 10% of the outstanding voting securities of an issuer, except that such restrictions shall not apply to securities issued or guaranteed by the United States Government or its agencies, bank money instruments or bank repurchase agreements. 23 / / Invest more than 25% of its assets in securities of issuers in any single industry, provided that this limitation shall not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. For the purpose of this restriction, each utility that provides a separate service (e.g., gas, gas transmission, electric or telephone) shall be considered a separate industry. This test shall be applied on a pro forma basis using the market value of all assets immediately prior to making any investment. / / Allow its current obligations under reverse repurchase agreements (together with borrowings) to exceed one-third of the value of its total assets (less all its liabilities other than the obligations under borrowings and such agreements). Liquid Fund and Government Securities Fund cannot do any of the following: / / Borrow money, except from banks for temporary or emergency purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, borrow in the aggregate more than 10% of the value of its total assets, or invest in portfolio securities while outstanding borrowings exceed 5% of the value of its total assets. / / Invest more than 15% of the value of its total assets in the obligations of any one bank, or invest more than 5% of the value of its total assets in the commercial paper of any one issuer. / / Invest more than 25% of the value of its total assets in the securities of issuers in any single industry, provided that this limitation shall not apply to the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, certificates of deposit issued by domestic bankers and domestic bankers' acceptances (excluding foreign branches of domestic banks). HOW THE FUNDS ARE MANAGED ORGANIZATION AND HISTORY. The Company was organized in 1981 as a Maryland corporation. The Company is an open-end management investment company. Organized as a series fund, the Company presently has eight series, each of which is diversified. The Company is governed by a Board of Directors, which is responsible for protecting the interests of shareholders under Maryland law. The Directors meet periodically throughout the year to oversee each Fund's activities, review its performance, and review the actions of the Manager. "Directors and Officers of the Fund" in the Statement of Additional Information names the Directors and officers of the Funds and provides more information about them. Although the Funds are not required by law to hold annual meetings, they may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Director or to take other action described in the Company's Articles of Incorporation. The Board of Directors has the power, without shareholder approval, to divide unissued shares of the Company into two or more classes. With respect to Income Fund and Government Securities Fund, the Board has done so, and each of these Funds currently has two classes of shares, Class A and Class B. Liquid Fund offers only a single class of shares. All classes of a Fund invest in the same investment portfolio. 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 on matters submitted to the vote of shareholders. Shares of each class may have separate voting rights on matters in which interests of one class are different from interests of another class, and shares of a particular class vote as a class on matters that affect that class alone. 24 Shares are freely transferrable. Please refer to "How the Funds are Managed" in the Statement of Additional Information for further information on voting of shares. THE MANAGER AND ITS AFFILIATES. The Funds are managed by the Manager, OppenheimerFunds, Inc., which is responsible for each Fund's investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Directors, under separate Investment Advisory Agreements for each Fund which state the Manager's responsibilities and its fees. The Agreements set forth the fees paid by a Fund to the Manager, and describes the expenses that a 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 Oppenheimer funds, with assets of more than $40 billion as of December 31, 1995, and with more than 2.8 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. / / PORTFOLIO MANAGERS. The Portfolio Manager of Government Securities Fund and Income Fund is David A. Rosenberg. He is a Vice President of the Manager and has been the person principally responsible for the day-to-day management of the Funds' portfolio since March 1996. Mr. Rosenberg also serves as a portfolio manager of other Oppenheimer funds. Previously he was an officer and portfolio manager for Delaware Investment Advisors and for one of its mutual funds. The Portfolio Manager of Liquid Fund is Carol E. Wolf. Ms. Wolf has been the person principally responsible for the day-to-day management of Liquid Fund's portfolio since March 1996. Ms. Wolf is also an officer of Centennial Asset Management Corporation, an investment adviser subsidiary of the Manager, and is an officer and portfolio manager of other Oppenheimer funds. / / FEES AND EXPENSES. Under separate Investment Advisory Agreements with each Fund, each Fund pays the Manager a monthly fee equal to a percentage of the Fund's average daily net assets as follows: LIQUID FUND NET ASSET VALUE ANNUAL RATE --------------- ----------- First $200,000,000 .................... 0.50% Next $100,000,000 ..................... 0.45% Amount over $300,000,000 .............. 0.40% GOVERNMENT SECURITIES FUND AND INCOME FUND NET ASSET VALUE ANNUAL RATE -------------- ----------- First $300,000,000 .................... 0.625% Next $100,000,000 ..................... 0.500% Amount over $400,000,000 .............. 0.450% Each Fund pays expenses related to its daily operations, such as custodian fees, Directors' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of a 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 Agreements and the other expenses paid by the Funds is contained in the Statement of Additional Information. 25 There is also information about the Funds' brokerage policies and practices in "Brokerage Policies of the Funds" in the Statement of Additional Information. That section discusses how brokers and dealers are selected for the Funds' portfolio transactions. Because the Funds purchase most of their portfolio securities directly from the sellers and not through brokers, the Funds therefore incur relatively little expense for brokerage. From time to time the Funds may use brokers when buying portfolio securities. When deciding which brokers to use, the Manager is permitted by the Investment Advisory Agreements to consider whether brokers have sold shares of the Funds or any other funds for which the Manager serves as investment adviser. / / THE DISTRIBUTOR. A Fund's shares are sold through dealers and brokers that have a sales agreement with OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as each Fund's Distributor. The Distributor also distributes the shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. / / THE TRANSFER AGENT. Each Fund's transfer agent is OppenheimerFunds Services, a division of the Manager, which acts as the shareholder servicing agent for each Fund on an "at-cost" basis. It also acts as the shareholder servicing agent for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts, to the Transfer Agent at the address and toll-free number shown below in this Prospectus or on the back cover. PERFORMANCE OF THE FUNDS EXPLANATION OF PERFORMANCE TERMINOLOGY. Each Fund uses the terms "total return" and "yield" to illustrate its performance. Liquid Fund also uses "compounded effective yield" to illustrate its performance. The performance of each class of shares of Income Fund and Government Securities Fund is shown 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. These returns measure the performance of a hypothetical account in a Fund over various periods, and do not show the performance of each shareholder's account (which will vary if dividends are received in cash, or shares are sold or purchased). A Fund's performance data may help you see how well your investment has done over time. It is important to understand that a 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 a Fund's performance. A Fund's investment performance will vary over time, depending on market conditions, the composition of the portfolio, expenses and, in the case of Income Fund or Government Securities Fund, which class of shares you purchase. / / TOTAL RETURNS. There are different types of "total returns" used to measure a Fund's performance. Total return is the change in value of a hypothetical investment in a 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 a Fund's actual year-by-year performance. In the case of Income Fund and Government Securities Fund, when total returns are quoted for Class A shares, they include the payment of the current maximum initial sales charge. When total returns are shown for Class B shares, they include the effect of the contingent deferred sales charge that applies to the period for which total return is shown. Total returns may also be quoted 26 at "net asset value," without including the effect of either the front-end or the contingent deferred sales charge, as applicable, and those returns would be reduced if sales charges were deducted. / / YIELD FOR INCOME FUND AND GOVERNMENT SECURITIES FUND. Each class of shares of Income Fund and Government Securities Fund 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 a Fund's net asset value per share. Yields for Class B shares do not reflect the deduction of the contingent deferred sales charge. / / YIELD FOR LIQUID FUND. The "yield" of Liquid Fund is the income generated by an investment in the Fund over a seven-day period, which is then "annualized." In annualizing, the amount of income generated by the investment during that seven days is assumed to be generated each week over a 52-week period, and is shown as a percentage of the investment. The "compounded effective yield" is calculated similarly, but the annualized income earned by an investment in Liquid Fund is assumed to be reinvested in additional shares. The "compounded effective yield" will be slightly higher than the yield because of the effect of the assumed reinvestment. A B O U T Y O U R A C C O U N T HOW TO BUY SHARES LIQUID FUND. Shares of Liquid Fund are sold at the share price next calculated after receipt of your purchase order. There is no sales charge for direct purchases of Liquid Fund shares. INCOME FUND AND GOVERNMENT SECURITIES FUND. Income Fund and Government Securities Fund each offer 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 (up to $500,000 for purchases by OppenheimerFunds prototype 401(k) plans). If you purchase Class A shares as part of an investment of at least $1 million ($500,000 for OppenheimerFunds prototype 401(k) plans) in shares of one or more Oppenheimer funds, you will not pay an initial sales charge, but if you sell any of those shares within 18 months of buying them, you may pay a contingent deferred sales charge. The amount of that sales charge will vary depending on the amount you invested. Sales charge rates are described in "Buying Class A Shares," 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 of buying them, you will normally pay a contingent deferred sales charge that varies depending on how long you owned your shares, as described in "Buying Class B Shares," below. 27 WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that a 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. A 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 and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares. 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 a Fund. We used the sales charge rates that apply to each class, and considered the effect of the 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 your investment each year. Of course, the actual performance of your investment cannot be predicted and will vary, based on a Fund's actual investment returns, and the operating expenses borne by each class of shares, and which class of shares you invest in. The factors discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes. / / HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. Because of the effect of class-based expenses your choice will also depend on how much you invest. For example, the reduced sales charges available for larger purchases of Class A shares may, over time, offset the effect of paying an initial sales charge on your investment (which reduces the amount of your investment dollars used to buy shares for your account), compared to the effect over time of higher class-based expenses on Class B shares for which no initial sales charge is paid. / / INVESTING FOR THE SHORT TERM. If you have a short term investment horizon (that is, you plan to hold your shares for not more than five years), you should probably consider purchasing Class A shares rather than Class B shares, because of the effect of the Class B contingent deferred sales charge if you redeem in less than six years, as well as the effect of the Class B asset-based sales charge on the investment return for that class in the short-term. And for most investors who invest $500,000 or more, in most cases Class A shares will be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the Distributor normally will not accept purchase orders of $500,000 or more of Class B shares from a single investor. / / INVESTING FOR THE LONGER TERM. If you are investing for the longer term, for example, for retirement, and do not expect to need access to your money for six years or more, Class B shares may be an appropriate consideration, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charge available for larger investments in Class A shares under a Fund's Right of Accumulation. Of course all of these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, using the assumed annual performance return stated above, and you should analyze your options carefully. 28 / / ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Because some features (such as check writing) may not be available to Class B shareholders, or other features (such as Automatic Withdrawal Plans) may not be advisable (because of the effect of the contingent deferred sales charge 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. For example, share certificates are not available for Class B shares and if you are considering using your shares as collateral for a loan, this may be a factor to consider. Additionally, dividends payable to Class B shareholders will be reduced by the additional expenses borne by those classes that are not borne by Class A, such as the Class B asset-based sales charges described below and in the Statement of Additional Information. / / 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 for selling another class. It is important that investors understand that the purpose of the Class B contingent deferred sales charges and asset-based sales charges are the same as the purpose of the front-end sales charge on sales of Class A shares: to reimburse 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 for as little as $25; and subsequent purchases of at least $25 can be made by telephone through AccountLink. Under pension and profit-sharing plans and Individual Retirement Accounts (IRAs), you can make an initial investment of as little as $250 (if your IRA is established under an Asset Builder Plan, the $25 minimum applies), and subsequent investments may be as little as $25. There is no minimum investment requirement if you are buying shares by reinvesting dividends from a Fund or other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can ask your dealer or call the Transfer Agent), or by reinvesting distributions from unit investment trusts that have made arrangements with the Distributor. / / HOW ARE SHARES PURCHASED? You can buy shares several ways --through any dealer, broker or financial institution that has a sales agreement with the Distributor, or directly through the Distributor, or automatically from your bank account through an Asset Builder Plan under the OppenheimerFunds AccountLink service. WHEN YOU BUY SHARES OF INCOME FUND OR GOVERNMENT SECURITIES FUND, 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 "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment first with a financial advisor, to be sure it is appropriate for you. / / PAYMENT BY FEDERAL FUNDS WIRE (LIQUID FUND ONLY). Shares of Liquid Fund may be purchased by Federal Funds wire. The minimum investment is $2,500. You must FIRST call the 29 Distributor's Wire Department at 1-800-525-7041 to notify the Distributor of the wire, and to receive further instructions. / / GUARANTEE PAYMENT (LIQUID FUND ONLY). Broker-dealers that have sales agreements with the Distributor may place purchase orders for shares on a regular business day with the Distributor before the close of The New York Stock Exchange, which is normally 4:00 P.M., but may be earlier on some days, and the order will be effected that day if the broker-dealer guarantees that the Fund's custodian bank will receive Federal Funds to pay for the purchase by 2:00 P.M. on the next regular business day. Dividends will begin to accrue on shares purchased in this way on the regular business day the Federal Funds are received by the required time. / / BUYING SHARES THROUGH OPPENHEIMERFUNDS ACCOUNTLINK. You can use AccountLink to link your Fund account with an account at a U.S. bank or other financial institution that is an Automated Clearing House (ACH) member to transmit funds electronically to PURCHASE SHARES, to have the Transfer Agent SEND REDEMPTION PROCEEDS, or 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 a Fund (and up to four other Oppenheimer funds) automatically each month from your account at a bank or other financial institution under an Asset Builder Plan with AccountLink. Details are on the Application and in the Statement of Additional Information. / / AT WHAT PRICES ARE SHARES SOLD? Shares are sold at the public offering price based on the net asset value (and any initial sales charge that applies) that is next determined after the Distributor receives the purchase order in Denver, Colorado. 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, IN ITS SOLE DISCRETION, MAY REJECT ANY PURCHASE ORDER FOR FUND SHARES. SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix C to this Prospectus sets forth conditions for the waiver of, or exemption from, sales charges or the special sales charge rates that apply to purchases of Fund shares (including purchases by exchange) by a person who was a shareholder of one of the Former Quest for Value Funds and Former Connecticut Mutual Funds (each as defined in that Appendix). BUYING 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 may be net asset value. In some cases, reduced sales charges may be available, as described below. Out of the amount you invest, a Fund receives the net asset value to invest for your account. The sales charge varies depending on the 30 amount of your purchase. A portion of the sales charge may be retained by the Distributor and allocated to your dealer as commission. Different sales charge rates and commissions applied to sales of Class A shares prior to March 18, 1996. The current sales charge rates and commissions paid to dealers and brokers are as follows:
FRONT-END SALES FRONT-END SALES COMMISSION AS AMOUNT OF PURCHASE CHARGE AS PERCENTAGE CHARGE AS PERCENTAGE PERCENTAGE OF OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE - ------------------------------------------------------------------------------------------------ Less than $50,000 4.75% 4.98% 4.00% - ------------------------------------------------------------------------------------------------ $50,000 or more but less than $100,000 4.50% 4.71% 3.75% - ------------------------------------------------------------------------------------------------ $100,000 or more but less than $250,000 3.50% 3.63% 2.75% - ------------------------------------------------------------------------------------------------ $250,000 or more but less than $500,000 2.50% 2.56% 2.00% - ------------------------------------------------------------------------------------------------ $500,000 or more but less than $1 million 2.00% 2.04% 1.60% - ------------------------------------------------------------------------------------------------
The Distributor reserves the right to reallow the entire commission to dealers. If that occurs, the dealer may be considered an "underwriter" under Federal securities laws. / / CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales charge on purchases of Class A shares of any one or more of the Oppenheimer funds in the following cases: / / purchases aggregating $1 million or more, or / / purchases by an OppenheimerFunds prototype 401(k) plan that: (1) buys shares costing $500,000 or more or (2) has, at the time of purchase, 100 or more eligible participants, or (3) certifies that it projects to have annual plan purchases of $200,000 or more. The Distributor pays dealers of record commissions on those 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 purchases over $5 million. That commission will be paid only on the amount of those purchases in excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k) prototype plans) 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% either (1) of the aggregate net asset value of the redeemed shares (not including shares purchased by reinvestment of dividends or capital gain distributions) or (2) the original cost of the shares, whichever is less. The Class A contingent deferred sales charge will not exceed the aggregate commissions the Distributor paid to your dealer on all Class A shares of all Oppenheimer funds you purchased subject to the Class A contingent deferred sales charge. In determining whether a contingent deferred sales charge is payable, a 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. 31 No Class A contingent deferred sales charge is charged on exchanges of shares under a 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 Oppenheimer funds (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 of Income Fund or Government Securities Fund 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 and Class B shares you purchase for your individual accounts, or jointly, or for trust or custodial accounts on behalf of your children who are minors. 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 and Class B shares of a Fund and other Oppenheimer funds to reduce the sales charge rate for current purchases of Class A shares. You can also include Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your investment in one of the Oppenheimer funds. 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 Oppenheimer funds are listed in "Reduced Sales Charges" in the Statement of Additional Information, or a list can be obtained from the Distributor. 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, if you purchase Class A shares or Class A and Class B shares of a Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares purchased during that period. More information is contained in the Application and in "Reduced Sales Charges" in the Statement of Additional Information. / / WAIVERS OF CLASS A SALES CHARGES. The Class A sales charges are not imposed in the circumstances described below. There is an explanation of this policy in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN PURCHASERS. Class A shares purchased by the following investors are not subject to any Class A sales charges: / / the Manager or its affiliates; / / 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 a Fund, the Manager and its affiliates, and retirement plans established by them for their employees; 32 / / registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; / / dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees; / / employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and 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); / / dealers, brokers or registered investment advisers that have entered into an agreement with the Distributor providing specifically for the use of shares of a Fund in particular investment products made available to their clients (those clients may be charged a transaction fee by their dealer, broker or advisor for the purchase or sale of Fund shares) / / 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 administrative services. / / directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons; / / accounts for which Oppenheimer Capital is the investment adviser (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts; / / any unit investment trust that has entered into an appropriate agreement with the Distributor; / / a TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B TRAC-2000 program on November 24, 1995; or / / qualified retirement plans that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, provided that such arrangements are consummated and share purchases commence by March 31, 1996. WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN TRANSACTIONS. Class A shares issued or purchased in the following transactions are not subject to Class A sales charges: / / shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which a Fund is a party; / / shares purchased by the reinvestment of loan repayments by a participant in a retirement plan for which the Manager or one of its affiliates acts as sponsor; / / shares purchased by the reinvestment of dividends or other distributions reinvested from a Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor; 33 / / shares purchased and paid for with the proceeds of shares redeemed in the past 12 months from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid (this waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner); this waiver must be requested when the purchase order is placed for your Fund shares, and the Distributor may require evidence of your qualification for this waiver; and / / shares purchased with the proceeds of maturing principal of units of any Qualified Unit Investment Liquid Trust Series. WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: / / for retirement distributions or loans to participants or beneficiaries from qualified retirement plans, deferred compensation plans or other employee benefit plans, including OppenheimerFunds prototype 401(k) plans (these are all referred to as "Retirement Plans"); / / to return excess contributions made to Retirement Plans; / / to make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the original account value; / / involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (see "Shareholder Account Rules and Policies," below); / / if, at the time a purchase order is placed for Class A shares that would otherwise be subject to the Class A contingent deferred sales charge, the dealer agrees in writing to accept the dealer's portion of the commission payable on the sale in installments of 1/18th of the commission per month (and no further commission will be payable if the shares are redeemed within 18 months of purchase); or / / for distributions from OppenheimerFunds prototype 401(k) plans for any of the following cases or purposes: (1) following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary (the death or disability must occur after the participant's account was established); (2) hardship withdrawals, as defined in the plan; (3) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (4) to meet the minimum distribution requirements of the Internal Revenue Code; (5) to establish "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code, or (6) separation from service. / / SERVICE PLAN FOR CLASS A SHARES. Each of Income Fund and Government Securities 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 a 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 a Fund's Board of Directors authorizes such reimbursements, which no Fund Board has done as yet) for its other expenditures under the Plan. Services to be provided include, among others, answering customer inquiries about a Fund, assisting in establishing and maintaining accounts in a Fund, making a Fund's investment plans 34 available and providing other services at the request of a 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. BUYING 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 six years of their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. That sales charge will not apply to shares purchased by the reinvestment of dividends or capital gains distributions. The charge will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price. The contingent deferred sales charge is not imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions). The Class B contingent deferred sales charge is paid to the Distributor to compensate it for providing distribution-related services to a Fund in connection with the sale of Class B shares. To determine whether the contingent deferred sales charge applies to a redemption, a Fund redeems shares in the following order: (1) shares acquired by reinvestment of dividends and capital gains distributions, (2) shares held for over five years, and (3) shares held the longest during the five-year period. The contingent deferred sales charge is not imposed in the circumstances described in "Waivers of Class B Sales Charges," below. The amount of the contingent deferred sales charge will depend on the number of years since you invested and the dollar amount being redeemed, according to the following schedule: YEARS SINCE BEGINNING OF CONTINGENT DEFERRED SALES CHARGE MONTH IN WHICH ON REDEMPTIONS IN THAT YEAR PURCHASE ORDER WAS ACCEPTED (AS % OF AMOUNT SUBJECT TO CHARGE) - -------------------------------------------------------------------- 0-1 5.0% - -------------------------------------------------------------------- 1-2 4.0% - -------------------------------------------------------------------- 2-3 3.0% - -------------------------------------------------------------------- 3-4 3.0% - -------------------------------------------------------------------- 4-5 2.0% - -------------------------------------------------------------------- 5-6 1.0% - -------------------------------------------------------------------- 6 and following None In the table, a "year" is a 12-month period. All purchases are considered to have been made on the first regular business day of the month in which the purchase was made. Different contingent deferred sales charges applied to redemptions of Class B shares prior to March 18, 1996. / / AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase Class B shares, those shares will automatically convert to Class A shares. This conversion feature relieves Class B shareholders of the asset-based sales charge that applies to Class B shares under the Class B Distribution and Service Plan, described below. The conversion is based on the relative 35 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 PLANS FOR CLASS B SHARES. Each of Income Fund and Government Securities Fund has adopted Distribution and Service Plans for Class B shares to compensate the Distributor for its costs in distributing Class B shares and servicing accounts. Under the Plans, a 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. Under each Plan, both fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The 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 those shares. The Distributor uses the service fees 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 Distributor pays the 0.25% service fees to dealers in advance for the first year after Class B shares have been sold by the dealer and retains the service fee paid by a Fund in that year. After the shares have been held for a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor currently pays sales commissions of 2.75% on the purchase price of Class B shares to dealers from its own resources at the time of sale. The total amount paid by the Distributor to the dealer at the time of sales of Class B shares is therefore 3.00% of the purchase price. A Fund pays the asset-based sales charge to the Distributor for its services rendered in distributing Class B shares. Those payments, retained by the Distributor, are at a fixed rate that is not related to the Distributor's expenses. The services rendered by the Distributor include paying and financing the payment of sales commissions, service fees and other costs of distributing and selling Class B shares. 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 a Fund under the Distribution and Service Plans for Class B shares. Therefore, those expenses may be carried over and paid in future years. If a Fund terminates its Plan, the Board of Directors may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the Plan was terminated. / / WAIVERS OF CLASS B SALES CHARGES. The Class B contingent deferred sales charges will not be applied to shares purchased in certain types of transactions nor will it apply to Class B shares redeemed in certain circumstances as described below. The reasons for this policy are in "Reduced Sales Charges" in the Statement of Additional Information. WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B contingent deferred sales charges will be waived for redemptions of shares in the following cases, if the Transfer Agent is notified that these conditions apply to the redemption: / / 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 36 Internal Revenue Code) of the participant or beneficiary (the death or disability must have occurred after the account was established); / / redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder (the death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration); / / returns of excess contributions to Retirement Plans; / / distributions from IRAs (including SEP-IRAs and SAR/SEP accounts) before the participant is age 59-1/2, and distributions from 403(b)(7) custodial plans or pension or profit sharing plans before the participant is age 59-1/2 but only after the participant has separated from service, if the distributions are made in substantially equal periodic payments over the life (or life expectancy) of the participant or the joint lives (or joint 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); / / shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," below; or / / distributions from OppenheimerFunds prototype 401(k) plans (1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code; (3) to meet minimum distribution requirements as defined in the Internal Revenue Code; (4) to make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for separation from service. WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent deferred sales charge is also waived on Class B shares sold or issued in the following cases: / / shares sold to the Manager or its affiliates; / / shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose; and / / shares issued in plans of reorganization to which a Fund is a party. 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 should 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 by sending signature-guaranteed 37 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 a 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 Oppenheimer funds 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 a 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. Each Fund has several plans that enable you to sell shares automatically or exchange them to another Oppenheimer funds 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 to exchange an amount you establish in advance automatically for shares of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum purchase for each other Oppenheimer funds 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 Class A or Class B shares, you have up to 6 months to reinvest all or part of the redemption proceeds in Class A shares of the same Fund or other Oppenheimer funds without paying a sales charge. This privilege applies to Class A shares that you purchased subject to an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge when you redeemed them. You must be sure to 38 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 / / 401(k) PROTOTYPE RETIREMENT PLANS for businesses 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 by selling (redeeming) some or all of your shares on any regular business day. Your shares will be sold at the next net asset value calculated after your order is received and accepted by the Transfer Agent. Each Fund offers you a number of ways to sell your shares: in writing, or by using the Fund's check writing privilege, or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis, as described above. If you sell shares of the Liquid Fund which were acquired by an exchange from Class B shares or Class A shares subject to a CDSC of any of the other Oppenheimer funds, such shares of Liquid Fund when redeemed are subject to the CDSC rate of the original shares purchased. 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 Funds 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 39 / / The redemption check is not payable to all shareholders listed on the account statement / / The redemption check is not sent to the address of record on your account statement / / Shares are being transferred to a Fund account with a different owner or name / / Shares are redeemed by someone other than the owners (such as an Executor) / / WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer Agent will accept a guarantee of your signature by a number of financial institutions, including: a U.S. bank, trust company, credit union or savings association, or by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered dealer or broker in securities, municipal securities or government securities, or by a U.S. national securities exchange, a registered securities association or a clearing agency. IF YOU ARE SIGNING AS A FIDUCIARY OR ON BEHALF OF A CORPORATION, PARTNERSHIP OR OTHER BUSINESS, 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 / / Your Fund's name / / Your Fund account number (from your account statement) / / The dollar amount or number of shares to be redeemed / / Any special payment instructions / / Any share certificates for the shares you are selling / / The signatures of all registered owners exactly as the account is registered, and / / Any special 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: OppenheimerFunds Services P.O. Box 5270, Denver, Colorado 80217 SEND COURIER OR EXPRESS MAIL REQUESTS TO: OppenheimerFunds 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 40 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 seven-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 OR WIRE. There are no dollar limits on telephone redemption proceeds sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank is initiated on the business day after the redemption. You do not receive dividends on the proceeds of the shares you redeemed while they are waiting to be transferred. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank account if the bank is a member of the Federal Reserve wire system. There is a $10 fee for each Federal Funds wire. To place a wire redemption request, call the Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the next bank business day after the shares are redeemed. There is a possibility that the wire may be delayed up to seven days to enable a Fund to sell securities to pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been redeemed and are awaiting transmittal by wire. To establish wire redemption privileges on an account that is already established, please contact the Transfer Agent for instructions. CHECK WRITING. 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 a Fund's bank or custodian. / / CHECK WRITING 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 your 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. 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. 41 SELLING SHARES BY WIRE (LIQUID FUND ONLY). You may request that redemption proceeds of Liquid Fund of $2,500 or more be wired to a previously designated account at a commercial bank that is a member of the Federal Reserve wire system. The wire will normally be transmitted on the next bank business day after the redemption of shares. To place a wire redemption request, call the Transfer Agent at 1-800-525-7048. There is a $10 fee for each wire. HOW TO EXCHANGE SHARES Shares of a Fund may be exchanged for shares of certain Oppenheimer funds at net asset value per share at the time of exchange, without sales charge. To exchange shares, you must meet several conditions: / / Shares of the fund selected for exchange must be available for sale in your state of residence. / / The prospectuses of your 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 OPPENHEIMER FUNDS. For example, you can exchange Class A shares of a Fund only for Class A shares of another fund. At present, Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are considered to be Class A shares for this purpose. 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 names and address. Shares held under certificates may not be exchanged by telephone. You can find a list of Oppenheimer funds currently available for exchanges in the Statement of Additional Information or obtain one by calling a service representative at 1-800-525-7048. That list can change from time to time. 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 42 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 up to seven days if it determines it would be disadvantaged by a same-day transfer of the proceeds to buy shares. For example, the receipt of multiple exchange requests from a dealer in a "market-timing" strategy might require the disposition of securities at a time or price disadvantageous to a Fund. / / Because excessive trading can hurt fund performance and harm shareholders, a 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. / / A Fund may amend, suspend or terminate the exchange privilege at any time. Although a Fund will attempt to provide you notice whenever it is reasonably able to do so, it may impose these changes at any time. / / For tax purposes, exchanges of shares involve a redemption of the shares of the Fund you own and a purchase of the shares of the other fund, which may result in a taxable gain or a loss. For more information about taxes affecting exchanges, please refer to "How to Exchange Shares" in the Statement of Additional Information. / / 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 which is normally 4:00 P.M., but may be earlier on some days, on each day the Exchange is open by dividing the value of a Fund's net assets attributable to a class by the number of shares of that class that are outstanding. Each Fund's Board of Directors has established procedures to value the Fund's securities to determine net asset value. In general, securities values are based on market value. There are special procedures for valuing illiquid and restricted securities and obligations for which market values cannot be readily obtained. These procedures are described more completely in the Statement of Additional Information. / / THE OFFERING OF SHARES may be suspended during any period in which the determination of net asset value is suspended, and the offering may be suspended by the Board of Directors at any time the Board believes it is in a Fund's best interest to do so. / / TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or exchanges may be modified, suspended or terminated by a Fund at any time. If an account has more than one owner, a 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 neither the Transfer Agent nor a Fund will 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. 43 / / 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 Funds if the dealer performs any transaction erroneously. / / THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the value of the securities in a 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. For accounts registered in the name of a broker-dealer, payment will be forwarded within 3 business days. 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 a Fund if the account has fewer than 100 shares. / / UNDER UNUSUAL CIRCUMSTANCES, shares of a Fund may be redeemed "in kind," which means that the redemption proceeds will be paid with securities from a 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 a Fund your correct certified Social Security or Employer Identification Number and any other certifications required by the Internal Revenue Service ("IRS") when you sign your application, or if you violate IRS regulations on tax reporting of income. / / A 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 charge when redeeming certain Class A and Class B shares. / / TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, a Fund will mail only one copy of each annual and semi-annual report to shareholders having the same last name and address on the Fund's records. However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of those materials be sent personally to that shareholder. DIVIDENDS, CAPITAL GAINS AND TAXES DIVIDENDS. Government Securities Fund and Income Fund each declares and pays dividends separately for Class A and Class B shares from net investment income monthly. Liquid Fund 44 declares and accrues dividends daily and pays such dividends monthly. Normally, dividends are paid on the last business day every dividend period, but the Board of Directors can change that date. Dividends for the Liquid Fund are not paid on shares until the day following the date on which the shares are issued. Dividends paid on Class A shares generally are expected to be higher than for Class B shares because expenses allocable to Class B shares will generally be higher. CAPITAL GAINS. Each Fund may make distributions annually in December out of any net short-term or long-term capital gains. Long-term capital gains will be separately identified in the tax information your Fund sends you after the end of the year. Distributions of short-term capital gains are treated as ordinary income for tax purposes. There can be no assurance that your 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 YOUR FUND. You can elect to reinvest all dividends and long-term capital gains distributions in additional shares of your Fund. / / REINVEST CAPITAL GAINS ONLY. You can elect to reinvest long-term capital gains in your 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 OPPENHEIMER FUNDS ACCOUNT. You can reinvest all distributions in another Oppenheimer funds 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 a Fund. A Fund's distributions from long-term capital gains are taxable to shareholders as long-term capital gains, no matter how long you held your shares. It is not anticipated that Liquid Fund will generally realize or distribute any long-term capital gains. Dividends paid by a Fund from short-term capital gains and net investment income, including certain net realized foreign exchange gains, are taxable as ordinary income. These dividends and distributions are subject to Federal income tax and may be subject to state or local taxes. Your distributions are taxable as described above, whether you reinvest them in additional shares or take them in cash. The Funds' distributions are not expected to qualify for the corporate dividends received deduction under the Internal Revenue Code. Every year your Fund will send you and the IRS a statement showing the aggregate amount and character of the dividends and other distributions you received for the previous year. / / "BUYING A DIVIDEND". When a Fund goes ex-dividend, its share price is reduced by the amount of the distribution (except in the case of Liquid Fund's daily dividends). If you buy shares of a Fund other than Liquid Fund on or just before the ex-dividend date, or just before your 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 and repurchases, including redemptions for exchanges, may produce a taxable gain or a loss, which generally will be a capital gain or loss for shareholders who hold their Fund shares as capital assets. Such a gain or loss is the difference between your tax basis, which is usually the price you paid for the shares, and the proceeds you received when you sold them. No gain or loss will generally result for such redemptions and other transactions in Liquid Fund's shares provided that it successfully maintains a constant net asset value per share, although a loss could result to the extent any sales charge is imposed. Special tax 45 rules may apply to certain redemptions preceded or followed by investments in the same Fund or another Oppenheimer fund. / / RETURNS OF CAPITAL. In certain cases distributions made by your Fund may be considered a return of capital to shareholders. If that occurs, it will be identified in notices to shareholders. A return of capital will reduce your tax basis in your Fund shares but will not be taxable except to the extent it exceeds such tax basis. / / FOREIGN TAXES (INCOME FUND ONLY). Income Fund may be subject to foreign withholding taxes or other foreign taxes on income (possibly including capital gains) on certain of its foreign investments, if any. These taxes may be reduced or eliminated pursuant to an income tax treaty in some cases. The Fund does not expect to qualify to pass such foreign taxes and any related tax deductions or credits through to its shareholders. / / STATE AND LOCAL TAXES. A state income (and possibly local income and/or intangible property) tax exemption is generally available to the extent (if any) a Fund's distributions are derived from interest on (or, in the case of intangibles taxes, the value of its assets is attributable to) certain U.S. Government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. The Funds will not necessarily satisfy any such threshold or other requirement . The Funds have qualified and intend to continue to qualify as regulated investment companies under the Internal Revenue Code. Provided that a Fund so qualifies, it will not be required to pay any federal income tax on its net investment income and net realized capital gains that it distributes to its shareholders in accordance with certain timing requirements. This information is only a summary of certain federal tax information about your investment. Tax-exempt or tax-deferred investors, foreign investors, and investors subject to special tax rules (such as certain banks and securities dealers) may have different tax consequences not described above. More tax 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 a Fund on your particular tax situation. 46 APPENDIX A: DESCRIPTION OF RATINGS CATEGORIES OF RATING SERVICES DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS Aaa: Bonds 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 rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as "high-grade" bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than those of "Aaa" securities. A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds rated "Baa" are considered medium grade obligations, that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated "Ba" are judged to have speculative elements; their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated "Caa" are of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree and are often in default or have other marked shortcomings. C: Bonds rated "C" can be regarded as having extremely poor prospects of ever attaining any real investment standing. DESCRIPTION OF STANDARD & POOR'S BOND RATINGS AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from "AAA" issues only in small degree. A: Bonds rated "A" have a strong capacity to pay principal and interest, although they are somewhat more susceptible to adverse effects of change in circumstances and economic conditions. BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the "A" category. BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal A-1 in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "CC" the highest degree. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D" are in default and payment of interest and/or repayment of principal is in arrears. A-2 APPENDIX B CREDIT QUALITY DISTRIBUTION The average quality distribution of the portfolio of Income Fund during the year ended December 31, 1995 was as follows: QUALITY DISTRIBUTION % OF AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO - ---------------------- ------------- --------- Government Securities $ 6,721,109.48 15.71% AAA 1,812,140.34 4.24 AA 1,570,196.43 3.67 A 16,191,176.37 37.84 BBB 10,362,040.19 24.22 BB 2,838,024.71 6.63 B 356,759.38 0.83 Unrated 1,596,304.63 3.73 Bonds 41,447,751.51 96.87 Short Term 1,339,674.79 3.13 -------------- ------ Total Portfolio 42,787,426.30 100.00% -------------- ------ -------------- ------ B-1 APPENDIX C SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS The initial and contingent sales charge rates and waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund, Quest for Value Small Capitalization Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when those funds merged into various Oppenheimer funds on November 24, 1995. The funds listed above are referred to in this Prospectus as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of the Fund (i) acquired by such shareholder pursuant to an exchange of shares of one of the Oppenheimer funds that was one of the Former Quest for Value Funds or (ii) received by such shareholder pursuant to the merger of any of the Former Quest for Value Funds into an Oppenheimer fund on November 24, 1995. CLASS A SALES CHARGES / / REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST SHAREHOLDERS / / PURCHASES BY GROUPS, ASSOCIATIONS AND CERTAIN QUALIFIED RETIREMENT PLANS. The following table sets forth the initial sales charge rates for Class A shares purchased by a "Qualified Retirement Plan" through a single broker, dealer or financial institution, or by members of "Associations" formed for any purpose other than the purchase of securities if that Qualified Retirement Plan or that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single employer. C-1
FRONT-END SALES FRONT-END SALES CHARGE AS A CHARGE AS A COMMISSION AS NUMBER OF ELIGIBLE PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF EMPLOYEES OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE - ------------------------------------------------------------------------------------------------- 9 or fewer 2.50% 2.56% 2.00% - ------------------------------------------------------------------------------------------------- At least 10 but not more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described on pages to of this Prospectus. Purchases made under this arrangement qualify for the lower of the sales charge rate in the table based on the number of eligible employees in a Qualified Retirement Plan or members of an Association or the sales charge rate that applies under the Rights of Accumulation described above in the Prospectus. In addition, purchases by 401(k) plans that are Qualified Retirement Plans qualify for the waiver of the Class A initial sales charge if they qualified to purchase shares of any of the Former Quest For Value Funds by virtue of projected contributions or investments of $1 million or more each year. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations, or as eligible employees in Qualified Retirement Plans also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Fund's Distributor. / / SPECIAL CLASS A CONTINGENT DEFERRED SALES CHARGE RATES Class A shares of the Fund purchased by exchange of shares of other Oppenheimer funds that were acquired as a result of the merger of Former Quest for Value Funds into those Oppenheimer funds, and which shares were subject to a Class A contingent deferred sales charge prior to November 24, 1995 will be subject to a contingent deferred sales charge at the following rates: if they are redeemed within 18 months of the end of the calendar month in which they were purchased, at a rate equal to 1.0% if the redemption occurs within 12 months of their initial purchase and at a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six months. Class A shares of any of the Former Quest for Value Funds purchased without an initial sales charge on or before November 22, 1995 will continue to be subject to the applicable contingent deferred sales charge in effect as of that date as set forth in the then-current prospectus for such fund. / / WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS Class A shares of the Fund purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: / / Shareholders of the Fund who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. C-2 / / Shareholders of the Fund who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. / / WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS The Class A contingent deferred sales charge will not apply to redemptions of Class A shares of the Fund purchased by the following investors who were shareholders of any Former Quest for Value Fund: / / Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. / / Participants in Qualified Retirement Plans that purchased shares of any of the Former Quest For Value Funds pursuant to a special "strategic alliance" with the distributor of those funds. The Fund's Distributor will pay a commission to the dealer for purchases of Fund shares as described above in "Class A Contingent Deferred Sales Charge." CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A or B shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged, if those shares were purchased prior to March 6, 1995: in connection with (i) distributions to participants or beneficiaries of plans qualified under Section 401(a) of the Internal Revenue Code or from custodial accounts under Section 403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation plans under Section 457 of the Code, and other employee benefit plans, and returns of excess contributions made to each type of plan, (ii) withdrawals under an automatic withdrawal plan holding only Class B shares if the annual withdrawal does not exceed 10% of the initial value of the account, and (iii) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. / / WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995 BUT PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A or B shares of the Fund acquired by merger of a Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such fund merged, if those shares were purchased on or after March 6, 1995, but prior to November 24, 1995: (1) distributions to participants or beneficiaries from Individual Retirement Accounts under Section 408(a) of the Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions are made either (a) to an individual participant as a result of separation from service or (b) following the death or disability (as defined in the Code) of the participant or beneficiary; (2) returns of excess contributions to such retirement plans; (3) redemptions other than from retirement plans following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the C-3 U.S. Social Security Administration); (4) withdrawals under an automatic withdrawal plan (but only for Class B shares) where the annual withdrawals do not exceed 10% of the initial value of the account; and (5) liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A or B shares of the Fund described in this section if within 90 days after that redemption, the proceeds are invested in the same Class of shares in the Fund or another Oppenheimer fund. SPECIAL DEALER ARRANGEMENTS. Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping system and that were transferred to an OppenheimerFunds prototype 401(k) plan shall be eligible for an additional one-time payment by the Distributor of 1% of the value of the plan assets transferred, but that payment may not exceed $5,000 as to any one plan. SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO WERE SHAREHOLDERS OF THE FORMER CONNECTICUT MUTUAL FUNDS Certain of the sales charge waivers for Class A and Class B shares of the Fund described elsewhere in this Prospectus are modified as described below for those shareholders of Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Capital Appreciation Account and CMIA LifeSpan Balanced Account (the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds. CLASS A SALES CHARGE WAIVERS Additional Class A shares of the Fund may be purchased without a sales charge, provided that the Class A shares of the Fund were acquired prior to March 1, 1996, by: (1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase; (2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; (3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; (4) NASD registered representatives whose employer consents to such purchases, and by the spouses and immediate family members of such representatives; (5) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the Fund's prior distributor, and its affiliated companies; (6) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; (7) any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which was beyond the applicable surrender charge period C-4 and which was used to fund a qualified plan, who exchanged the variable annuity contract for Class A shares of the Fund; and (8) an institution acting as a fiduciary on behalf of an individual or individuals, where such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to a CDSC. CLASS A AND CLASS B CONTINGENT DEFERRED SALES CHARGE WAIVERS The contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of the Fund and exchanges of Class A or Class B shares of the Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 1, 1996 or (ii) were acquired by exchange from an Oppenheimer Fund that was a Former Connecticut Mutual Fund and the shares of such Former Connecticut Mutual Fund were purchased prior to March 1, 1996: (1) by the estate of the deceased shareholder; (2) upon the disability of the shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (Code); (3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; (4) as tax-free returns of excess contributions to such retirement or employee benefit plans; (5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment management company; (6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; (7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; (8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to a Systematic Withdrawal Plan but limited to no more than 12% of the original value annually; and (9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. C-5 CONNECTICUT MUTUAL LIQUID ACCOUNT CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT CONNECTICUT MUTUAL INCOME ACCOUNT Two World Trade Center New York, New York 10048-0203 1-800-525-7048 INVESTMENT ADVISOR OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 DISTRIBUTOR OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 CUSTODIAN OF PORTFOLIO SECURITIES State Street Bank & Trust Company 225 Franklin Street Boston, Massachusetts 02110 INDEPENDENT AUDITORS Arthur Andersen LLP One Financial Plaza Hartford, Connecticut 06103 LEGAL COUNSEL NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS, OPPENHEIMERFUNDS, INC., OPPENHEIMERFUNDS DISTRIBUTOR, INC. OR ANY AFFILIATE THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE. ____________________ *PRINTED ON RECYCLED PAPER OPPENHEIMER SERIES FUND, INC. Two World Trade Center, New York, New York 10048-0203 1-800-525-7048 STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996 OPPENHEIMER SERIES FUND, INC. (the "Company") is an investment company consisting of eight separate series (the "Funds"): CONNECTICUT MUTUAL LIQUID ACCOUNT ("LIQUID FUND") CONNECTICUT MUTUAL INCOME ACCOUNT ("INCOME FUND") CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT ("GOVERNMENT SECURITIES FUND") OPPENHEIMER DISCIPLINED ALLOCATION FUND ("ALLOCATION FUND") OPPENHEIMER DISCIPLINED VALUE FUND ("VALUE FUND") AND OPPENHEIMER LIFESPAN BALANCED FUND ("LIFESPAN BALANCED FUND") OPPENHEIMER LIFESPAN GROWTH FUND ("LIFESPAN GROWTH FUND") OPPENHEIMER LIFESPAN INCOME FUND ("LIFESPAN INCOME FUND") (COLLECTIVELY, THE "LIFESPAN FUNDS") This Statement of Additional Information is not a Prospectus. This document contains additional information about the Funds and supplements information in each Fund's Prospectus dated May 1, 1996 (individually, a "Prospectus" and collectively, the "Prospectuses"). It should be read together with the Prospectuses which may be obtained by writing to the Funds' Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free number shown above. The Funds' investment adviser is OppenheimerFunds, Inc. (the "Manager"). In the case of the LifeSpan Funds, the Manager has engaged Babson-Stewart Ivory International ("Babson-Stewart"), BEA Associates and Pilgrim, Baxter & Assoc. Ltd. ("Pilgrim") as subadvisers to assist in the management of the LifeSpan Funds. Babson-Stewart, BEA Associates and Pilgrim are sometimes referred to herein individually as a "Subadviser" and collectively as the "Subadvisers." CONTENTS Page ABOUT THE FUNDS Investment Objectives and Policies. . . . . . . . . . . . . . . . Other Investment Techniques and Strategies . . . . . . . . . . Other Investment Restrictions. . . . . . . . . . . . . . . . . How the Funds are Managed . . . . . . . . . . . . . . . . . . . . Organization and History . . . . . . . . . . . . . . . . . . . Directors and Officers of the Funds. . . . . . . . . . . . . . The Manager and Its Affiliates . . . . . . . . . . . . . . . . Brokerage Policies of the Funds . . . . . . . . . . . . . . . . . Performance of the Funds. . . . . . . . . . . . . . . . . . . . . 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 Funds. . . . . . . . . . . . . . FINANCIAL INFORMATION ABOUT THE FUNDS . . . . . . . . . . . . . . Independent Auditors' Report. . . . . . . . . . . . . . . . . . . Financial Statements. . . . . . . . . . . . . . . . . . . . . . . Appendix: Industry Classifications. . . . . . . . . . . . . . . . -2- ABOUT THE FUNDS INVESTMENT OBJECTIVES AND POLICIES INVESTMENT POLICIES AND STRATEGIES. The investment objectives and policies of each Fund are described in its Prospectus. Set forth below is supplemental information about those policies and the types of securities in which the Funds may invest, as well as the strategies the Funds may use to try to achieve their objective. Certain capitalized terms used in this Statement of Additional Information have the same meaning as those terms have in the Prospectuses. FOREIGN SECURITIES (ALL FUNDS EXCEPT LIQUID FUND AND GOVERNMENT SECURITIES FUND). Consistent with the limitations on foreign investing set forth in the relevant Fund's Prospectus, each Fund (other than Liquid Fund and Government Securities Fund) may invest in foreign securities. Each Fund (other than Liquid Fund and Government Securities Fund) may also invest in debt and equity securities of corporate and governmental issuers of countries with emerging economies or securities markets. Investing in foreign securities offers potential benefits not available from investing solely in securities of domestic issuers, such as the opportunity to invest in foreign issuers that appear to offer growth potential, or in foreign countries with economic policies or business cycles different from those of the U.S., or to reduce fluctuations in portfolio value by taking advantage of foreign stock or bond markets that do not move in a manner parallel to U.S. markets. If a Fund's portfolio securities are held abroad, the countries in which such securities may be held and the sub-custodians holding them must be approved by the Fund's Board of Directors under applicable rules of the Securities and Exchange Commission ("SEC"). In buying foreign securities, a Fund may convert U.S. dollars into foreign currency, but only to effect securities transactions on foreign securities exchanges and not to hold such currency as an investment. "Foreign securities" include equity and debt securities of companies organized under the laws of countries other than the United States and debt securities of foreign governments, that are traded on foreign securities exchanges or in the foreign over-the-counter markets. Securities of foreign issuers that are represented by American depository receipts, or that are listed on a U.S. securities exchange, or are traded in the U.S. over-the-counter market are not considered "foreign securities" for purposes of a Fund's investment allocations, because they are not subject to many of the special considerations and risks (discussed below) that apply to foreign securities traded and held abroad. -3- Investing in foreign securities, and in particular in securities in emerging countries, involves special additional risks and considerations not typically associated with investing in securities of issuers traded in the U.S. These include: 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 in 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 against foreign issuers; 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, and in particular emerging countries, of expropriation or nationalization of assets, 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. A Fund's investment income or, in some cases, capital gains from foreign issuers may be subject to foreign withholding or other foreign taxes, thereby reducing a Fund's net investment income and/or net realized capital gains. See "Dividends, Capital Gains and Taxes." DEBT SECURITIES (ALL FUNDS). All debt securities are subject to two types of risks: credit risk and interest rate risk (these are in addition to other investment risks that may affect a particular security). CREDIT 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 bonds are subject to credit risk to a greater extent than higher quality bonds. INTEREST RATE RISK. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting solely from the inverse relationship between the market value of outstanding fixed-income securities and changes in interest rates. An increase in interest rates will generally reduce the market value of 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 -4- depreciation than obligations with shorter maturities. Fluctuations in the market value of fixed-income securities subsequent to their acquisition will not affect the interest payable on those securities, and thus the cash income from such securities, but will be reflected in the valuations of those securities used to compute a Fund's net asset values. HIGH YIELD SECURITIES. Each Fund (other than Liquid Fund and Government Securities Fund) may invest in high-yield/high risk securities (commonly called junk bonds). The Manager does not rely on credit ratings assigned by rating agencies in assessing investment opportunities in debt securities. Ratings by credit agencies assess safety of principal and interest payments and do not reflect market risks. In addition, ratings by credit agencies may not be changed by the agencies in a timely manner to reflect subsequent economic events. By carefully selecting individual issues and diversifying portfolio holdings by industry sector and issuer, the Manager believes that the risk of the Fund holding defaulted lower grade securities can be reduced. Emphasis on credit risk management involves the Manager's own internal analysis to determine the debt service capability, financial flexibility and liquidity of an issuer, as well as the fundamental trends and outlook for the issuer and its industry. The Manager's rating helps it determine the attractiveness of specific issues relative to the valuation by the market place of similarly rated credits. Risks of high yield securities include: (i) limited liquidity and secondary market support, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates which may cause the Fund to invest premature redemption proceeds in lower yielding portfolio securities, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service, and (vi) the issuer's low creditworthiness and potential for insolvency during periods of rising interest rates and economic downturn. As a result of the limited liquidity of high yield securities, their prices have at times experienced significant and rapid decline when a substantial number of holders decided to sell. A decline is also likely in the high yield bond market during an economic downturn. An economic downturn or an increase in interest rates could severely disrupt the market for high yield bonds and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest. In addition, there have been several Congressional attempts to limit the use of tax and other advantages of high yield bonds which, if enacted, could adversely affect the value of -5- these securities and the net asset value of a Fund. For example, federally-insured savings and loan associations have been required to divest their investments in high yield bonds. U.S. GOVERNMENT SECURITIES (ALL FUNDS). 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. U.S. TREASURY OBLIGATIONS. These include Treasury Bills (which have maturities of one year or less when issued), Treasury Notes (which have maturities of one to ten years when issued) and Treasury Bonds (which have maturities generally greater than ten years when issued). U.S. Treasury obligations are backed by the full faith and credit of the United States. U.S. GOVERNMENT AND AGENCY. U.S. Government Securities are debt obligations issued by or guaranteed by the United States government or any of its agencies or instrumentalities. Some of these obligations, including U.S. Treasury notes and bonds, and mortgage-backed securities (referred to as "Ginnie Maes") guaranteed by the Government National Mortgage Association, are supported by the full faith and credit of the United States, which means that the government pledges to use its taxing power to repay the debt. 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. They may include obligations supported by the ability of the issuer to borrow from the U.S. Treasury. However, the Treasury is not under a legal obligation to make a loan. Examples of these are obligations of Federal Home Loan Mortgage Corporation (those securities are often called "Freddie Macs"). Other obligations are supported by the credit of the instrumentality, such as Federal National Mortgage Association bonds (these securities are often called "Fannie Maes"). GNMA CERTIFICATES. Certificates of Government National Mortgage Association ("GNMA") are mortgaged-backed securities of GNMA that evidence an undivided interest in a pool or pools of mortgages ("GNMA Certificates"). The GNMA Certificates that a Fund may purchase may be 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. -6- 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 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 a 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 two types of mortgage pass-through certificates ("FHLMC Certificates"): mortgage participation certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). 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 PCs and the ultimate payment of principal. The FHLMC guarantee is not backed by the full faith and credit of the U.S. Government. GMCs also represent a pro rata interest in a pool of mortgages. However, these instruments pay interest semi-annually and return principal once a year in guaranteed minimum payments. The expected average life of these securities is approximately ten years. The FHLMC guarantee is not backed by the full faith and credit of the U.S. Government. MORTGAGE-BACKED SECURITY ROLLS. The Income Fund, Government Securities Fund and Allocation 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 a Fund, a 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 -7- 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 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 possibility that the market value of the securities sold by a Fund may decline below the price at which the Fund is obligated to purchase the securities. Upon entering into a mortgage-backed security roll, a 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. ZERO COUPON SECURITIES AND DEFERRED INTEREST BONDS. The Funds may invest in zero coupon securities and deferred interest bonds issued by the U.S. Treasury or by private issuers such as domestic or foreign corporations. Zero coupon U.S. Treasury securities include: (1) U.S. Treasury bills without interest coupons, (2) U.S. Treasury notes and bonds that have been stripped of their unmatured interest coupons and (3) receipts or certificates representing interests in such stripped debt obligations or coupons. Zero coupon securities and deferred interest bonds usually trade at a deep discount from their face or par value and will be subject to greater fluctuations in market value in response to changing interest rates than debt obligations of comparable maturities that make current payments of interest. An additional risk of private-issuer zero coupon securities and deferred interest bonds is the credit risk that the issuer will be unable to make payment at maturity of the obligation. While zero coupon bonds do not require the periodic payment of interest, deferred interest bonds generally provide for a period of delay before the regular payment of interest begins. Although this period of delay is different for each deferred interest bond, a typical period is approximately one-third of the bond's term to maturity. Such investments benefit the issuer by mitigating its initial need for cash to meet debt service, but some also provide a higher rate of return to attract investors who are willing to defer receipt of such cash. With zero coupon securities, however, the lack of periodic interest payments means that the interest rate is "locked in" and the investor avoids the risk of having to reinvest periodic interest payments in securities having lower rates. Because a Fund accrues taxable income from zero coupon and deferred interest securities without receiving cash, a Fund may be required to sell portfolio securities in order to pay dividends or redemption proceeds for its shares, which require the payment of cash. This will depend on several factors: the proportion of -8- shareholders who elect to receive dividends in cash rather than reinvesting dividends in additional shares of a Fund, and the amount of cash income a Fund receives from other investments and the sale of shares. In either case, cash distributed or held by a Fund that is not reinvested by investors in additional Fund shares will hinder a Fund from seeking current income. MORTGAGE-BACKED SECURITIES (ALL FUNDS). These securities represent participation interests in pools of residential mortgage loans which are 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. Some mortgage-backed securities in which the Funds 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 borrower from the U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation); and some are backed by only the credit of the issuer itself. Those guarantees do not extend to the value of or yield of the mortgage-backed securities themselves or to the net asset value of a Fund's shares. Mortgage-backed securities may also be issued by trusts or other entities formed or sponsored by private originators of and institutional investors in mortgage loans and other foreign or domestic non-governmental entities (or represent custodial arrangements administered by such institutions). These private originators and institutions include domestic and foreign savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. Privately issued mortgage-backed securities are generally backed by pools of conventional (i.e., non-government guaranteed or insured) mortgage loans. Since such mortgage-backed securities are not guaranteed by an entity having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating, they normally are structured with one or more types of "credit enhancement." Such credit enhancements fall generally into two categories; (1) liquidity protection and (2) protection against losses resulting after default by a borrower and liquidation of the collateral. Liquidity protection refers to the providing of cash advances to holders of mortgage-backed securities when a borrower on an underlying mortgage fails to make its monthly payment on time. Protection against losses resulting after default and liquidation is designed to cover losses resulting when, for example, the proceeds of a foreclosure sale are insufficient to cover the outstanding amount on the mortgage. Such protection may be -9- provided through guarantees, insurance policies or letters of credit, though various means of structuring the transaction or through a combination of such approaches. 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 a Fund to differ from the yield calculated on the basis of the expected average life of the pool. Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments will most likely decline. When prevailing interest rates rise, the value of a pass-through security may decrease as do the values of other debt securities, but, when prevailing interest rates decline, the value of a pass-through security is not likely to rise to the extent that the value of other debt securities rise, because of the prepayment feature of pass-through securities. A Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at times when available investments offer higher or lower rates than the original investment, thus affecting the yield of such Fund. Monthly interest payments received by a 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. A Fund may purchase mortgage-backed securities at par, at a premium or at a discount. Accelerated prepayments adversely affect yields for pass-through securities purchased at a premium (i.e., at a price in excess of their principal amount) and may involve additional risk of loss of principal because the premium may not have been fully amortized at the time the obligation is repaid. The opposite is true for pass-through securities purchased at a discount. Mortgage-backed securities may be less effective than debt obligations of similar maturity at maintaining yields during periods of declining interest rates. As new types of mortgage-related securities are developed and offered to investors, the -10- Manager will, subject to the direction of the Board of Directors and consistent with a Fund's investment objective and policies, consider making investments in such new types of mortgage-related securities. "STRIPPED" MORTGAGE-BACKED SECURITIES. The Government Securities Fund, Income Fund, Allocation Fund and each LifeSpan 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 accordance with a requirement imposed by the staff of the SEC, the Manager or the relevant Subadviser will consider privately-issued fixed rate IOs and POs to be illiquid securities for purposes of a Fund's limitation on investments in illiquid securities. Unless the Manager or the relevant Subadviser, acting pursuant to guidelines and standards established by the Board of Directors, determines that a particular government-issued fixed rate IO or PO is liquid, management will also consider these IOs and POs to be illiquid. 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. CUSTODIAL RECEIPTS. Each of the Funds may acquire U.S. Government Securities and their unmatured interest coupons that have been separated (stripped) by their holder, typically a custodian bank or investment brokerage firm. Having separated the interest coupons from the underlying principal of the U.S. Government Securities, the holder will resell the stripped securities in custodial receipt programs with a number of different names, including Treasury Income Growth Receipts (TIGRs) and Certificate of Accrual on Treasury Securities (CATS). The stripped coupons are sold separately from the underlying principal, which is usually sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. The underlying U.S. Treasury bonds and notes -11- themselves are generally held in book-entry form at a Federal Reserve Bank. Counsel to the underwriters of these certificates or other evidences of ownership of U.S. Treasury securities have stated that, in their opinion, purchasers of the stripped securities most likely will be deemed the beneficial holders of the underlying U.S. Government Securities for federal tax and securities purposes. In the case of CATS and TIGRs, the IRS has reached this conclusion for the purpose of applying the tax diversification requirements applicable to regulated investment companies such as the Funds. CATS and TIGRs are not considered U.S. Government Securities by the Staff of the SEC, however. Further, the IRS' conclusion is contained only in a general counsel memorandum, which is an internal document of no precedential value or binding effect, and a private letter ruling, which also may not be relied upon by the Funds. The Company is not aware of any binding legislative, judicial or administrative authority on this issue. COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS ("CMOS"). Government Securities Fund, Income Fund, Allocation Fund and each of the LifeSpan Funds may invest in collateralized mortgage 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, which may be a domestic or foreign corporation. 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 -12- not supply additional collateral in the event of such prepayment, there will be sufficient collateral to secure CMOs that remain outstanding. ASSET-BACKED SECURITIES. Income Fund, Government Securities Fund, Allocation Fund and each Life Span Fund may purchase asset-back securities. The value of an asset-backed security is affected by changes in the market's perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing any credit enhancement, and is also affected if any credit enhancement has been exhausted. The risks of investing in asset-backed securities are ultimately dependent upon payment of consumer loans by the individual borrowers. As a purchaser of an asset-backed security, a 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 the prepayments of a pool of mortgage loans underlying mortgage-backed securities. COMMERCIAL PAPER (ALL FUNDS). Each Fund may purchase commercial paper for temporary defensive purposes as described in its Prospectus. In addition, a Fund may invest in variable amount master demand notes and floating rate notes as follows: VARIABLE AMOUNT MASTER DEMAND NOTES. Master demand notes are corporate obligations which permit the investment of fluctuating amounts by a Fund at varying rates of interest pursuant to direct arrangements between a Fund, as lender, and the borrower. They permit daily changes in the amounts borrowed. A 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, a Fund's right to redeem such notes is dependent upon the ability of the borrower to pay principal and interest on demand. A Fund has no limitations on the type of issuer from whom these notes will be purchased; however, in connection with such purchases and on an ongoing basis, 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 master demand notes are subject to the limitation on -13- investments by a Fund in illiquid securities, described in the Fund's Prospectus. The Manager and relevant Subadviser will consider the earning power, cash flow and other liquidity ratios of issuers of demand notes and continually will monitor their financial ability to meet payment on demand. FLOATING RATE/VARIABLE RATE NOTES. Some of the notes a 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 support arrangements. Any bank providing such a bank letter, line of credit, guarantee or loan commitment will meet a Fund's investment quality standards relating to investments in bank obligations. A Fund will invest in variable and floating rate instruments only when the Manager or relevant Subadviser deems the investment to meet the investment guidelines applicable to a Fund. The Manager or relevant Subadviser will also continuously monitor the creditworthiness of issuers of such instruments to determine whether a Fund should continue to hold the investments. The absence of an active secondary market for certain variable and floating rate notes could make it difficult to dispose of the instruments, and a Fund could suffer a loss if the issuer defaults or during periods in which the Fund is not entitled to exercise its demand rights. Variable and floating rate instruments held by a Fund will be subject to the Fund's limitation on investments in illiquid securities when a reliable trading market for the instruments does not exist and the Fund may not demand payment of the principal amount of such instruments within seven days. BANK OBLIGATIONS AND INSTRUMENTS SECURED THEREBY (ALL FUNDS). The bank obligations a Fund may invest in 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) obligations of a foreign bank with total assets of at least U.S. $1 billion. A 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, time deposits that are subject to withdrawal penalties, other than those maturing in -14- seven days or less, are subject to the limitation on investments by a Fund in illiquid investments, set forth in the Fund's 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. EQUITY SECURITIES (ALL FUNDS EXCEPT LIQUID FUND). Additional information about some of the types of equity securities a Fund may invest in is provided below. CONVERTIBLE SECURITIES. Each Fund (other than Liquid Fund, Government Securities Fund and Income Fund) may invest in convertible securities. While convertible securities are a form of debt security in many cases, their conversion feature (allowing conversion into equity securities) causes them to be regarded more as "equity equivalents." As a result, any rating assigned to the security has less impact on the Manager's or relevant Subadviser's investment decision with respect to convertible securities than in the case of non-convertible debt securities. To determine whether convertible securities should be regarded as "equity equivalents," the Manager or relevant Subadviser examines the following factors: (1) whether, at the option of the investor, the convertible security can be exchanged for a fixed number of shares of common stock of the issuer, (2) whether the issuer of the convertible securities has restated its earnings per share of common stock on a fully diluted basis (considering the effect of converting the convertible securities), and (3) the extent to which the convertible security may be a defensive "equity substitute," providing the ability to participate in any appreciation in the price of the issuer's common stock. WARRANTS AND RIGHTS. Each Fund (other than Liquid Fund and Government Securities Fund) may purchase warrants. Warrants are options to purchase equity securities at set prices valid for a specified period of time. The prices of warrants do not necessarily move in a manner parallel to the prices of the underlying securities. The price a Fund pays for a warrant will be lost unless the warrant is exercised prior to its expiration. Rights are similar to warrants, but normally have a short duration and are distributed directly by the issuer to its shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. PREFERRED STOCK (ALL FUNDS EXCEPT LIQUID FUND AND GOVERNMENT SECURITIES FUND). Each of the Funds (other than the Liquid Fund and the Government Securities Fund), subject to its investment objective, may purchase preferred stock. Preferred stocks are equity securities, but possess certain attributes of debt securities and are generally considered fixed income securities. -15- Holders of preferred stocks normally have the right to receive dividends at a fixed rate when and as declared by the issuer's board of directors, but do not participate in other amounts available for distribution by the issuing corporation. Dividends on the preferred stock may be cumulative, and all cumulative dividends usually must be paid prior to dividend payments to common stockholders. Because of this preference, preferred stocks generally entail less risk than common stocks. Upon liquidation, preferred stocks are entitled to a specified liquidation preference, which is generally the same as the par or stated value, and are senior in right of payment to common stocks. However, preferred stocks are equity securities in that they do not represent a liability of the issuer and therefore do not offer as great a degree of protection of capital or assurance of continued income as investments in corporate debt securities. In addition, preferred stocks are subordinated in right of payment to all debt obligations and creditors of the issuer, and convertible preferred stocks may be subordinated to other preferred stock of the same issuer. HEDGING (ALL FUNDS EXCEPT LIQUID FUND). Consistent with the limitations set forth in its Prospectus and below, each Fund may employ one or more of the types of hedging instruments described below. Additional information about the hedging instruments a Fund may use is provided below. In the future, a Fund may employ hedging instruments and strategies that are not presently contemplated but which may be developed, to the extent such investment methods are consistent with the Fund's investment objective, legally permissible and adequately disclosed. COVERED CALL OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES (ALL FUNDS EXCEPT LIQUID FUND). Each Fund may write covered call options. Each LifeSpan Fund may purchase and write covered call options. Such options may relate to particular U.S. or non-U.S. securities, to various U.S. or non-U.S. stock indices or to U.S. or non-U.S. currencies. The Funds may purchase and write, as the case my be, call options which are issued by the Options Clearing Corporation (OCC) or which are traded on U.S. and non-U.S. exchanges. LifeSpan Growth Fund and LifeSpan Balanced Fund (with respect to the international component) may purchase options on currency in the over-the-counter (OTC) markets. WRITING COVERED CALLS. When a Fund writes a call on a security, it receives a premium and agrees to sell the callable investment to a purchaser of a corresponding call on the same security during the call period (usually not more than 9 months) at a fixed exercise price (which may differ from the market price of the underlying security), regardless of market price changes during the call period. A Fund retains the risk of loss should the price of the underlying security decline during the call period, which may be offset to some extent by the premium. -16- To terminate its obligation on a call it has written, a Fund may purchase a corresponding call in a "closing purchase transaction." A profit or loss will be realized, depending upon whether the net of the amount of the option transaction costs and the premium received on the call written was more or less than the price of the call subsequently purchased. A profit may also be realized if the call expires unexercised, because a Fund retains the underlying investment and the premium received. Any such profits are considered short-term capital gains for Federal income tax purposes, and when distributed by the Fund are taxable as ordinary income. If a Fund could not effect a closing purchase transaction due to lack of a market, it would have to hold the callable investments until the call lapsed or was exercised. No Fund shall write a covered call option if as a result thereof the assets underlying calls outstanding (including the proposed call option) would exceed 20% of the value of the assets of the Fund. PURCHASING COVERED CALLS. When a Fund purchases a call (other than in a closing purchase transaction), it pays a premium and, except as to calls on indices or futures, has the right to buy the underlying investment from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. When a Fund purchases a call on a securities index or future, it pays a premium, but settlement is in cash rather than by delivery of the underlying investment to the Fund. In purchasing a call, a 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 exercise 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. -17- Calls on broadly-based indices or futures are similar to calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question (and thus on price movements in the stock market generally) rather than on price movements in individual securities or futures contracts. When a Fund buys a call on an index or future, it pays a premium. During the call period, upon exercise of a call by a Fund, a seller of a corresponding call on the same investment will pay the Fund an amount of cash to settle the call if the closing level of the index or future upon which the call is based is greater than the exercise price of the call. That cash payment is equal to the difference between the closing price of the index and the exercise price of the call times a specified multiple (the "multiplier"), which determines the total dollar value for each point of difference. That cash payment is determined by the multiplier, in the same manner as described above as to calls. An option position may be closed out only on a market which provides secondary trading for options of the same series and there is no assurance that a liquid secondary market will exist for any particular option. A Fund's option activities may affect its turnover rate and brokerage commissions. A Fund may pay a brokerage commission each time it buys a call, sells a call, or buys or sells an underlying investment in connection with the exercise of a call. Such commissions may be higher than those which would apply to direct purchases or sales of such underlying investments. Premiums paid for options are small in relation to the market value of the related investments, and consequently, call options offer large amounts of leverage. The leverage offered by trading in options could result in a Fund's net asset value being more sensitive to changes in the value of the underlying investments. -18- FUTURES CONTRACTS AND RELATED OPTIONS. To hedge against changes in interest rates, securities prices or currency exchange rates or for certain non-hedging purposes, each Fund (other than the Liquid Fund) may, subject to its investment objectives and policies, purchase and sell various kinds of futures contracts, and purchase and write call and put options on any of such futures contracts. A Fund may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities (such as U.S. Government securities), securities indices, currencies and other financial instruments and indices. The Value Fund and Allocation Fund may purchase and sell futures contracts on stock indices and sell options on such futures. Income Fund and Allocation Fund may purchase and sell interest rate futures and sell options on such futures. In addition, each Fund that may invest in securities that are denominated in a foreign currency may purchase and sell futures on currencies and sell options on such futures. A Fund will engage in futures and related options transactions only for bona fide hedging or other non-hedging purposes as defined in regulations promulgated by the CFTC. All futures contracts entered into by the Funds are traded on U.S. exchanges or boards of trade that are licensed and regulated by the CFTC or on foreign exchanges approved by the CFTC. A Fund may buy and sell futures contracts on interest rates ("Interest Rate Futures"). No price is paid or received upon the purchase or sale of an Interest Rate Future. An Interest Rate Future obligates the seller to deliver and the purchaser to take a specific type of debt security at a specific future date for a fixed price. That obligation may be satisfied by actual delivery of the debt security or by entering into an offsetting contract. The Fund may buy and sell futures contracts related to financial indices (a "Financial Future"). A financial index assigns relative values to the securities included in the index and fluctuates with the changes in the market value of those securities. Financial indices cannot be purchased or sold directly. 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 a Fund on the purchase or sale of a Financial Future. Upon entering into a futures transaction, a Fund will be required to deposit an initial margin payment in cash or U.S. Treasury bills with the futures commission merchant (the "futures broker"). The initial margin will be deposited with a Fund's Custodian in an account registered in the futures broker's name; -19- however the futures broker can gain access to that account only under specified conditions. As the Future is marked to market to reflect changes in its market value, subsequent margin payments, called variation margin, will be made to or by the futures broker on a daily basis. Prior to expiration of the Future, if a Fund elects to close out its position by taking an opposite position, a final determination of variation margin is made, additional cash is required to be paid by or released to the Fund, and any loss or gain is realized for tax purposes. Although Financial Futures and Interest Rate Futures by their terms call for settlement by delivery cash or securities, respectively, in most cases the obligation is fulfilled by entering into an offsetting position. All futures transactions are effected through a clearinghouse associated with the exchange on which the contracts are traded. OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures contracts will give the Funds the right (but not the obligation) for a specified price to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, a Fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs. The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of a Fund's assets. By writing a call option, a Fund becomes obligated, in exchange for the premium, to sell a futures contract (if the option is exercised), which may have a value higher than the exercise price. Conversely, the writing of a put option on a futures contract generates a premium which may partially offset an increase in the price of securities that a Fund intends to purchase. However, a Fund becomes obligated to purchase a futures contract (if the option is exercised) which may have a value lower than the exercise price. Thus, the loss incurred by a Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The Funds will incur transaction costs in connection with the writing of options on futures. The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same series. There is no guarantee that such closing transactions can be effected. The Fund's ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market. The Funds may use options on futures contracts solely for bona fide hedging or other non-hedging purposes as described below under ""Regulatory Aspects of Hedging Instruments.'' FORWARD CONTRACTS. Each Fund (other than the Liquid Fund and the Government Securities Fund) may enter into foreign currency exchange contracts ("Forward Contracts") for hedging and non-hedging purposes. A forward currency exchange contract generally has no deposit requirement, and no commissions are generally charged at any stage for trades. 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. A Fund generally will not enter into a forward currency exchange contract with a term of greater than one year. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A 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 a 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. A Fund may enter into Forward Contracts with respect to specific transactions. For example, when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates receipt of dividend payments in a foreign currency, a Fund may desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of such payment by entering into a Forward Contract, for a fixed amount of U.S. dollars per unit of foreign currency, for the purchase or sale of the amount of foreign currency involved in the underlying transaction ("transaction hedge"). A Fund will thereby -20- 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. A 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 a Fund believes that foreign currency may suffer a substantial decline against the U.S. dollar, it may enter into a forward sale contract to sell an amount of that foreign currency approximating the value of some or all of a Fund's portfolio securities denominated in such foreign currency, or when it 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 a 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 is denominated ("cross hedge"). A Fund will not enter into such Forward Contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate a fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio securities or other assets denominated in that currency. A Fund, however, in order to avoid excess transactions and transaction costs, may maintain a net exposure to Forward Contracts in excess of the value of the Fund's portfolio securities or other assets denominated in that currency provided the excess amount is "covered" by liquid, high-grade debt securities, denominated in any currency, at least equal at all times to the amount of such excess. As an alternative, a LifeSpan 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 a LifeSpan 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 a 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 -21- these securities between the date the Forward Contract is entered into and the date it is sold. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot (i.e., cash) market (and bear the expense of such purchase), if the market value of the security is less than the amount of foreign currency a Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency a Fund is obligated to deliver. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Forward Contracts involve the risk that anticipated currency movements will not be accurately predicted, causing a Fund to sustain losses on these contracts and transactions costs. At or before the maturity of a Forward Contract requiring a Fund to sell a currency, a 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 a Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, a 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. A The Income 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 a Fund of engaging in Forward Contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because Forward Contracts are usually entered into on a principal basis, no fees or commissions are involved. Because such contracts are not traded on an exchange, a Fund must evaluate the credit and performance risk of each particular counterparty under a Forward Contract. Although a 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. A 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 -22- buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should a Fund desire to resell that currency to the dealer. INTEREST RATE SWAP TRANSACTIONS. All Funds may enter into 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 a Fund under a swap agreement will have been greater than those received by them. Credit risk arises from the possibility that the counterparty will default. If the counterparty to an interest rate swap defaults, a Fund's loss will consist of the net amount of contractual interest payments that the Fund has not yet received. The Manager or relevant Subadviser will monitor the creditworthiness of counterparties to the Fund's interest rate swap transactions on an ongoing basis. A Fund will enter into swap transactions with appropriate counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between a Fund and that counterparty under that master agreement shall be regarded as parts of an integral agreement. If on any date amounts are payable in the same currency in respect of one or more swap transactions, the net amount payable on that date in that currency shall be paid. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty may terminate the swaps with that party. Under such agreements, if there is a default resulting in a loss to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement swap with respect to each swap (i.e., the mark-to-market value at the time of the termination of each swap). The gains and losses on all swaps are then netted, and the result is the counterparty's gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as "aggregation." The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with the markets for other similar instruments which are traded in the interbank market. However, the staff of the SEC takes the position that swaps, caps and floors are illiquid investments that are subject to a limitation on such investments. ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. A Fund's Custodian, or a securities depository acting for the Custodian, will act as a Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the investments on which a Fund has written options traded on -23- exchanges or as to other acceptable escrow securities, so that no margin will be required for such transactions. OCC will release the securities covering a call on the expiration of the option or upon a Fund entering into a closing purchase transaction. An option position may be closed out only on a market which provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option. When LifeSpan Growth Fund or LifeSpan Balanced Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a primary U.S. Government securities dealer, which would establish a formula price at which the Fund would have the absolute right to repurchase that OTC option. That formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below the market price of the underlying security (that is, the extent to which the option "is in-the-money"). When LifeSpan Growth Fund or LifeSpan Balanced Fund writes an OTC option, it will treat as illiquid (for purposes of the limit on its assets that may be invested in illiquid securities, stated in its Prospectus) the mark-to-market value of any OTC option held by them. The SEC is evaluating whether OTC options should be considered liquid securities, and the procedure described above could be affected by the outcome of that evaluation. REGULATORY ASPECTS OF HEDGING INSTRUMENTS. The Funds are required to operate within certain guidelines and restrictions with respect to their use of futures and options thereon as established by the Commodities Futures Trading Commission ("CFTC"). In particular, the Funds are excluded from registration as a "commodity pool operator" if they comply with the requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of the Funds' assets that may be used for Futures margin and related options premiums for a bona fide hedging position. However, under the Rule a Fund must limit its aggregate initial futures margin and related option premiums to no more than 5% of the Funds' net assets for hedging strategies that are not considered bona fide hedging strategies under the Rule. Transactions in options by the Funds are subject to limitations established by each of the exchanges governing the maximum number of options which may be written or held by a single investor or group of investors acting in concert, regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more accounts or through one or more different exchanges through one or more or brokers. Thus, the number of options which the Funds may write or hold may be affected by options written or held by other entities, including -24- other investment companies having the same or an affiliated investment adviser. Position limits also apply to Futures. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Due to requirements under the Investment Company Act of 1940 (the "Investment Company Act"), when the Funds purchase a Future, the Funds will maintain, in a segregated account or accounts with their 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. Each Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code. That qualification enables a Fund to "pass through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders will be taxed on the dividends and capital gains they receive from the Fund. One of the tests for a Fund's qualification is that less than 30% of its gross income (irrespective of losses) must be derived from gains realized on the sale of securities held for less than three months. To comply with that 30% cap, a Fund will limit the extent to which it engages in the following activities, but will not be precluded from them: (i) selling investments, including Futures, held for less than three months, whether or not they were purchased on the exercise of a call held by the Fund; (ii) purchasing calls or puts which expire in less than three months; (iii) effecting closing transactions with respect to calls or puts written or purchased less than three months previously; (iv) exercising puts or calls held by a Fund for less than three months; or (v) writing calls on investments held for less than three months. RISKS OF HEDGING WITH OPTIONS AND FUTURES. In addition to the risks with respect to hedging discussed in each Fund's Prospectus and above, there is a risk in using short hedging by selling Futures to attempt to protect against a decline in value of a Fund's portfolio securities (due to an increase in interest rates) that the prices of such Futures will correlate imperfectly with the behavior of the cash (i.e., market value) prices of a 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 -24- 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. PORTFOLIO TURNOVER. Each Fund's particular portfolio securities may be changed without regard to the holding period of these securities (subject to certain tax restrictions), when the Manager or respective Subadviser deems that this action will help achieve the Fund's objective given a change in an issuer's operations or changes in general market conditions. Short-term trading means the purchase and subsequent sale of a security after it has been held for a relatively brief period of time. The Funds do not generally intend to invest for the purpose of seeking short-term profits. Variations in portfolio turnover rate from year to year reflect the investment discipline applied to the particular Fund and do not generally reflect trading for short-term profits. OTHER INVESTMENT RESTRICTIONS A. FUNDAMENTAL INVESTMENT RESTRICTIONS Each Fund has adopted the following fundamental investment restrictions. Each Fund's most significant investment restrictions are also set forth in its Prospectus. Fundamental policies cannot be changed without the vote of a "majority" of a Fund's outstanding voting securities. Under the Investment Company Act, such a "majority" vote is defined as the vote of the holders of the lesser of (i) 67% or more of the shares present or represented by proxy at a shareholder meeting, if the holders of more than 50% of the outstanding shares are present, or (ii) more than 50% of the outstanding shares. The Liquid Fund may not: 1. Issue senior securities, except as permitted by paragraphs 3, 4, 5 and 15 below. For purposes of this restriction, the issuance of shares of common stock in multiple classes or series, the purchase or sale of options, futures contracts and options on futures contracts, forward commitments, and repurchase agreements entered into in accordance with the Fund's investment policies, and the pledge, mortgage or hypothecation of the Fund's assets are not deemed to be senior securities. -26- 2. Purchase equity securities (e.g., common stocks, preferred stocks), voting securities or local or state government securities (e.g., municipal bonds, state bonds). 3. Borrow money, except from banks for temporary or emergency purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, borrow in the aggregate more than 10 percent of the value of its total assets, or invest in portfolio securities while outstanding borrowings exceed 5 percent of the value of its total assets. 4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an amount of not more than 10 percent of the value of its net assets to secure borrowings for temporary or emergency purposes and except as may be necessary in connection with securities lending as provided in investment restriction (10) below. The deposit of cash, cash equivalents and liquid debt securities in a segregated account with the custodian and/or with a broker in connection with futures contracts or related options transactions and the purchase of securities on a "when- issued" basis is not deemed to be a pledge. 5. Sell securities short or purchase securities on margin. The deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin. 6. Write or purchase put or call options. 7. Underwrite the securities of other issuers or purchase restricted securities. 8. Purchase or sell real estate, real estate investment trust securities, commodities or commodities contracts, or oil and gas interests. 9. Make loans, except that the Fund (1) may lend portfolio securities in accordance with the Fund's investment policies up to 33 1/3 percent of the Fund's total assets taken at market value, (2) enter into repurchase agreements, and (3) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers' acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities. -27- 10. Invest more than 15 percent of the value of its total assets in the obligations of any one bank or invest more than 5 percent of the value of its total assets in the commercial paper of any one issuer. 11. Invest more than 25 percent of the value of its total assets in the securities of issuers in any single industry, provided that this limitation shall not apply to the purchase of obligations issued or guaranteed by the United States Government, its agencies or instrumentalities, certificates of deposit issued by domestic banks and domestic bankers' acceptances (excluding foreign branches of domestic banks). 12. Invest more than 10 percent in the aggregate of the value of its total assets in repurchase agreements maturing in more than 7 days, time deposits maturing in more than 2 days and portfolio securities which are not readily marketable. 13. Invest in companies for the purpose of exercising control. 14. Invest in securities of other investment companies, except as they may be acquired as part of a merger, consolidation or acquisition of assets. 15. Enter into a reverse repurchase agreement if as a result its current obligations under such agreement would exceed one-third of the value of its total assets (less all its liabilities other than the obligations under such agreements). 16. Invest in any security with a maturity in excess of one year. The Income, Value and Allocation Funds may not: 1. Issue senior securities, except as permitted by paragraphs 7, 8, 9 and 11 below. For purposes of this restriction, the issuance of shares of common stock in multiple classes or series, the purchase or sale of options, futures contracts and options on futures contracts, forward commitments, and repurchase agreements entered into in accordance with the Fund's investment policies, and the pledge, mortgage or hypothecation of the Fund's assets are not deemed to be senior securities. 2. (a) Invest more than 5 percent of its total assets (taken at market value at the time of each investment) in the securities (other than United States Government or Government agency securities) of any one issuer (including repurchase agreements with any one bank or dealer) or more than 15 percent of its total assets in the obligations of any one bank; and (b) -28- purchase more than either (i) 10 percent in principal amount of the outstanding debt securities of an issuer, or (ii) 10 percent of the outstanding voting securities of an issuer, except that such restrictions shall not apply to securities issued or guaranteed by the United States Government or its agencies, bank money instruments or bank repurchase agreements. 3. Invest more than 25 percent of the value of its total assets in the securities of issuers in any single industry, provided that this limitation shall not apply to the purchase of obligations issued or guaranteed by the United States Government, its agencies or instrumentalities. For the purpose of this restriction, each utility that provides a separate service (e.g., gas, gas transmission, electric or telephone) shall be considered to be a separate industry. This test shall be applied on a proforma basis using the market value of all assets immediately prior to making any investment. 4. Alone, or together with any other portfolio or portfolios, make investments for the purpose of exercising control over, or management of, any issuer. 5. Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization, or by purchase in the open market of securities of closed- end investment companies where no underwriter or dealer's commission or profit, other than the customary broker's commission is involved and only if immediately thereafter not more than 10 percent of such portfolio's total assets, taken at market value, would be invested in such securities. 6. Purchase or sell interests in oil, gas or other mineral exploration or development programs, commodities, commodity contracts or real estate, except that such portfolio may: (1) purchase securities of issuers which invest or deal an any of the above and (2) invest for hedging purposes in futures contracts on securities, financial instruments and indices, and foreign currency, as are approved for trading on a registered exchange. 7. Purchase any securities on margin (except that the Company may obtain such short- term credits as may be necessary for the clearance of purchases and sales of portfolio securities) or make short sales of securities or maintain a short position. The deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin. 8. Make loans, except that the Fund (1) may lend portfolio securities in accordance with the Fund's investment policies up to 33 1/3% of the Fund's total assets taken at market value, (2) -29- enter into repurchase agreements, and (3) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers' acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities. 9. Borrow amounts in excess of 10 percent of its total assets, taken at market value at the time of the borrowing, and then only from banks as a temporary measure for extraordinary or emergency purposes, or make investments in portfolio securities while such outstanding borrowings exceed 5 percent of its total assets. 10. Allow its current obligations under reverse repurchase agreements, together with borrowings, to exceed 1/3 of the value of its total assets (less all its liabilities other than the obligations under borrowings and such agreements). 11. Mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by such Fund except as may be necessary in connection with borrowings as mentioned in investment restriction (9) above, and then such mortgaging, pledging or hypothecating may not exceed 10 percent of such Fund's total assets, taken at market value at the time thereof. In order to comply with certain state statutes, such Fund will not, as a matter of operating policy, mortgage, pledge or hypothecate its portfolio securities to the extent that at any time the percentage of the value of pledged securities plus the maximum sales charge will exceed 10 percent of the value of such Fund's shares at the maximum offering price. The deposit of cash, cash equivalents and liquid debt securities in a segregated account with the custodian and/or with a broker in connection with futures contracts or related options transactions and the purchase of securities on a "when-issued" basis is not deemed to be a pledge. 12. Underwrite securities of other issuers except insofar as the Company may be deemed an underwriter under the 1933 Act in selling portfolio securities. 13. Write, purchase or sell puts, calls or combinations thereof, except that covered call options may be written. 14. Invest in securities of foreign issuers if at the time of acquisition more than 10 percent of its total assets, taken at market value at the time of the investment, would be invested in such securities. However, up to 25 percent of the total assets of such portfolio may be invested in the aggregate in such securities (i) issued, assumed or guaranteed by foreign governments, or political subdivisions or instrumentalities thereof, (ii) assumed -30- or guaranteed by domestic issuers, including Eurodollar securities, or (iii) issued, assumed or guaranteed by foreign issuers having a class of securities listed for trading on the New York Stock Exchange. 15. Invest more than 10 percent in the aggregate of the value of its total assets in repurchase agreements maturing in more than seven days, time deposits maturing in more than 2 days, portfolio securities which do not have readily available market quotations and all other illiquid assets. The Government Securities Fund may not: 1. Issue senior securities, except as permitted by paragraphs 3, 4, 5 and 15 below. For purposes of this restriction, the issuance of shares of common stock in multiple classes or series, the purchase or sale of options, futures contracts and options on futures contracts, forward commitments, and repurchase agreements entered into in accordance with the Fund's investment policies, and the pledge, mortgage or hypothecation of the Fund's assets are not deemed to be senior securities. 2. Purchase equity securities (e.g., common stocks, preferred stocks), voting securities or local or state government securities (e.g., municipal bonds, state bonds). 3. Borrow money, except from banks for temporary or emergency purposes, including the meeting of redemption requests which might otherwise require the untimely disposition of securities, borrow in the aggregate more than 10 percent of the value of its total assets, or invest in portfolio securities while outstanding borrowings exceed 5 percent of the value of its total assets. 4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an amount of not more than 10 percent of the value of its net assets to secure borrowings for temporary or emergency purposes and except as may be necessary in connection with securities lending as provided in investment restriction (10) below. The deposit of cash, cash equivalents and liquid debt securities in a segregated account with the custodian and/or with a broker in connection with futures contracts or related options transactions and the purchase of securities on a "when- issued" basis is not deemed to be a pledge. 5. Sell securities short or purchase securities on margin. The deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin. -31- 6. Write or purchase put or call options, except that the Fund may engage in covered call option writing. 7. Underwrite the securities of other issuers or purchase restricted securities. 8. Purchase or sell real estate, real estate investment trust securities, commodities or commodity contracts, or oil and gas interests, except that the Fund may invest for hedging purposes in futures contracts on securities, financial instruments, and indices as are approved for trading on a registered exchange. 9. Make loans, except that the Fund (1) may lend portfolio securities in accordance with the Fund's investment policies up to 33 1/3 percent of the Fund's total assets taken at market value, (2) enter into repurchase agreements, and (3) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, bankers' acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities. 10. Invest more than 15 percent of the value of its total assets in the obligations of any one bank, or invest more than 5 percent of the value of its total assets in the commercial paper of any one issuer. 11. Invest more than 25 percent of the value of its total assets in the securities of issuers in any single industry, provided that this limitation shall not apply to the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, certificates of deposit issued by domestic banks and domestic bankers' acceptances (excluding foreign branches of domestic banks). 12. Invest more than 10 percent in the aggregate of the value of its total assets in repurchase agreements maturing in more than 7 days, time deposits maturing in more than 2 days and portfolio securities which do not have readily available market quotations. 13. Invest in companies for the purpose of exercising control. 14. Invest in securities of other investment companies, except as they may be acquired as part of a merger, consolidation or acquisition of assets. -32- 15. Allow its current obligations under reverse repurchase agreements, together with borrowings, to exceed one-third of the value of its total assets (less all its liabilities other than the obligations under borrowings and such agreements). Each of the LifeSpan Funds each may not: 1. Issue senior securities, except as permitted by paragraphs 2, 3, 6 and 7 below. For purposes of this restriction, the issuance of shares of common stock in multiple classes or series, the purchase or sale of options, futures contracts and options on futures contracts, forward commitments and repurchase agreements entered into in accordance with the Fund's investment policies, are not deemed to be senior securities. 2. Purchase any securities on margin (except that the Company may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities) or make short sales of securities or maintain a short position. The deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin. 3. Borrow money, except for emergency or extraordinary purposes including (i) from banks for temporary or short-term purposes or for the clearance of transactions in amounts not to exceed 33 1/3% of the value of the Fund's total assets (including the amount borrowed) taken at market value, (ii) in connection with the redemption of Fund shares or to finance failed settlements of portfolio trades without immediately liquidating portfolio securities or other assets; and (iii) in order to fulfill commitments or plans to purchase additional securities pending the anticipated sale of other portfolio securities or assets, but only if after each such borrowing there is asset coverage of at least 300% as defined in the Investment Company Act. For purposes of this investment restriction, reverse repurchase agreements, mortgage dollar rolls, short sales, futures contracts, options on futures contracts, securities or indices and forward commitment transactions shall not constitute borrowing. 4. Act as an underwriter, except to the extent that in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter for purposes of the 1933 Act. 5. Purchase or sell real estate except that the Fund may (i) acquire or lease office space for its own use, (ii) invest in securities of issuers that invest in real estate or interests therein, (iii) invest in securities that are secured by real estate or interests therein, (iv) purchase and sell mortgage-related securities and (v) hold and sell real estate acquired by the Fund as a result of the ownership of securities. -33- 6. Invest in commodities, except the Fund may purchase and sell options on securities, securities indices and currency, futures contracts on securities, securities indices and currency and options on such futures, forward foreign currency exchange contracts, forward commitments, securities index put or call warrants and repurchase agreements entered into in accordance with the Fund's investment policies. 7. Make loans, except that the Fund (1) may lend portfolio securities in accordance with the Fund's investment policies up to 33 1/3% of the Fund's total assets taken at market value, (2) enter into repurchase agreements, and (3) purchase all or a portion of an issue of publicly distributed bonds, debentures or other similar obligations. 8. Purchase the securities of issuers conducting their principal activity in the same industry if, immediately after such purchase, the value of its investments in such industry would exceed 25% of its total assets taken at market value at the time of such investment. This limitation does not apply to investments in obligations of the U.S. Government or any of its agencies, instrumentalities or authorities. 9. With respect to 75% of total assets, purchase securities of an issuer (other than the U.S. Government, its agencies, instrumentalities or authorities), if: (a) such purchase would cause more than 5% of the Fund's total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. For purposes of the fundamental investment restrictions, the term "borrow" does not include mortgage dollar rolls, reverse repurchase agreements or lending portfolio securities and the terms "illiquid securities" and "portfolio securities which do not have readily available market quotations" shall include restricted securities. However, as non-fundamental policies, the Company will treat reverse repurchase agreements as borrowings, master demand notes as illiquid securities and mortgage dollar rolls as sales transactions and not as a financing. For purposes of the restriction on investing more than 25% of the Funds' assets in the securities of issuers in any single industry, the category Financial Services as used in the Financial Statements may include several different industries such as mortgage-backed securities, brokerage firms and other financial institutions. Each of the Income Fund and Liquid Fund of the -34- Company may not, as a non-fundamental investment restriction, invest more than 5% of its total assets in securities of any issuer which, together with its predecessors, has been in operation for less than three years. For purposes of a Funds' policy not to concentrate their assets, described in the above restrictions, the Funds have adopted the industry classifications set forth in the Appendix to this Statement of Additional Information. This is not a fundamental policy. The percentage restrictions described above and in each Fund's Prospectus are applicable only at the time of investment and require no action by a Fund as a result of subsequent changes in value of the investments or the size of a Fund. B. NON-FUNDAMENTAL INVESTMENT RESTRICTIONS The following restrictions are designated as non-fundamental and may be changed by the Board of Directors without the approval of shareholders. The LifeSpan Funds each may not: (1) Pledge, mortgage or hypothecate its assets, except to secure permitted borrowings and then only if such pledging, mortgaging or hypothecating does not exceed 33 1/3% of the Fund's total assets taken at market value. Collateral arrangements with respect to margin, option and other risk management and when-issued and forward commitment transactions are not deemed to be pledges or other encumbrances for purposes of this restriction. (2) Participate on a joint or joint-and-several basis in any securities trading account. The "bunching" of orders for the sale or purchase of marketable portfolio securities with other accounts under the management of the Manager or the Subadvisers to save commissions or to average prices among them is not deemed to result in a joint securities trading account. (3) Purchase or retain securities of an issuer if one or more of the Directors or officers of the Company or directors or officers of the Manager or any Subadviser or any investment management subsidiary of the Manager or any Subadviser individually owns beneficially more than 0.5% and together own beneficially more than 5% of the securities of such issuer. (4) Purchase a security if, as a result, (i) more than 10% of the Fund's assets would be invested in securities of other investment companies, (ii) such purchase would result in more than 3% of the total outstanding voting securities of any one such investment company being held by the Fund or (iii) more than 5% of -35- the Fund's assets would be invested in any one such investment company. The Fund will not purchase the securities of any open-end investment company except when such purchase is part of a plan of merger, consolidation, reorganization or purchase of substantially all of the assets of any other investment company, or purchase the securities of any closed-end investment company except in the open market where no commission or profit to a sponsor or dealer results from the purchase, other than customary brokerage fees. The Fund has no current intention of investing in other investment companies. (5) Invest more than 15% of total assets in restricted securities, including securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933. (6) Invest more than 5% of total assets in securities of any issuer which, together with its predecessors, has been in operation for less than three years. (7) Invest in securities which are illiquid if, as a result, more than 15% of its net assets would consist of such securities, including repurchase agreements maturing in more than seven days, securities that are not readily marketable, certain restricted securities, purchased OTC options, certain assets used to cover written OTC options, and privately issued stripped mortgage-backed securities. (8) Purchase securities while outstanding borrowings exceed 5% of the Fund's total assets. (9) Invest in real estate limited partnership interests. (10) Purchase warrants of any issuer, if, as a result of such purchase, more than 2% of the value of the Fund's total assets would be invested in warrants which are not listed on an exchange or more than 5% of the value of the total assets of the Fund would be invested in warrants generally, whether or not so listed. For these purposes, warrants are to be valued at the lesser of cost or market, but warrants acquired by the Fund in units with or attached to debt securities shall be deemed to be without value. (11) Purchase interests in oil, gas, or other mineral exploration programs or mineral leases; however, this policy will not prohibit the acquisition of securities of companies engaged in the production or transmission of oil, gas, or other minerals. (12) Write covered call or put options with respect to more than 25% of the value of its total assets, invest more than 25% of its total assets in protective put options or invest more than 5% of its total assets in puts, calls, spreads or straddles, or any combination thereof, other than protective put options. The -36- aggregate value of premiums paid on all options, other than protective put options, held by the Fund at any time will not exceed 20% of the Fund's total assets. (13) Invest for the purpose of exercising control over or management of any company. In order to permit the sale of shares of the Funds in certain states, the Board of Directors may, in its sole discretion, adopt restrictions on investment policy more restrictive than those described above. Should the Board of Directors determine that any such more restrictive policy is no longer in the best interest of a Fund and its shareholders, the Fund may cease offering shares in the state involved and the Board of Directors may revoke such restrictive policy. Moreover, if the states involved shall no longer require any such restrictive policy, the Board of Directors may, in its sole discretion, revoke such policy. HOW THE FUNDS ARE MANAGED ORGANIZATION AND HISTORY. The Company was incorporated in Maryland on December 9, 1981. Prior to March 18, 1996, the Company was named Connecticut Mutual Investment Accounts, Inc. On March 18, 1996 the Funds listed below changed their names as follows: Fund Name Prior to Fund March 18, 1996 - ------------------- ---------------------- Allocation Fund Connecticut Mutual Balanced Account Value Fund Connecticut Mutual Growth Account LifeSpan Balanced Fund CMIA LifeSpan Balanced Account LifeSpan Growth Fund CMIA LifeSpan Capital Appreciation Account LifeSpan Income Fund CMIA LifeSpan Income Account As a Maryland corporation, the Funds are not required to hold, and do not plan to hold, regular annual meetings of shareholders. The Funds will hold meetings when required to do so by the Investment Company Act or other applicable law, or when a shareholder meeting is called by the Directors or upon proper request of the shareholders. The Directors will call a meeting of shareholders to vote on the removal of a Director upon the written request of the record holders of 10% of its outstanding shares. In addition, if the Directors receive a request from at least 10 shareholders (who have been shareholders for at least six months) holding shares of the Company valued at $25,000 or more or holding at least 1% of the Company's outstanding shares, whichever is less, stating that they wish to communicate with other shareholders to request a meeting to remove a Director, the Directors will then either make each Fund's shareholder list available to the applicants or mail their communication to all other shareholders at the applicants' expense, or the Directors may take such other action as set forth under Section 16(c) of the Investment Company Act. DIRECTORS AND OFFICERS OF THE COMPANY. The Company's Directors and officers and their principal occupations and business affiliations during the past five years are listed below. The address of each Director and officer is Two World Trade Center, New York, New York 10048-0203, unless another address is listed below. All of the Directors are directors of Oppenheimer Target -37- Fund, Oppenheimer Fund, Oppenheimer Global Fund, Oppenheimer Time Fund, Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer Global Emerging Growth Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund, Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset Allocation Fund, Oppenheimer Mortgage Income Fund, Oppenheimer U.S. Government Trust, Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-Government Trust (the "New York-based OppenheimerFunds"). Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and Zack, who are officers of the Company, hold the same offices with the other New York-based OppenheimerFunds as with the Company. LEON LEVY, CHAIRMAN OF THE BOARD OF DIRECTORS; AGE: 70 General Partner of Odyssey Partners, L.P. (investment partnership) and Chairman of Avatar Holdings, Inc. (real estate development). ROBERT G. GALLI, DIRECTOR*; AGE: 62 Vice Chairman of the Manager and Vice President and Counsel of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company; formerly he held the following positions: a director of the Manager and OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and a director of HarbourView Asset Management Corporation ("HarbourView") and Centennial Asset Management Corporation ("Centennial"), investment advisory subsidiaries of the Manager, a director of Shareholder Financial Services, Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of the Manager, an officer of other Oppenheimer funds and Executive Vice President and General Counsel of the Manager and the Distributor. BENJAMIN LIPSTEIN, DIRECTOR; AGE: 72 91 Breezy Hill Road, Hillsdale, New York 12529 Professor Emeritus of Marketing, Stern Graduate School of Business Administration, New York University; a director of Sussex Publishers, Inc. (Publishers of PSYCHOLOGY TODAY on MOTHER EARTH NEWS) and a director of Spy Magazine, L.P. BRIDGET A. MACASKILL, PRESIDENT AND DIRECTOR; AGE: 47 President, Chief Executive Officer and a Director of the Manager; Chairman and a Director of SSI, Vice President and a Director of OAC; a Director of HarbourView and of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the Manager; formerly an Executive Vice President of the Manager. - ------------------- * A Director who is an "interested person" of the Company as defined in the Investment Company Act. -38- ELIZABETH B. MOYNIHAN, DIRECTOR; AGE: 66 801 Pennsylvania Avenue, N.W., Washington, DC 20004 Author and architectural historian; a trustee of the Freer Gallery of Art (Smithsonian Institution), the Institute of Fine Arts (New York University), National Building Museum; a member of the Trustees Council, Preservation League of New York State; a member of the Indo-U.S. Sub-Commission on Education and Culture. KENNETH A. RANDALL, DIRECTOR; AGE: 68 6 Whittaker's Mill, Williamsburg, Virginia 23185 A director of Dominion Resources, Inc. (electric utility holding company), Dominion Energy, Inc. (electric power and oil & gas producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper Corporation (insurance and financial services company), Fidelity Life Association (mutual life insurance company); formerly Chairman of the Board of ICL, Inc. (information systems), and President and Chief Executive Officer of The Conference Board, Inc. (international economic and business research). EDWARD V. REGAN, DIRECTOR; AGE: 65 40 Park Avenue, New York, New York 10016 Chairman of Municipal Assistance Corporation for the City of New York; President of Jerome Levy Economics Institute; a member of the U.S. Competitiveness Policy Council; a director of GranCare, Inc. (healthcare provider); formerly New York State Comptroller and a trustee of the New York State and Local Retirement Fund. RUSSELL S. REYNOLDS, JR., DIRECTOR; AGE: 63 200 Park Avenue, New York, New York 10166 Founder and Chairman of Russell Reynolds Associates, Inc. (executive recruiting); Chairman of Directors Publication, Inc. (consulting and publishing); a trustee of Mystic Seaport Museum, International House, Greenwich Historical Society and Greenwich Hospital. SIDNEY M. ROBINS, DIRECTOR; AGE: 83 50 Overlook Road, Ossining, New York 10562 Chase Manhattan Professor Emeritus of Financial Institutions, Graduate School of Business, Columbia University; Visiting Professor of Finance, University of Hawaii; and a director of The Korea Fund, Inc. (closed-end investment company); a member of the Board of Advisors, Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance, Adelphi University. -39- DONALD W. SPIRO, DIRECTOR*; AGE: 69 Chairman Emeritus and a director of the Manager; formerly Chairman of the Manager and the Distributor. PAULINE TRIGERE, DIRECTOR; AGE: 82 498 Seventh Avenue, New York, New York 10018 Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of women's fashions). CLAYTON K. YEUTTER, DIRECTOR; AGE: 64 1325 Merrie Ridge Road, McLean, Virginia 22101 Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T. Industries, Ltd. (tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra, Inc. (food and agricultural products), Farmers Insurance Company (Insurance); FMC Corp. (chemicals and machinery), Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments, Inc. (electronics), and The Virgo Corporation (fertilizer manufacturer); formerly (in descending chronological order) Counsellor to the President (Bush) for Domestic Policy, Chairman of the Republican National Committee, Secretary of the U.S. Department of Agriculture, and U.S. Trade Representative. ANDREW J. DONOHUE, SECRETARY; AGE: 45 Executive Vice President and General Counsel of the Manager and the Distributor; an officer of other Oppenheimer funds; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor; prior to which he was a Partner in Kraft & McManimon (a law firm), an officer of First Investors Corporation (a broker-dealer) and First Investors Management Company, Inc. (broker-dealer and investment adviser), and a director and an officer of First Investors Family of Funds and First Investors Life Insurance Company. ROBERT DOLL, JR., VICE PRESIDENT; AGE: 41 Executive Vice President of the Manager; an officer of other Oppenheimer funds. GEORGE C. BOWEN, TREASURER; AGE: 59 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 Oppenheimer funds. - ------------------------- * A Director who is an "interested person" of the Company as defined in the Investment Company Act. -40- ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 47 Senior Vice President and Associate General Counsel of the Manager; Assistant Secretary of SSI and SFSI; and officer of other Oppenheimer funds. ROBERT 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 Oppenheimer funds; previously a Fund Controller for the Manager, prior to which he was an Accountant for Yale & Seffinger, P.C., an accounting firm, and previously an Accountant and Commissions Supervisor for Stuart James Company Inc., a broker-dealer. SCOTT FARRAR, ASSISTANT TREASURER; AGE: 30 3410 South Galena Street, Denver, Colorado 80231 Assistant Vice President of the Manager/Mutual Fund Accounting; an officer of other Oppenheimer funds; previously a Fund Controller for the Manager, prior to which he was an International Mutual Fund Supervisor for Brown Brothers Harriman Co., a bank, and previously a Senior Fund Accountant for State Street Bank & Trust Company, before which he was a sales representative for Central Colorado Planning. REMUNERATION OF DIRECTORS. The officers of the Funds are affiliated with the Manager; they and the Directors of the Funds who are affiliated with the Manager receive no salary or fee from the Funds. The chart below sets forth the fees paid by each Fund to its Directors and certain other information for the fiscal year ended December 31, 1995*: - ------------------- * Effective May 31, 1996, each of the individuals listed below resigned their position as a Director of the Company. -41-
RICHARD M. DONALD E. A. RICHARD W. BEVERLY L. DONALD H. DAVID E. AYERS CARSON GREENE HAMILTON POND, JR. SAMS, JR. ---------- ------------ ---------- ---------- --------- --------- COMPENSATION RECEIVED FROM EACH FUND LIQUID FUND $974 $1,034 $1,180 $1,003 $-0- $-0- GOVERNMENT SECURITIES FUND 850 894 1,021 872 -0- -0- INCOME FUND 751 787 898 768 -0- -0- ALLOCATION FUND 2,328 2,512 2,851 2,420 -0- -0- VALUE FUND 1,309 1,404 1,597 1,357 -0- -0- LIFESPAN INCOME FUND 128 148 169 138 -0- -0- LIFESPAN BALANCED FUND 221 255 289 238 -0- -0- LIFESPAN GROWTH FUND 172 199 226 187 -0- -0-
-42-
RICHARD M. DONALD E. A. RICHARD W. BEVERLY L. DONALD H. DAVID E. AYERS CARSON GREENE HAMILTON POND, JR. SAMS, JR. ---------- ------------ ---------- ---------- --------- --------- PENSION OR RETIREMENT BENEFITS ACCRUED AS A FUND EXPENSE LIQUID FUND -0- -0- -0- -0- -0- -0- GOVERNMENT SECURITIES FUND -0- -0- -0- -0- -0- -0- INCOME FUND -0- -0- -0- -0- -0- -0- TOTAL RETURN FUND -0- -0- -0- -0- -0- -0- VALUE FUND -0- -0- -0- -0- -0- -0- LIFESPAN INCOME FUND -0- -0- -0- -0- -0- -0- LIFESPAN BALANCED FUND -0- -0- -0- -0- -0- -0- LIFESPAN GROWTH FUND -0- -0- -0- -0- -0- -0- TOTAL COMPENSATION FROM COMPANY AND COMPLEX PAID TO THE DIRECTORS** 13,500 14,500 16,500 14,000 -0- -0-
As of December 31, 1995, the Directors and officers of the Company as a group owned of record or beneficially less than 1% of the outstanding shares of the Company. MAJOR SHAREHOLDERS. As of January 31, 1995, Connecticut Mutual Life Insurance Company ("CML") and its affiliates owned shares of the Funds as follows: Value Fund (1,980,906 shares) (29% of shares outstanding); Liquid Fund (36,099,906 shares) (46% of shares. - ------------------- * As of the calendar year ended December 31, 1995, there were 22 investment companies in the Complex (including the Funds). -43- outstanding); LifeSpan Growth Fund (2,590,448 shares) (83% of shares outstanding); LifeSpan Balanced Fund (3,485,974 shares) (89% of shares outstanding); LifeSpan Income Fund (2,086,830 shares) (89% of shares outstanding). CML is incorporated under the laws of the State of Connecticut. CML and its affiliates are deemed to be controlling persons of any Fund of the Company of which they own more than 25% of the shares outstanding. As such, the exercise by CML and its affiliates of their voting rights may diminish the voting power of other shareholders. Effective March 1, 1996, Massachusetts Mutual Life Insurance Company, a Massachusetts corporation, acquired CML's interests in the Funds. As of January 31, 1996, no person owned of record or was known by the Company to own beneficially 5% or more of the outstanding shares of any Fund. THE MANAGER, THE SUBADVISERS AND THEIR AFFILIATES. The Manager is wholly-owned by Oppenheimer Acquisition Corporation ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager's directors and officers, some of whom also serve as officers of the Funds, and two of whom (Mr. Jon S. Fossel and Mr. James C. Swain) serve as Directors of the Funds. The Manager and the Funds have a Code of Ethics. It is designed to detect and prevent improper personal trading by certain employees, including portfolio managers, that would compete with or take advantage of a Fund's portfolio transactions. Compliance with the Code of Ethics is carefully monitored and strictly enforced by the Manager. THE INVESTMENT ADVISORY AGREEMENTS. Each Fund has entered into an Investment Advisory Agreement with the Manager. The investment advisory agreement between the Manager and each Fund requires the Manager, at its expense, to provide each Fund with adequate office space, facilities and equipment, and to provide and supervise the activities of all administrative and clerical personnel required to provide effective corporate administration for each Fund, including the compilation and maintenance of records with respect to its operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for the continuous public sale of shares of each Fund. Expenses not expressly assumed by the Manager under an advisory agreement or by the Distributor under a Distribution Agreement (defined below) are paid by the relevant Fund. The advisory agreement lists examples of expenses to be paid by a Fund, the major categories of which relate to interest, taxes, brokerage commissions, fees to certain Directors, legal, and audit -44- expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation. The advisory fees paid by the Funds to G.R. Phelps & Co., the Funds' prior investment advisor, for the last three fiscal years were:
1993 1994 1995 --------- ---------- ---------- Liquid Fund $357,506 $ 385,774 $ 349,609 Government Securities Fund $465,806 $ 460,523 $ 342,325 Income Fund $277,291 $ 304,391 $ 274,057 Allocation Fund $867,544 $1,173,401 $1,251,666 Value Fund $264,629 $ 342,082 $ 613,378 LifeSpan Balanced Fund $ 0 $ 0 $ 214,011 LifeSpan Growth Fund $ 0 $ 0 $ 166,212 LifeSpan Income Fund $ 0 $ 0 $ 111,599 Total All Funds $232,776 $ 666,171 $3,322,857 --------- ---------- ---------- --------- ---------- ----------
Under each advisory agreement, the Manager has undertaken that if the total expenses of a Fund in any fiscal year should exceed the most stringent state regulatory requirements on expense limitations applicable to a Fund, the Manager's compensation under the advisory agreement will be reduced by the amount of such excess. For the purpose of such calculation, there shall be excluded any expense borne directly or indirectly by a Fund which is permitted to be excluded from the computation of such limitation by such statute or state regulatory authority. At present, that limitation is imposed by California, and limits expenses (with specific exclusions) to 2.5% of the first $30 million of average net assets, 2% of the next $70 million of average net assets and 1.5% of average net assets in excess of $100 million. Any assumption of a Fund's expenses under this limitation would lower a Fund's overall expense ratio and increase its total return during any period in which expenses are limited. The advisory agreement provides that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the advisory agreement, the Manager is not liable for any loss resulting from any good faith errors or omissions in connection with any matters to which the Agreement relates. Each advisory agreement permits the Manager to act as -45- investment adviser for any other person, firm or corporation and to use the name "Oppenheimer" in connection with its other investment activities. If the Manager shall no longer act as investment adviser to the Funds, the right of the Funds to use the name "Oppenheimer" as part of their corporate names may be withdrawn. Babson-Stewart, One Memorial Drive, Cambridge, Massachusetts 02142, is a Massachusetts general partnership and a registered investment adviser and was originally established in 1987. The general partners of Babson-Stewart are David L. Babson & Co., which is an indirect subsidiary of Massachusetts Life Insurance Company, and Stewart Ivory & Co. (International), Ltd. As of September 30, 1995, Babson-Stewart had approximately $917 million in assets under management. BEA Associates, Citicorp Center, 153 E. 53rd Street, 57th Floor, New York, NY 10022, is a partnership between Credit Suisse Capital Corporation and BEA Associate's employee shareholders. BEA Associates has been providing domestic and global fixed income and equity investment management services for institutional clients and mutual funds since 1984 and, together with its global affiliate, had $28.9 billion in assets under management as of June 30, 1995. Pilgrim, 1255 Drummers Lane, Wayne, Pennsylvania 19087, was established in 1982 to provide specialized equity management for institutional investors. Pilgrim is a Delaware corporation and a wholly owned subsidiary of United Asset Management Corporation. As of May 31, 1995, Pilgrim had over $4 billion in assets under management. THE INVESTMENT SUBADVISORY AGREEMENTS. With respect to the international Component for LifeSpan Growth Fund and LifeSpan Balanced Fund, the Manager has entered into investment subadvisory agreements with Babson-Stewart. With respect to the small cap Component of each LifeSpan Fund, the Manager has entered into investment subadvisory agreements with Pilgrim. With respect to the high yield/high risk bond Component for each LifeSpan Fund, the Manager has entered into investment subadvisory agreements with BEA Associates. Under the respective investment subadvisory agreement, the corresponding Subadviser, subject to the review of the Board of Directors and the overall supervision of the Manager, is responsible for managing the investment operations of the corresponding LifeSpan Fund Component and the composition of the Component's portfolio and furnishing the LifeSpan Fund with advice and recommendations with respect to investments and the purchase and sale of securities for the respective Component. The investment subadvisory agreements with Babson-Stewart provide that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard with respect to its obligations and duties under the agreements, Babson-Stewart will -46- not be subject to liability for any loss sustained by reason of its good faith errors of omissions in connection with any matters to which the agreements relate. The investment subadvisory agreements with Pilgrim provide that in the absence of willful misfeasance, bad faith, negligence, or reckless disregard of the performance of its duties under the agreements, Pilgrim is not subject to liability for any error of judgment or mistake of law or for any other action or omission in the course of, or connected with, rendering services or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. The investment subadvisory agreement with BEA Associates provides that in the absence of willful misfeasance, bad faith, negligence, or reckless disregard of the performance of its duties under the agreement, BEA Associates is not subject to liability for losses as a result of its activities in connection with the adoption of any investment policy or the purchase, sale or retention of securities on behalf of the LifeSpan Funds subadvised by BEA Associates if such activities were made with due care and in good faith. THE DISTRIBUTOR. Under its Distribution Agreements with each Fund, the Distributor acts as each Fund's principal underwriter in the continuous public offering of the Fund's shares, but is not obligated to sell a specific number of shares. Expenses normally attributable to sales (other than those paid 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. The compensation paid by the Funds to G.R. Phelps & Co., the prior distributor of the Funds' shares, for distribution fees for the last three fiscal years was:
1993 1994 1995 --------- ---------- ---------- Liquid Fund 0 0 0 Government Securities Fund $ 365,583 $ 189,799 $ 77,366 Income Fund $ 203,149 $ 127,640 $102,642 Allocation Fund $1,790,711 $1,671,181 $902,663 Value Fund $ 416,056 $ 513,544 $559,650 LifeSpan Income Fund $ 0 $ 0 $ 75,262 -------- LifeSpan Balanced Fund $ 0 $ 0 $123,711 -------- LifeSpan Growth Fund $ 0 $ 0 $151,750 --------
-47- For additional information about distribution of the Funds' shares and the expenses connected with such activities, please refer to "Distribution and Service Plans," below. THE TRANSFER AGENT. OppenheimerFunds Services, each Fund's transfer agent, is responsible for maintaining each Fund's shareholder registry and shareholder accounting records, and for shareholder servicing and administrative functions. BROKERAGE POLICIES OF THE FUNDS BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AGREEMENTS. One of the duties of the Manager under each advisory agreement is to arrange the portfolio transactions for each Fund. Each advisory agreement contains provisions relating to the employment of broker-dealers ("brokers") to effect a Fund's portfolio transactions. In doing so, the Manager is authorized by the advisory agreement to employ such 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 a 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 a Fund as established by its Board of Directors. Under each advisory agreement, the Manager is authorized to select brokers that provide brokerage and/or research services for a Fund and/or the other accounts over which the Manager or its affiliates have investment discretion. The commissions paid to such brokers may be higher than another qualified broker would have charged, if a good faith determination is made by the Manager and the commission is fair and reasonable in relation to the services provided. Subject to the foregoing considerations, the Manager may also consider sales of shares of a Fund and other investment companies managed by the Manager or its affiliates as a factor in the selection of brokers for a Fund's portfolio transactions. DESCRIPTION OF BROKERAGE PRACTICES FOLLOWED BY THE MANAGER. Most purchases made by the Funds are principal transactions at net prices, and the Funds incur little or no brokerage costs. Subject to the provisions of the advisory agreement, the procedures and rules described above, allocations of brokerage are generally made by the Manager's portfolio traders based upon recommendations from the Manager's portfolio managers. In certain instances, portfolio managers may directly place trades and allocate brokerage, also subject to the provisions of the advisory agreements and the -48- procedures and rules described above. In either case, brokerage is allocated under the supervision of the Manager's executive officers. Transactions in securities other than those for which an exchange is the primary market are generally done with principals or market makers. Brokerage commissions are paid primarily for effecting transactions in listed securities or for certain fixed income agency transactions in the secondary market and otherwise only if it appears likely that a better price or execution can be obtained. When the Funds engage in an option transaction, ordinarily the same broker will be used for the purchase or sale of the option and any transaction in the securities to which the option relates. When possible, concurrent orders to purchase or sell the same security by more than one of the accounts managed by the Manager and its affiliates are combined. The transactions effected pursuant to such combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each account. The research services provided by a particular broker may be useful only to one or more of the advisory accounts of the Manager and its affiliates, and investment research received for the commissions of those other accounts may be useful both to the Funds and one or more of such other accounts. Such research, which may be supplied by a third party at the instance of a broker, includes information and analyses on particular companies and industries as well as market or economic trends and portfolio strategy, receipt of market quotations for portfolio evaluations, information systems, computer hardware and similar products and services. If a research service also assists the Manager in a non-research capacity (such as bookkeeping or other administrative functions), then only the percentage or component that provides assistance to the Manager in the investment decision-making process may be paid in commission dollars. The Board of Directors has permitted the Manager to use concessions on fixed price offerings to obtain research, in the same manner as is permitted for agency transactions. The Board has also permitted the Manager to use stated commissions on secondary fixed-income trades to obtain research where the broker has represented to the Manager that (i) the trade is not from the broker's own inventory, (ii) the trade was executed by the broker on an agency basis at the stated commission, and (iii) the trade is not a riskless principal transaction. The research services provided by brokers broadens the scope and supplements the research activities of the Manager, by making available additional views for consideration and comparisons, and enabling the Manager to obtain market information for the valuation of securities held in a Fund's portfolio or being considered for purchase. The Board of Directors, including the -49- "independent" Directors of the Funds (those Directors of the Funds 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. LIQUID FUND, INCOME FUND AND GOVERNMENT SECURITIES FUND. As most purchases made by Liquid Fund, Income Fund and Government Securities Fund are principal transactions at net prices, these Funds incur little or no brokerage costs. Purchases of securities from underwriters include a commission or concession paid by the issuer to the underwriter, and purchases from dealers include a spread between the bid and asked price. No principal transactions and, except under unusual circumstances, no agency transactions for these Funds will be handled by any affiliated securities dealer. In the unusual circumstance when these Funds pay brokerage commissions, the above-described brokerage practices and policies are followed. Liquid Fund's policy of investing in short-term debt securities with maturities of less than 397 days results in high portfolio turnover. However, since brokerage commissions, if any, are small, high portfolio turnover does not have an appreciable adverse effect upon net asset value of the Fund. Brokerage commissions for the most recent three year period for the Fund's listed below were as follows:
1993 1994 1995 ------ ------ ------ Brokerage Brokerage Brokerage Fund Commissions Commissions Commissions ---- ----------- ----------- ----------- Value Fund $187,654 $249,665 $233,480 Allocation Fund $297,403 $379,734 $211,491 LifeSpan Income Fund $0 $0 $12,083 LifeSpan Balanced Fund $0 $0 $58,577 LifeSpan Growth Fund $0 $0 $62,173
PERFORMANCE OF THE FUNDS YIELD (LIQUID FUND ONLY). Liquid Fund's current yield is determined in accordance with regulations adopted under the Investment Company Act. Yield is calculated for a seven-day period of time as follows. First, a base period return is calculated for the seven-day period by determining the net change in the value of a hypothetical pre-existing account having one share at the beginning of the seven-day period. The change includes dividends declared on the original share and dividends declared on any shares purchased with dividends on that share, but such dividends are adjusted to exclude any realized or unrealized capital gains or losses affecting the dividends declared. Next, the base period return is multiplied by 365/7 to obtain the current yield to the nearest hundredth of one percent. The compounded effective yield for a seven-day period is calculated by (a) adding 1 to the base period return (obtained as described above), (b) raising the sum to a power equal to 365 divided by 7, and (c) subtracting 1 from the result. Liquid Fund's "current yield" for the seven days ended December 31, 1995, was 4.73% and its "compounded effective yield" was 4.84%. The yield as calculated above may vary for accounts less than approximately $100 in value due to the effect of rounding off each daily dividend to the nearest full cent. Since the calculation of yield under either procedure described above does not take into consideration any realized or unrealized gains or losses on Liquid Fund's portfolio securities which may affect dividends, the return on dividends declared during a period may not be the same on an annualized basis as the yield for that period. YIELD AND TOTAL RETURN INFORMATION (ALL FUNDS OTHER THAN LIQUID FUND). From time to time, as set forth in a Fund's Prospectus, the "standardized yield," "dividend yield," "average annual total return," "total return," or "total return at net asset value", as the case may be, of an investment in a class of a Fund may be advertised. An explanation of how yields and total returns are calculated for each class and the components of those calculations is set forth below. A Fund's maximum sales charge rate on Class A shares was lower prior to March 18, 1996, and actual investment performance would be affected by that change. -50- A Fund's advertisement of its performance must, under applicable rules of the SEC, include the average annual total returns for each class of shares of a Fund for the 1, 5 and 10-year periods (or the life of the class, if less) as of the most recently ended calendar quarter prior to the publication of the advertisement. This enables an investor to compare a Fund's performance to the performance of other funds for the same periods. However, a number of factors should be considered before using such information as a basis for comparison with other investments. An investment in a Fund is not insured; its yields and total returns and share prices are not guaranteed and normally will fluctuate on a daily basis. When redeemed, an investor's shares may be worth more or less than their original cost. Yields and total returns for any given past period are not a prediction or representation by a Fund of future yields or rates of return on its shares. The yields and total returns of Class A, Class B or Class C shares of a Fund, as the case may be, are affected by portfolio quality, the type of investments the Fund holds and its operating expenses allocated to a particular class. STANDARDIZED YIELDS YIELD. A Fund's "yields" (referred to as "standardized yield") for a given 30-day period for a class of shares are calculated using the following formula set forth in rules adopted by the SEC that apply to all funds that quote yields: 6 2 [( a-b + 1) - 1] Standardized Yield = ( cd ) The symbols above represent the following factors: a = dividends and interest earned during the 30-day period. b = expenses accrued for the period (net of any expense reimbursements). c = the average daily number of shares of that class outstanding during the 30-day period that were entitled to receive dividends. d = the maximum offering price per share of the class on the last day of the period, using the current maximum sales charge rate adjusted for undistributed net investment income. The standardized yield of a class of shares for a 30-day period may differ from its yield for any other period. The SEC formula assumes that the standardized yield for a 30-day period occurs at a constant rate for a six-month period and is annualized at the end of the six-month period. This standardized yield is not based on actual distributions paid by a Fund to shareholders in the 30-day period, but is a hypothetical yield based upon the net investment income from a Fund's portfolio investments calculated for that period. The standardized yield may differ -51- 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 a Fund's classes of shares will differ. DIVIDEND YIELD AND DISTRIBUTION RETURN. From time to time a Fund may quote a "dividend yield" or a "distribution return" for each class. Dividend yield is based on the dividends paid on shares of a class from 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 DIVIDED BY Number of days (accrual - -------------------------------- period) x 365 Max. Offering Price of the Class (last day of period) The maximum offering price for Class A shares includes the current maximum front-end sales charge. For Class B or Class C shares, as the case may be, the maximum offering price is the net asset value per share, without considering the effect of contingent deferred sales charges. From time to time similar yield or distribution return calculations may also be made using the Class A net asset value (instead of its respective maximum offering price) at the end of the period. TOTAL RETURN INFORMATION AVERAGE ANNUAL TOTAL RETURNS. The "average annual total return" of each class is an average annual compounded rate of return for each year in a specified number of years. It is the rate of return based on the change in value of a hypothetical initial investment of $1,000 ("P" in the formula below) held for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of that investment according to the following formula: 1/n (ERV) - 1 = AVERAGE ANNUAL TOTAL RETURN --- P CUMULATIVE TOTAL RETURNS. The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over an entire period of years. Its -52- 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 5.75% for Allocation, Value, LifeSpan Balanced, LifeSpan Growth and LifeSpan Income Fund (the "Equity Funds") and 4.75% for Government Securities and Income Fund (the "Bond Funds") (as a percentage of the offering price) is deducted from the initial investment ("P") (unless the return is shown at net asset value, as discussed below). For Class B shares of an Equity Fund, the payment of the current contingent deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is applied to the investment result for the time period shown (unless the total return is shown at the net asset value, as described below). For Class B shares of a Bond Fund, the payment of the current contingent deferred sales charge (4.0% for the first year, 3.0% for the second year, 2.0% for the third and fourth years, 1.0% in the fifth year and none thereafter) is applied to the investment result for the time period shown (unless the total return is shown at net asset value, as described below). For Class C shares, the 1.0% contingent deferred sales charge is applied to the investment results for the one-year period (or less). 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. 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. TOTAL RETURNS AT NET ASSET VALUE. From time to time a Fund may also quote an "average annual total return at net asset value" or a cumulative "total return at net asset value" for Class A, Class B or Class C shares, as the case may be. 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. -53- VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE GOVERNMENT SECURITIES FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 4% (including 4% Period Date sales charge) sales charge) 10 Years Ended 12/31/85 8.92% 8.44% 12/31/95 5 Years Ended 12/31/90 8.59% 7.71% 12/31/95 1 Year Ended 12/31/94 17.90% 13.18% 12/31/95
VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE GOVERNMENT SECURITIES FUND:
Total Return Annualized Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 4.20% -1.01% to 12/31/95
*Date of Inception VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE INCOME FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 4% (including 4% Period Date sales charge) sales charge) 10 Years Ended 12/31/85 7.74% 4.30% 12/31/95 5 Years Ended 12/31/90 7.91% 7.03% 12/31/95 1 Year Ended 12/31/94 11.77% 7.29% 12/31/95
-54- VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE INCOME FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 2.41% -2.71% 12/31/95
*Date of Inception VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE ALLOCATION FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 5% (including 5% Period Date sales charge) sales charge) 10 Years Ended 12/31/85 12.02% 11.45% 12/31/95 5 Years Ended 12/31/90 14.65% 13.48% 12/31/95 1 Year Ended 12/31/94 23.95% 17.75% 12/31/95
VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE ALLOCATION FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 4.93% -0.31% to 12/31/95
*Date of Inception -55- VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE VALUE FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 5% (including 5% Period Date sales charge) sales charge) 10 Years Ended 12/31/85 14.84% 14.25% 12/31/95 5 Years Ended 12/31/90 20.23% 19.00% 12/31/95 1 Year Ended 12/31/94 36.40% 29.58% 12/31/95
VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE VALUE FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 8.04% 2.63% to 12/31/95
*Date of Inception VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE LIFESPAN GROWTH FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 5% (including 5% Period Date sales charge) sales charge) Life of Fund 5/1/95* 18.02% 12.12% to 12/31/95
-56- VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE LIFESPAN GROWTH FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 5.34% 0.07% to 12/31/95
VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE LIFESPAN BALANCED FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 5% (including 5% Period Date sales charge) sales charge) Life of Fund 5/1/95* 15.33% 9.56% to 12/31/95
*Date of Inception VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE LIFESPAN BALANCED FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/1/95* 4.49% -0.73% to 12/31/95
*Date of Inception VALUE OF A $1,000 INVESTMENT IN THE CLASS A SHARES OF THE LIFESPAN INCOME FUND:
Total Return Total Return Annualized Annualized Investment Investment (excluding 5% (including 5% Period Date sales charge) sales charge) Life of Fund 5/1/95* 11.22% 5.66% to 12/31/95
*Date of Inception -57- VALUE OF A $1,000 INVESTMENT IN THE CLASS B SHARES OF THE LIFESPAN INCOME FUND:
Total Return Total Return Investment Investment (excluding 5% (including 5% Period Date CDSC) CDSC) Life of Fund 10/01/95* 4.30% -0.92% to 12/31/95
*Date of Inception OTHER PERFORMANCE COMPARISONS. From time to time a Fund may also include in its advertisements and sales literature performance information about a Fund or rankings of a Fund's performance cited in newspapers or periodicals, such as The New York Times. These articles may include quotations of performance from other sources, such as Lipper Analytical Services, Inc. or Morningstar, Inc. -58- From time to time, a Fund's Manager may publish rankings or ratings of the Manager (or the Transfer Agent), by independent third-parties, on the investor services provided by them to shareholders of the Oppenheimer funds, other than the performance rankings of the Oppenheimer funds themselves. These ratings or rankings of shareholder/investor services by third parties may compare the Oppenheimer funds services to those of other mutual fund families selected by the rating or ranking services, and may be based upon the opinions of the rating or ranking service itself, using its own research or judgment, or based upon surveys of investors, brokers, shareholders or others. When comparing yield, total return and investment risk of an investment in Class A, Class B or Class C shares, as the case may be, of a Fund with other investments, investors should understand that certain other investments have different risk characteristics than an investment in shares of a Fund. For example, certificates of deposit may have fixed rates of return and may be insured as to principal and interest by the FDIC, while a Fund's returns will fluctuate and its share values and returns are not guaranteed. U.S. Treasury securities are guaranteed as to principal and interest by the full faith and credit of the U.S. government. DISTRIBUTION AND SERVICE PLANS (NOT APPLICABLE TO LIQUID FUND) Each Fund (other than Liquid Fund) has adopted a Service Plan for Class A Shares and a Distribution and Service Plan for Class B -59- shares of the Fund under Rule 12b-1 of the Investment Company Act. Each of Allocation Fund, Value Fund and each LifeSpan Fund has adopted a Distribution and Service Plan for Class C shares of such Fund under Rule 12b-1 of the Investment Company Act. Pursuant to such Plans, each Fund will reimburse the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of that class, as described in the Prospectuses. Each Plan has been approved by a vote of (i) the Board of Directors of the effected Funds, including a majority of the Independent Directors, cast in person at a meeting called for the purpose of voting on that Plan, and (ii) the holders of a "majority" (as defined in the Investment Company Act) of the shares of each class. For the Distribution and Service Plans for the Class C shares, the votes were cast by the Manager as the then-sole initial holder of Class C shares of the effected Funds. 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 a 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 at no cost to a Fund. The Distributor and the Manager may, in their sole discretion, increase or decrease the amount of payments they make to Recipients from their own resources. Unless terminated as described below, each Plan continues in effect from year to year but only as long as such continuance is specifically approved at least annually by the effected Fund's Board of Directors including its Independent Directors by a vote cast in person at a meeting called for the purpose of voting on such continuance. Each Plan may be terminated at any time by the vote of a majority of the Independent Directors or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding shares of that class. No Plan may be amended to increase materially the amount of payments to be made unless such amendment is approved by shareholders of the class affected by the amendment. In addition, because Class B shares of each Fund automatically convert into Class A shares after six years, a Fund is required to obtain the approval of Class B as well as Class A shareholders for a proposed amendment to a Class A Plan that would materially increase payments under the Class A Plan. Such approval must be by a "majority" of the Class A and Class B shares (as defined in the Investment Company Act), voting separately by class. All material amendments must be approved by the Board and the Independent Directors. While the Plans are in effect, the Treasurer of the Funds shall provide separate written reports to the Board of Directors at least quarterly for its review, detailing the amount of all -60- payments made pursuant to each Plan, the purpose for which the payments were made and the identity of each Recipient that received any such payment and the purpose of the payments. The report for the Class B Plan shall also include the Distributor's distribution costs for that quarter, and such costs for previous fiscal periods that are carried forward, as explained in the Prospectuses and below. Those reports, including the allocations on which they are based, will be subject to the review and approval of the Independent Directors in the exercise of their fiduciary duty. Each Plan further provides that while it is in effect, the selection and nomination of those Directors who are not "interested persons" of the Funds are committed to the discretion of the Independent Directors. This does not prevent the involvement of others in such selection and nomination if the final decision on any such selection or nomination is approved by a majority of the Independent Directors. Under the Plans, no payment will be made to any Recipient in any quarter if the aggregate net asset value of all shares of a Fund 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 Directors. Initially, the Board of Directors has set the fee at the maximum rate and set no minimum amount. Any unreimbursed expenses incurred by the Distributor with respect to Class A shares for any fiscal quarter by the Distributor may not be recovered under the Class A Plan in subsequent fiscal quarters. Payments received by the Distributor under the Plan for Class A shares will not be used to pay any interest expense, carrying charges, or other financial costs, or allocation of overhead by the Distributor. The Class B and Class C Plans allow the service fee payments to be paid by the Distributor to Recipients in advance for the first year Class B and Class C shares are outstanding, and thereafter on a quarterly basis, as described in the Prospectuses. The advance payment is based on the net asset value of the Class B and Class C shares sold. An exchange of shares does not entitle the Recipient to an advance payment of the service fee. In the event Class B or Class C shares are redeemed during the first year such shares are outstanding, the Recipient will be obligated to repay a pro rata portion of the advance of the service fee payment to the Distributor. Although the Class B and the Class C Plans permit the Distributor to retain both the asset-based sales charges and the service fee, or to pay Recipients the service fee on a quarterly basis, without payment in advance, the Distributor presently intends to pay the service fee to Recipients in the manner described above. A minimum holding period may be established from time to time under the Class B Plan and the Class C Plan by the Board. Initially, the Board has set no minimum holding period. -61- All payments under the Class B Plan and the Class C Plan are subject to the limitations imposed by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. The Distributor anticipates that it will take a number of years for it to recoup (from a Fund's payments to the Distributor under the Class B or Class C Plan and from contingent deferred sales charges collected on redeemed Class B or Class C shares) the sales commissions paid to authorized brokers or dealers. For the fiscal year ended December 31, 1995, each Fund paid the Distributor the following amounts under its respective Class A and Class B Plans:
Class A Class B ----------- ----------- Liquid Fund $ 0* N/A Government Securities Fund $ 0 $ 75 Income Fund $ 0 $ 112 Allocation Fund $ 348,698 $ 917 Value Fund $ 176,158 $ 742 LifeSpan Growth Fund $ 48,745 $ 563 LifeSpan Balanced Fund $ 62,792 $ 608 LifeSpan Income Fund $ 37,134 $ 264
During this period, no Class C Plans were in effect for the Funds and no Class C shares were outstanding. - --------------- * Liquid Fund terminated its 12b-1 Plan in March 1996. Asset-based sales charge payments are designed to permit an investor to purchase shares of a Fund without the assessment of a front-end sales load and at the same time permit the Distributor to compensate brokers and dealers in connection with the sale of Class B and Class C shares of a Fund. The Class B and Class C Plans provide for the Distributor to be compensated at a flat rate whether the Distributor's distribution expenses are more than the amounts paid by a Fund during that period. Such payments are made in recognition that the Distributor (i) pays sales commissions to authorized brokers and dealers at the time of sale, (ii) may finance such commissions and/or the advance of the service fee payment to Recipients under those Plans or provide such financing from its own resources, or from an affiliate, (iii) employs personnel to support distribution of shares, and (iv) costs of -62- sales literature, advertising and prospectuses (other than those furnished to current shareholders) and state "blue sky" registration fees and certain other distribution expenses. ABOUT YOUR ACCOUNT HOW TO BUY SHARES ALTERNATIVE SALES ARRANGEMENTS - CLASS A, CLASS B AND CLASS C SHARES (NOT APPLICABLE TO LIQUID FUND). Income Fund and Government Securities Fund offer two classes of shares, Class A and Class B shares. Value Fund, Allocation Fund and each LifeSpan Fund offer three classes of shares, Class A, Class B and Class C shares. The availability of multiple classes of shares permits an investor to choose the method of purchasing shares that is more beneficial to the investor depending on the amount of the purchase, the length of time the investor expects to hold shares and other relevant circumstances. Investors should understand that the purpose and function of the deferred sales charge and asset-based sales charge with respect to Class B and Class C shares are the same as those of the initial sales charge with respect to Class A shares. Any salesperson or other person entitled to receive compensation for selling Fund shares may receive different compensation with respect to one class of shares than the other. The Distributor will not accept any order for $500,000 or $1 million or more of Class B or Class C shares, respectively, 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 a Fund instead. A Fund's classes of shares each represent an interest in the same portfolio investments of the Fund. However, each class has different shareholder privileges and features. The net income attributable to Class B and Class C shares and the dividends payable on Class B and Class C shares will be reduced by incremental expenses borne solely by that class, including the asset-based sales charge to which Class B and Class C shares are subject. The conversion of Class B shares to Class A shares after six years is subject to the continuing availability of a private letter ruling from the Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect that the conversion of Class B shares does not constitute a taxable event for the 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 -63- 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 a Fund's Class A, Class B and Class C shares recognizes two types of expenses. General expenses that do not pertain specifically to any class are allocated pro rata to the shares of each class, based on the percentage of the net assets of such class to a Fund's total net assets, and then equally to each outstanding share within a given class. Such general expenses include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials for current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi) share issuance costs, (vii) organization and start-up costs, (viii) interest, taxes and brokerage commissions, and (ix) non-recurring expenses, such as litigation costs. Other expenses that are directly attributable to a class are allocated equally to each outstanding share within that class. Such expenses include (i) Distribution and/or Service Plan fees, (ii) incremental transfer and shareholder servicing agent fees and expenses, (iii) registration fees and (iv) shareholder meeting expenses, to the extent that such expenses pertain to a specific class rather than to a Fund as a whole. DETERMINATION OF NET ASSET VALUES PER SHARE (ALL FUNDS OTHER THAN LIQUID FUND). The net asset values per share of Class A, Class B and, in some cases, Class C shares of a Fund are determined as of the close of business of The New York Stock Exchange on each day the Exchange is open by dividing the value of a 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 Exchange's most recent annual holiday schedule (which is subject to change) states that it will close New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it may close on other days. Trading may occur at times when the Exchange is closed (including weekends and holidays or after 4:00 P.M., on a regular business day). Because the net asset values of a Fund will not be calculated at such times, if securities held in a Fund's portfolio are traded at such time, the net asset values per share of Class A, Class B or Class C shares of a Fund may be significantly affected on such days when shareholders do not have the ability to purchase or redeem shares. -64- The Funds' Board of Trustees has established procedures for the valuation of a Fund's securities, generally as follows: (i) equity securities traded on a securities exchange or on NASDAQ for which last sale information is regularly reported are valued at the last reported sale prices on their primary exchange or NASDAQ that day (or, in the absence of sales that day, at values based on the last sales prices of the preceding trading day, or closing bid and asked prices); (ii) securities actively traded on a foreign securities exchange are valued at the last sales price available to the pricing service approved by a Fund's Board of Directors or to the Manager as reported by the principal exchange on which the security is traded; (iii) unlisted foreign securities or listed foreign securities not actively traded are valued as in (i) above, if available, or at the mean between "bid" and "asked" prices obtained from active market makers in the security on the basis of reasonable inquiry; (iv) long-term debt securities having a remaining 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 a Fund's Board of Directors or obtained from active market makers in the security on the basis of reasonable inquiry; (v) debt instruments having a maturity of more than one year when issued, and non-money market type instruments having a maturity of one year or less when issued, which have a remaining maturity of 60 days or less are valued at the mean between "bid" and "asked" prices determined by a pricing service approved by a Fund's Board of Directors or obtained from active market makers in the security on the basis of reasonable inquiry; (vi) money market-type debt securities having a maturity of less than one year when issued that have a remaining maturity of 60 days or less are valued at cost, adjusted for amortization of premiums and accretion of discounts; and (vii) securities (including restricted securities) not having readily-available market quotations are valued at fair value under the Board's procedures. In the case of U.S. Government Securities and mortgage-backed securities, when last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity, and other special factors involved. A Funds' Board of Directors has authorized the Manager to employ a pricing service to price U.S. Government Securities for which last sale information is not generally available. The Directors will monitor the accuracy of such pricing services by comparing prices used for portfolio evaluation to actual sales prices of selected securities. Trading in securities on European and Asian exchanges and over-the-counter markets is normally completed before the close of The New York Stock Exchange. Events affecting the values of foreign securities traded in stock markets that occur between the -65- time their prices are determined and the close of the Exchange will not be reflected in a Fund's calculation of net asset value unless the Board of Directors or the Manager, under procedures established by the Board of Directors, determines that the particular event would materially affect a Fund's net asset value, in which case an adjustment would be made. Foreign currency, including forward contracts, will be valued at the closing price in the London foreign exchange market that day as provided by a reliable bank, dealer or pricing service. The values of securities denominated in foreign currency will be converted to U.S. dollars at the closing price in the London foreign exchange market that day as provided by a reliable bank, dealer or pricing service. Calls, puts and Futures held by a Fund are valued at the last sale prices on the principal exchanges on which they are traded, or on NASDAQ, as applicable, or, if there are no sales that day, in accordance with (i) above. When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset, and an equivalent deferred credit is included in the liability section. The deferred credit is "marked-to-market" to reflect the current market value of the option. In determining a Fund's gain on investments, if a call written by a Fund is exercised, the proceeds are increased by the premium received. If a call written by a Fund expires, the Fund has a gain in the amount of the premium; if the Fund enters into a closing purchase transaction, it will have a gain or loss depending on whether the premium was more or less than the cost of the closing transaction. AMORTIZED COST METHOD (LIQUID FUND ONLY). Liquid Fund will seek to maintain a net asset value of $1.00 per share for purchases and redemptions. There can be no assurance that it will do so. Under Rule 2a-7, Liquid Fund may use the amortized cost method of valuing its shares. Under the amortized cost method, a security is valued initially at its cost and its valuation assumes a constant amortization of any premium or accretion of a discount, regardless of the impact of fluctuating interest rates on the market value of the security. The method does not take into account unrealized capital gains or losses. Liquid Fund's Board of Directors has established procedures intended to stabilize the Fund's net asset value at $1.00 per share. If Liquid Fund's net asset value per share were to deviate from $1.00 by more than 0.5%, Rule 2a-7 requires the Board promptly to consider what action, if any, should be taken. If the Directors find that the extent of any such deviation may result in material dilution or other unfair effects on shareholders, the Board will take whatever steps it considers appropriate to eliminate or reduce such dilution or unfair effects, including, without limitation, selling portfolio securities prior to -66- maturity, shortening the average portfolio maturity, withholding or reducing dividends, reducing the outstanding number of Fund shares without monetary consideration, or calculating net asset value per share by using available market quotations. As long as it uses Rule 2a-7, Liquid Fund must abide by certain conditions described in the prospectus. Some of those conditions relate to portfolio management and require Liquid Fund to: (i) maintain a dollar-weighted average portfolio maturity not in excess of 90 days; (ii) limit its investments, including repurchase agreements, to those instruments which are denominated in U.S. dollars, and which are rated in one of the two highest short-term rating categories by at least two "nationally-recognized statistical rating organizations" ("NRSROs"), as defined in Rule 2a-7, or by only one NRSRO if only one NRSRO has rated the security; an instrument that is not rated must be of comparable quality as determined by the Board; and (iii) not purchase any instruments with a remaining maturity of more than 397 days. Under Rule 2a-7, the maturity of an instrument is generally considered to be its stated maturity (or in the case of an instrument called for redemption, the date on which the redemption payment must be made), with special exceptions for certain variable rate demand and floating rate instruments. Repurchase agreements and securities loan agreements are, in general, treated as having a maturity equal to the period scheduled until repurchase or return, or if subject to demand, equal to the notice period. While the amortized cost method provides certainty in valuation, there may be periods during which the value of an instrument as determined by the amortized cost method is higher or lower than the price Liquid Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield on shares of Liquid Fund may tend to be lower (and net investment income and daily dividends higher) than a like computation made by a fund with identical investments utilizing a method of valuation based upon market prices or estimates of market prices for its portfolio. Thus, if the use of amortized cost by Liquid Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in Liquid Fund would be able to obtain a somewhat higher yield than would result from investment in a fund utilizing only market values, and existing shareholders in Liquid Fund would receive less investment income than if the Fund were priced at market value. Conversely, during periods of rising interest rates, the daily yield on Fund shares will tend to be higher and its aggregate value lower than that of a portfolio priced at market value. A prospective investor would receive a lower yield than from an investment in a portfolio priced at market value, while existing investors in Liquid Fund would receive more investment income than if the Fund were priced at market value. -67- 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 a 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 a Fund three days after the transfers are initiated. The Distributor and the Funds are not responsible for any delays in purchasing shares resulting from delays in ACH transmissions. REDUCED SALES CHARGES (NOT APPLICABLE TO LIQUID FUND). 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 each Fund's Prospectus because the Distributor or broker-dealer incurs little or no selling expenses. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in-law, siblings, 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 Fund Oppenheimer Insured Tax-Exempt Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Florida Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer Fund Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Target Fund Oppenheimer Growth Fund Oppenheimer Equity Income Fund Oppenheimer Value Stock Fund Oppenheimer Asset Allocation Fund Oppenheimer Total Return Fund, Inc. -68- Oppenheimer Main Street Income & Growth Fund Oppenheimer High Yield Fund Oppenheimer Champion Income Fund Oppenheimer Bond Fund Oppenheimer U.S. Government Trust Oppenheimer Limited-Term Government 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 Income & Growth Fund Oppenheimer International Bond Fund Oppenheimer International Growth Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Growth & Income Value Fund Oppenheimer Quest Officers Value Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Disciplined Value Fund Oppenheimer Disciplined Allocation Fund Oppenheimer LifeSpan Growth Fund Oppenheimer LifeSpan Balanced Fund Oppenheimer LifeSpan Income Fund Connecticut Mutual Income Account Connecticut Mutual Government Securities Account 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. Connecticut Mutual Liquid Account There is an initial sales charge on the purchase of Class A shares of each of the Oppenheimer funds except Money Market Funds (under certain circumstances described herein, redemption proceeds of Money Market Fund shares may be subject to a CDSC). LETTERS OF INTENT. A Letter of Intent (referred to as a "Letter") is an investor's statement in writing to the Distributor of the intention to purchase Class A shares of a Fund (and Class A and Class B shares of other Oppenheimer funds) during a 13-month period (the "Letter of Intent period"), which may, at the -69- 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 of shares which, when added to the investor's holdings of shares of those funds, will equal or exceed the amount specified in the Letter. Purchases made by reinvestment of dividends or distributions of capital gains and purchases made at net asset value without sales charge do not count toward satisfying the amount of the Letter. A Letter enables an investor to count the Class A and Class B shares purchased under the Letter to obtain the reduced sales charge rate on purchases of Class A shares of a Fund (and other Oppenheimer funds) that applies under the Right of Accumulation to current purchases of Class A shares. Each purchase of Class A shares under the Letter will be made at the public offering price (including the sales charge) that applies to a single lump-sum purchase of shares in the amount intended to be purchased under the Letter. In submitting a Letter, the investor makes no commitment to purchase shares, 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 his or her Fund's 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 a Fund, that those amendments will apply automatically to existing Letters of Intent. For purchases of shares of a Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer Agent will not hold shares in escrow. If the intended purchase amount under the Letter entered into by an OppenheimerFunds prototype 401(k) plan is not purchased by the plan by the end of the Letter of Intent period, there will be no adjustment of commissions paid to the broker-dealer or financial institution of record for accounts held in the name of that plan. If the total eligible purchases made during the Letter of Intent period do not equal or exceed the intended purchase amount, the commissions previously paid to the dealer of record for the account and the amount of sales charge retained by the Distributor will be adjusted to the rates applicable to actual total purchases. If total eligible purchases during the Letter of Intent period exceed the intended amount and exceed the amount -70- 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 a 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 total minimum investment specified under the Letter is completed within the thirteen-month Letter of Intent period, the escrowed shares will be promptly released to the investor. 3. If, at the end of the thirteen-month Letter of Intent period the total purchases pursuant to the Letter are less than the intended amount specified in the Letter, the investor must remit to the Distributor an amount equal to the difference between the dollar amount of sales charges actually paid and the amount of sales charges which would have been paid if the total amount purchased had been made at a single time. Such sales charge adjustment will apply to any shares redeemed prior to the completion of the Letter. If such difference in sales charges is not paid within twenty days after a request from the Distributor or the dealer, the Distributor will, within sixty days of the expiration of the Letter, redeem the number of escrowed shares necessary to realize such difference in sales charges. Full and fractional shares remaining after such redemption will be released -71- from escrow. If a request is received to redeem escrowed shares prior to the payment of such additional sales charge, the sales charge will be withheld from the redemption proceeds. 4. By signing the Letter, the investor irrevocably constitutes and appoints the Transfer Agent as attorney-in-fact to surrender for redemption any or all escrowed shares. 5. The shares eligible for purchase under the Letter (or the holding of which may be counted toward completion of a Letter) include (a) Class A shares sold with a front-end sales charge or subject to a Class A contingent deferred sales charge, (b) Class B shares of other Oppenheimer funds acquired subject to a contingent deferred sales charge, and (c) Class A shares or Class B shares acquired in exchange for either (i) Class A shares of one of the other Oppenheimer funds that were acquired subject to a Class A initial or contingent deferred sales charge or (ii) Class B shares of one of the other Oppenheimer funds that were acquired subject to a contingent deferred sales charge. 6. Shares held in escrow hereunder will automatically be exchanged for shares of another fund to which an exchange is requested, as described in the section of the Prospectuses entitled "How to Exchange Shares," 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 Prospectuses. 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 Oppenheimer funds. There is a front-end sales charge on the purchase of Class A shares of certain OppenheimerFunds, or a contingent deferred sales charge may apply to shares purchased by Asset Builder payments. An application should be obtained from the Transfer Agent, completed and returned, and a prospectus of the selected fund(s) should be obtained from the Distributor or your financial advisor before initiating Asset Builder payments. The amount of the Asset Builder investment may be changed or the automatic investments may be terminated at any time by writing to the Transfer Agent. A reasonable period (approximately 15 days) is required after the Transfer Agent's receipt of such instructions to implement them. Each Fund reserves the right to amend, suspend, or discontinue offering such plans at any time without prior notice. -72- CANCELLATION OF PURCHASE ORDERS. Cancellation of purchase orders for a Fund's shares (for example, when a purchase check is returned to a 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 a Fund for the loss, the Distributor will do so. A 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 Funds is stated in the Prospectuses. The information below supplements the terms and conditions for redemptions set forth in the Prospectus. CHECK WRITING (NOT APPLICABLE TO VALUE, ALLOCATION OR ANY LIFESPAN FUND). When a check is presented to the Bank for clearance, the Bank will ask the effected Fund to redeem a sufficient number of full and fractional shares in the shareholder's account to cover the amount of the check. This enables the shareholder to continue receiving dividends on those shares until the check is presented to the Fund. Checks may not be presented for payment at the offices of the Bank or a Fund's Custodian. This limitation does not affect the use of checks for the payment of bills or to obtain cash at other banks. A Fund reserves the right to amend, suspend or discontinue offering check writing privileges at any time without prior notice. INVOLUNTARY REDEMPTIONS. A Fund's Board of Directors has the right to cause the involuntary redemption of the shares held in any account if the number of shares is less than 1,000. 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. SELLING SHARES BY WIRE. The wire of redemption proceeds may be delayed if a Fund's Custodian bank is not open for business on a day when the Fund would normally authorize the wire to be made, which is usually the Fund's next regular business day following the redemption. In those circumstances, the wire will not be transmitted until the next bank business day on which the Fund is open for business. No dividends will be paid on the proceeds of redeemed shares awaiting transfer by wire. -73- PAYMENTS "IN KIND". Each Fund's Prospectus states that payment for shares tendered for redemption is ordinarily made in cash. However, if the Board of Directors of a Fund determines that it would be detrimental to the best interests of the remaining shareholders of a Fund to make payment of a redemption order wholly or partly in cash, the Fund may pay the redemption proceeds in whole or in part by a distribution "in kind" of securities from the portfolio of the Fund, in lieu of cash, in conformity with applicable rules of the SEC. Each 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 a Fund uses to value its portfolio securities described above under "Determination of Net Asset Values Per Share" and such valuation will be made as of the time the redemption price is determined. REINVESTMENT PRIVILEGE (NOT APPLICABLE TO LIQUID FUND). 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 or (iii) Class C shares that were subject to the Class C contingent deferred sales charge when redeemed. The reinvestment may be made without sales charge only in Class A shares of a Fund or any of the other Oppenheimer funds into which shares of a Fund are exchangeable as described in "How to Exchange Shares" below, at the net asset value next computed after receipt by the Transfer Agent of the reinvestment order. The shareholder must ask the Distributor for such privilege at the time of reinvestment. Any capital gain that was realized when the shares were redeemed is taxable, and reinvestment will not alter any capital gains tax payable on that gain. If there has been a capital loss on the redemption, some or all of the loss may not be tax deductible, depending on the timing and amount of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds of Fund shares on which a sales charge was paid are reinvested in shares of a Fund or another of the Oppenheimer funds within 90 days of payment of the sales charge, the shareholder's basis in the shares of the Fund that were redeemed may not include the amount of the sales charge paid. That would reduce the loss or increase the gain recognized from the redemption. However, in that case, the sales charge would be added to the basis of the shares acquired by the reinvestment of the redemption proceeds. A 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. -74- TRANSFERS OF SHARES (NOT APPLICABLE TO LIQUID FUND). 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 a Fund's Prospectus under "How to Buy Shares" for the imposition of the Class B and Class C contingent deferred sales charge will be followed in determining the order in which shares are transferred. DISTRIBUTIONS FROM RETIREMENT PLANS. Requests for distributions from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or pension or profit-sharing plans should be addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed in "How To Sell Shares" in the relevant Fund's 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 a Fund's other redemption requirements. Participants (other than self-employed persons maintaining a plan account in their own name) in OppenheimerFunds-sponsored prototype pension or profit-sharing or 401(k) plans may not directly redeem or exchange shares held for their account under those plans. 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 Funds, 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. -75- SPECIAL ARRANGEMENTS FOR REPURCHASE OF SHARES FROM DEALERS AND BROKERS. The Distributor is the Funds' agent to repurchase their 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 the 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.). Ordinarily, for accounts redeemed by a broker-dealer under this procedure, payment will be made within three business days after the shares have been redeemed upon the Distributor's receipt of the required redemption documents in proper form, with the signature(s) of the registered owners guaranteed on the redemption document as described in the Prospectuses. AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. Investors owning shares of a 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. A Fund cannot guarantee receipt of the payment on the date requested and reserves the right to amend, suspend or discontinue offering such plans at any time without prior notice. Because of the sales charge assessed on Class A share purchases, shareholders should not make regular additional Class A share purchases while participating in an Automatic Withdrawal Plan. Class B and Class C shareholders should not establish withdrawal plans, because of the imposition of the Class B and Class C contingent deferred sales charges on such withdrawals (except where the Class B and Class C contingent deferred sales charge is waived as described in the Prospectuses under "Class B Contingent Deferred Sales Charge" or in "Class C Contingent Deferred Sales Charge"). -76- 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 Prospectuses. These provisions may be amended from time to time by a 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 a Fund for shares (of the same class) of other Oppenheimer funds automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount that may be exchanged to each other fund account is $25. Exchanges made under these plans are subject to the restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the Prospectus and below in this Statement of Additional Information. AUTOMATIC WITHDRAWAL PLANS. Fund shares will be redeemed as necessary to meet withdrawal payments. Shares acquired without a sales charge will be redeemed first and thereafter shares acquired with reinvested dividends and capital gains distributions will be redeemed next, followed by shares acquired with a sales charge, to the extent necessary to make withdrawal payments. Depending upon the amount withdrawn, the investor's principal may be depleted. Payments made under 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 and the effected Fund shall incur no liability to the Planholder for any action taken or omitted by the Transfer Agent and the Fund in good faith to administer the Plan. Certificates will not be issued for shares of a 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 such 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 a 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. -77- 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 a 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 such 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 a 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 a 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 a Fund, the Planholder will be deemed to have appointed any successor transfer agent to act as agent in administering the Plan. -78- HOW TO EXCHANGE SHARES. As stated in the Prospectuses, shares of a particular class of OppenheimerFunds having more than one class of shares may be exchanged only for shares of the same class of other OppenheimerFunds. Shares of the OppenheimerFunds that have a single class without a class designation are deemed "Class A" shares for this purpose. All of the Oppenheimer funds offer Class A, B and C shares except Oppenheimer Money Market Fund, Inc., 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. and Connecticut Mutual Liquid Account, which only offer Class A shares and Oppenheimer Main Street California Tax Exempt Fund, Connecticut Mutual Government Securities Account and Connecticut Mutual Income Account which only offers Class A and Class B shares (Class B and Class C shares of Oppenheimer Cash reserves are generally available only by exchange from the same class of shares of other Oppenheimer funds or through OppenheimerFunds sponsored 401 (k) plans). Class A shares of Oppenheimer funds 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 Oppenheimer funds offered with a sales charge upon payment of the sales charge (or, if applicable, may be used to purchase shares of Oppenheimer funds subject to a contingent deferred sales charge). Shares of a Fund acquired by reinvestment of dividends or distributions from any other of the Oppenheimer funds or from any unit investment trust for which reinvestment arrangements have been made with the Distributor may be exchanged at net asset value for shares of any of the Oppenheimer funds. No contingent deferred sales charge is imposed on exchanges of shares of either class purchased subject to a contingent deferred sales charge. However, shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds of shares of other mutual funds (other than funds managed by the Manager or its subsidiaries) redeemed within the 12 months prior to that purchase may subsequently be exchanged for shares of other Oppenheimer funds without being subject to an initial or contingent deferred sales charge, whichever is applicable. To qualify for that privilege, the investor or the investor's dealer must notify the Distributor of eligibility for this privilege at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must supply proof of entitlement to this privilege. The Class C contingent deferred sales charge is imposed on Class C shares acquired by exchange if they are redeemed within 12 months of the initial purchase of the exchanged Class C shares. -79- When Class B or Class C shares are redeemed to effect an exchange, the priorities described in "How To Buy Shares" in the Prospectuses for the imposition of the Class B and Class C contingent deferred sales charge will be followed in determining the order in which the shares are exchanged. Shareholders should take into account the effect of any exchange on the applicability and rate of any contingent deferred sales charge that might be imposed in the subsequent redemption of remaining shares. Shareholders owning shares of more than one class must specify whether they intend to exchange Class A, Class B or Class C shares. A Fund reserves the right to reject telephone or written exchange requests submitted in bulk by anyone on behalf of 10 or more accounts. A 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 relevant Fund's 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, the shareholder must either have an existing account in, or obtain 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. A 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 a Fund). -80- The different Oppenheimer funds available for exchange have different investment objectives, policies and risks, and a shareholder should assure that the funds selected are 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 Funds, the Distributor, and the Transfer Agent are unable to provide investment, tax or legal advice to a shareholder in connection with an exchange request or any other investment transaction. DIVIDENDS, CAPITAL GAINS AND TAXES DIVIDENDS AND DISTRIBUTIONS. Dividends will be payable on shares held of record at the time of the previous determination of net asset value, or as otherwise described in "How to Buy Shares." Daily dividends 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 three business days following the trade date (i.e., to and including the day prior to settlement of the repurchase). If all shares in an account are redeemed, all dividends accrued on shares of the same class in the account will be paid together with the redemption proceeds. Dividends, distributions and the proceeds of the redemption of Fund shares represented by checks returned to the Transfer Agent by the Postal Service as undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc., as promptly as possible after the return of such checks to the Transfer Agent, to enable the investor to earn a return on otherwise idle funds. The amount of a class's distributions may vary from time to time depending on market conditions, the composition of a Fund's portfolio, and expenses borne by the Fund or borne separately by a class, as described in "Alternative Sales Arrangements -- Class A, Class B and Class C shares" above. Dividends are calculated in the same manner, at the same time and on the same day for shares of each class. However, dividends on Class B and Class C shares are expected to be lower than dividends on Class A shares as a result of the asset-based sales charges on Class B and Class C shares, and will also differ in amount as a consequence of any difference in net asset value between the classes. If prior distributions must be re-characterized at the end of the fiscal year as a result of the effect of a Fund's investment policies, shareholders may have a non-taxable return of capital, -81- which will be identified in notices to shareholders. There is no fixed dividend rate and there can be no assurance as to the payment of any dividends or the realization of any capital gains. If a Fund qualifies as a "regulated investment company" under the Internal Revenue Code, they will not be liable for Federal income taxes on amounts paid by them as dividends and distributions. Each Fund qualified as a regulated investment company in its last fiscal year and intends to qualify in future years, but reserves the right not to qualify. The Internal Revenue Code contains a number of complex tests to determine whether a Fund will qualify, and a Fund might not meet those tests in a particular year. For example, if a Fund derives 30% or more of its gross income from the sale of securities held less than three months, it may fail to qualify (see "Tax Aspects of Covered Calls and Hedging Instruments," above). If it does not qualify, a Fund will be treated for tax purposes as an ordinary corporation and will receive no tax deduction for payments of dividends and distributions made to shareholders. Under the Internal Revenue Code, by December 31 each year each 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 a Fund must pay an excise tax on the amounts not distributed. While it is presently anticipated that each Fund will meet those requirements, a Fund's Board and the Manager might determine in a particular year that it would be in the best interest of shareholders for a Fund not to make such distributions at the required levels and to pay the excise tax on the undistributed amounts. That would reduce the amount of income or capital gains available for distribution to shareholders. DIVIDEND REINVESTMENT IN ANOTHER FUND. Shareholders of a Fund may elect to reinvest all dividends and/or capital gains distributions in shares of the same class of any of the other Oppenheimer funds listed in "Reduced Sales Charges" above, at net asset value without sales charge. To elect this option, the shareholder must notify the Transfer Agent in writing and either have an existing account in the fund selected for reinvestment or must obtain a prospectus for that fund and an application from the Transfer Agent to establish an account. The investment will be made at net asset value per share in effect at the close of business on the payable date of the dividend or distribution. Dividends and/or distributions from certain of the Oppenheimer funds may be invested in shares of a Fund on the same basis. -82- ADDITIONAL INFORMATION ABOUT THE FUNDS THE CUSTODIAN. State Street Bank and Trust Company is the Custodian of the Funds' assets. The Custodian's responsibilities include safeguarding and controlling the Funds' portfolio securities, collecting income on the portfolio securities and handling the delivery of such securities to and from the Funds. INDEPENDENT AUDITORS. The independent auditors of the Funds audit the Funds' financial statements and perform other related audit services. They also act as auditors for certain other funds advised by the Manager and its affiliates. FINANCIAL INFORMATION ABOUT THE FUNDS INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS The Funds' financial statements for the year ended December 31, 1995 are attached to and incorporated by reference from the Company's Annual Report into this Statement of Additional Information. The financial statements are so attached and incorporated in reliance upon the report of Arthur Andersen LLP, independent public accountants, as experts in accounting and auditing. -83- Appendix A Industry Classifications Aerospace/Defense Food Air Transportation Gas Utilities* Auto Parts Distribution Gold Automotive Health Care/Drugs Bank Holding Companies Health Care/Supplies & Services Banks Homebuilders/Real Estate Beverages Hotel/Gaming Broadcasting Industrial Services Broker-Dealers Insurance Building Materials Leasing & Factoring Cable Television Leisure Chemicals Manufacturing Commercial Finance Metals/Mining Computer Hardware Nondurable Household Goods Computer Software Oil - Integrated Conglomerates Paper Consumer Finance Publishing/Printing Containers Railroads Convenience Stores Restaurants Department Stores Savings & Loans Diversified Financial Shipping Diversified Media Special Purpose Financial Drug Stores Specialty Retailing Drug Wholesalers Steel Durable Household Goods Supermarkets Education Telecommunications - Technology Electric Utilities Telephone - Utility Electrical Equipment Textile/Apparel Electronics Tobacco Energy Services & Producers Toys Entertainment/Film Trucking Environmental - ------------------ *For purposes of a Fund's investment policy not to concentrate in securities of issuers in the same industry, utilities are divided into "industries" according to their services (e.g., gas utilities, gas transmission utilities, electric utilities and telephone utilities are each considered a separate industry). A-1 OPPENHEIMER SERIES FUND, INC. Two World Trade Center New York, New York 10048-0203 1-800-525-7048 INVESTMENT ADVISOR OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 DISTRIBUTOR OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 TRANSFER AND SHAREHOLDER SERVICING AGENT OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 CUSTODIAN OF PORTFOLIO SECURITIES State Street Bank & Trust Company 225 Franklin Street Boston, Massachusetts 02110 INDEPENDENT AUDITORS Arthur Andersen LLP One Financial Plaza Hartford, Connecticut 06103 LEGAL COUNSEL CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. PART C -- OTHER INFORMATION ITEM 24. Financial Statements and Exhibits. (a) Financial Statements. (1) Included in Part A: Financial Highlights for Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Balanced Account and CMIA LifeSpan Capital Appreciation Account, each for the period ended December 31, 1995 (audited). (2) Incorporated by reference into Part B from the Registrant's Annual Report to Shareholders for Liquid Account, Government Securities Account, Income Account, Growth Account and Balanced Account and Annual Report to Shareholders for the Lifespan Accounts each for the year ended December 31, 1995 (filed electronically on February 29, 1996; file no. 2-75276; accession numbers 0000912057-96-003353 and 000091205-003639, respectively): Financial Statements for each of Connecticut Mutual Liquid Account, Connecticut Mutual Government Securities Account, Connecticut Mutual Income Account, Connecticut Mutual Total Return Account, Connecticut Mutual Growth Account, CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Balanced Account and CMIA LifeSpan Capital Appreciation Account: Statement of Net Assets as of December 31, 1995 Statement of Operations for the year ended December 31, 1995 Statement of Changes in Net Assets for the years ended December 31, 1994 and 1995 Notes to Financial Statements as of December 31, 1995 Auditors' Report (b) Exhibits 1. Amended and Restated Articles of Incorporation dated January 6, 1995+ 1.1 Articles Supplementary dated September, 1995+ 1.2 Articles Supplementary dated May, 1995+ 2. By-Laws+ 3. Not Applicable 4. Not Applicable 5. Amendment to Investment Advisory Agreement between the Registrant, on behalf of each of CMIA LifeSpan Diversified Income Account, CMIA LifeSpan Balanced Account and CMIA LifeSpan Capital Appreciation Account (the "LifeSpan Accounts"), and G.R. Phelps & Co., Inc.**** 5.1. Subadvisory Agreement among the Registrant, on behalf of the respective LifeSpan Fund, G.R. Phelps & Co., Inc. and the respective Subadvisor and schedule of omitted substantially similar documents**** 5.2. Form of Investment Advisory Agreement between the Registrant, on behalf of Connecticut Mutual Total Return Account and OppenheimerFunds, Inc. and schedule of omitted substantially similar documents+ 5.3 Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and Pilgrim, Baxter & Associates, Ltd. (for CMIA LifeSpan Balanced Account) and schedule of omitted substantially similar documents+ 5.4 Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and BEA Associates (for CMIA LifeSpan Balanced Account) and schedule of omitted substantially similar documents+ 5.5 Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and Babson-Stewart Ivory International (for CMIA LifeSpan Balanced Account) and schedule of omitted substantially similar documents+ 6. Underwriting Agreement between Registrant and G.R. Phelps & Co., Inc.* 6.1. Amendment (Municipal Funds) to Amended Underwriting Agreement between Registrant and G.R. Phelps & Co., Inc.*** 6.2. Amendment (LifeSpan Accounts) to Amended Underwriting Agreement between Registrant and G.R. Phelps & Co., Inc.**** 6.3. Dealer Agreement with G.R. Phelps & Co., Inc.* 6.4. Underwriting Agreement between Registrant and Connecticut Mutual Financial Services, L.L.C.***** C-2 6.5 Form of General Distributor's Agreement between Registrant on behalf of Oppenheimer Disciplined Allocation Fund and OppenheimerFunds Distributor, Inc. and schedule of omitted substantially similar documents+ 7. Not Applicable 8. Form of Master Custodian Agreement between Registrant and Investors' Bank & Trust Company*** 8.1. Master Custodian Agreement between Registrant, on behalf of each series of the Registrant (except the Municipal Accounts), and State Street Bank and Trust Company+ 8.2. Amendment (LifeSpan Funds) to Custodian Agreement between Registrant and State Street Bank and Trust Company+ 9. Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Co.* 9.1. Amendment (Municipal Accounts) to Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Co.*** 9.2. Amendment (LifeSpan Funds) to Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Co.**** 9.3. Form of Subscription Agreement among G.R. Phelps & Co., Inc., the Registrant, on behalf of CMIA National Municipals Account, National Tax Free Portfolio and Eaton Vance Management*** 9.4. Form of Subscription Agreement among G.R. Phelps & Co., Inc., the Registrant, on behalf of CMIA California Municipals Account, California Tax Free Portfolio and Eaton Vance Management*** 9.5. Form of Subscription Agreement among G.R. Phelps & Co., Inc., the Registrant, on behalf of CMIA Massachusetts Municipals Account, Massachusetts Tax Free Portfolio and Eaton Vance Management*** 9.6. Form of Subscription Agreement among G.R. Phelps & Co., Inc., the Registrant, on behalf of CMIA New York Municipals Account, New York Tax Free Portfolio and Eaton Vance Management*** 9.7. Form of Subscription Agreement among G.R. Phelps & Co., Inc., the Registrant, on behalf of CMIA Ohio Municipals Account, Ohio Tax Free Portfolio and Eaton Vance Management*** 9.8. Form of Administrative Services Agreement between Registrant, on behalf of CMIA National Municipals Account, and G.R. Phelps & Co., Inc.*** C-3 9.9. Form of Administrative Services Agreement between the Registrant, on behalf of CMIA California Municipals Account, and G.R. Phelps & Co., Inc.*** 9.10. Form of Administrative Services Agreement between the Registrant, on behalf of CMIA Massachusetts Municipals Account, and G.R. Phelps & Co., Inc.*** 9.11. Form of Administrative Services Agreement between the Registrant, on behalf of CMIA New York Municipals Account, and G.R. Phelps & Co., Inc.*** 9.12. Form of Administrative Services Agreement between the Registrant, on behalf of CMIA Ohio Municipals Account, and G.R. Phelps & Co., Inc.*** 9.13 Form of Service Contract between Registrant and OppenheimerFunds Services+ 10. Opinion and Consent of Counsel** 10.1. Consent of Counsel in California and New York*** 10.2. Consent of Counsel in Ohio*** 11.1. Consent of Independent Public Accountants+ 12. Incorporated by reference to the filing on Form 30D-1 filed on February 29, 1996; file number 2-75276; accession numbers 0000912057- 96-003353 and 000091205-003639, respectively. . 13. Not Applicable 14. Not Applicable 15. Form of CMIA National Municipals Account Rule 12b-1 Plan*** 15.1. Form of CMIA California Municipals Account Rule 12b-1 Plan*** 15.2. Form of CMIA Massachusetts Municipals Account Rule 12b-1 Plan*** 15.3. Form of CMIA New York Municipals Account Rule 12b-1 Plan*** 15.4. Form of CMIA Ohio Municipals Account Rule 12b-1 Plan*** 15.5. Class A Rule 12b-1 Distribution Plans for the respective Funds and schedule of substantially similar omitted documents**** 15.6. Class B Rule 12b-1 Distribution Plan for the respective Funds and schedule of substantially similar omitted documents***** C-4 15.7 Form of Service Plan and Agreement between Oppenheimer Disciplined Allocation Fund and OppenheimerFunds Distributor, Inc. for Class A Shares and schedule of substantially similar omitted documents+ 15.8 Form of Distribution and Service Plan and Agreement with OppenheimerFunds Distributor, Inc. for Class B Shares of Oppenheimer Disciplined Allocation Fund and schedule of substantially similar omitted documents+ 15.9 Form of Distribution and Service Plan and Agreement with OppenheimerFunds Distributor, Inc. for Class C Shares of Oppenheimer Disciplined Allocation Fund and schedule of substantially similar omitted documents+ 16. Schedule of Computation for Performance Quotations (Municipal Accounts)*** 17. Financial Data Schedule+ 18. Rule 18f-3 Multiple Class Plan (Class A and Class B shares) for the respective Funds and schedule of substantially similar omitted documents***** 18.1 Rule 18f-3 Multiple Class Plan (Class A, B and C shares) for Oppenheimer Disciplined Allocation Fund, Oppenheimer Disciplined Value Fund, Oppenheimer LifeSpan Growth Fund, Oppenheimer LifeSpan Balanced Fund and Oppenheimer LifeSpan Income Fund+ ____________ + Filed herewith. * Previously filed as exhibit to Registrant's Registration Statement and incorporated by reference herein. ** Filed with Registrant's Rule 24f-2 Notice. *** Previously filed with post-effective amendment no. 19 to the Registration Statement (File No. 2-75276) (the "Registration Statement") on July 27, 1994 and incorporated by reference herein. **** Previously filed with post-effective amendment No. 20 to the Registration Statement on February 10, 1995 and incorporated by reference herein. ***** Previously filed with post-effective amendment no. 23 to the Registration Statement on July 27, 1995 and incorporated by reference herein. ****** Previously filed with post-effective amendment no. 24 on September 29, 1995 and incorporated by reference herein. ITEM 25. Persons Controlled by or Under Common Control with Registrant. (1) The chart that follows indicates those entities owned directly or indirectly by Connecticut Mutual Life Insurance Company at December 31, 1995. C-5 CONNECTICUT MUTUAL LIFE INSURANCE COMPANY SUBSIDIARIES AS OF 12/31/95 CM ADVANTAGE, INC.: This is a Connecticut corporation incorporated February 27, 1984. Its business is acting as general partner in real estate limited partnerships. DHC, Inc. owns all the outstanding stock. CM ASSURANCE COMPANY: This is a Connecticut corporation incorporated July 23, 1986 (CM Insurance Company) and renamed December 15, 1987. Type of business - life insurance, endowments, annuities, accident, disability and health insurance. Connecticut Mutual owns all the stock. CM BENEFIT INSURANCE COMPANY: This is a Connecticut corporation incorporated April 22, 1986 as CM Pension Insurance Company and renamed CM Benefit Insurance Company on December 15, 1987. Type of business - life insurance, endowments, annuities, accident, disability and health insurance. Connecticut Mutual owns all the stock. CM INSURANCE SERVICES, INC.: A Connecticut corporation incorporated July 20, 1981 as DIVERSIFIED INSURANCE SERVICES OF AMERICA, INC. and renamed as CM Insurance Services, Inc. on June 23, 1992. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. DHC, Inc. owns all the issued and outstanding stock. CM INSURANCE SERVICES, INC. (ARKANSAS): An Arkansas corporation incorporated January 11, 1982 as Diversified Insurance Services Agency of America and renamed CM Insurance Services, Inc. on October 19, 1992. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. owns all of the issued and outstanding common stock. CM INSURANCE SERVICES, INC. (TEXAS): A Texas corporation incorporated April 16, 1982 and renamed CM Insurance Services, Inc. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. controls 100 shares (100%) of the issued and outstanding common stock through a voting trust. CM INTERNATIONAL, INC.: A Delaware corporation incorporated July 25, 1985. Type of business - holding a mortgage pool and issuance of collateralized mortgage obligations. DHC, Inc. owns all the outstanding stock. CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.: This is a Maryland corporation incorporated December 9, 1981 as Connecticut Mutual Liquid Account, Inc. It is a diversified open-end management investment company. As of 3/31/94, Connecticut Mutual and its various subsidiaries owned approximately 30% of its shares. CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.: This is a Maryland corporation organized August 17, 1981. It is a diversified open-end management investment company. Shares of the fund are sold only to Connecticut Mutual and its affiliates, primarily CML's Panorama separate account. C-6 CONNECTICUT MUTUAL FINANCIAL SERVICES, LLC: A Connecticut limited liability corporation formed November 10, 1994. It is a registered broker-dealer. Connecticut Mutual has a 99% ownership interest and CM Strategic Ventures, Inc. has a 1% ownership interest. CM LIFE INSURANCE COMPANY: A Connecticut corporation incorporated April 25, 1980. Its business is the sale of life insurance, endowments, annuities, accident, disability and accident and health insurance. Connecticut Mutual owns all the common stock. CM PROPERTY MANAGEMENT, INC.: A Connecticut corporation incorporated December 27, 1976 as URBCO, Inc., and renamed CM Property Management, Inc. on October 7, 1991. Type of business -Real estate holding company. DHC, Inc. owns all the stock. CM STRATEGIC VENTURES, INC.: A Connecticut corporation incorporated October 26, 1987. It acts as general partner in limited partnerships. All outstanding stock is held by G.R. Phelps & Co., Inc. CM TRANSNATIONAL S.A.: A Luxembourg corporation incorporated July 8, 1987. Type of business - life insurance endowments and annuity contracts. Connecticut Mutual owns 99.7% and DHC, Inc. owns the remaining 0.3% of outstanding stock. CML INVESTMENTS I CORP.: A Delaware corporation incorporated December 26, 1991. This Company is organized to authorize, co-issue, sell and deliver jointly with CML Investments I L.P. bonds, notes or other obligations secured by primarily non-investment grade corporate debt obligations and other collateral. CML Investments I L.P. owns all of the outstanding stock (State House I Corp. is the General Partner of CML Investments I L.P.). DHC, INC.: A Connecticut corporation incorporated December 27, 1976. Type of business - holding company. Connecticut Mutual owns all the stock. DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA OHIO): An Ohio corporation incorporated March 18, 1982. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. holds 100 shares (100%) of the issued and outstanding Class B (non-voting) common. In addition, it controls 1 share (100%) of the issued and outstanding Class A (voting) common through a voting trust. DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA MASSACHUSETTS A Massachusetts corporation incorporated March 18, 1982. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. owns all of the issued and outstanding stock. DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA ALABAMA): An Alabama corporation incorporated January 21, 1982. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. owns all of the issued and outstanding stock. C-7 DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA NEW YORK): A New York corporation incorporated January 20, 1982. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. owns all of the issued and outstanding common stock. DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA HAWAII): A Hawaii corporation incorporated January 13, 1982. Type of business - the sale of, solicitation for, or procurement or making of insurance or annuity contracts and any other type of contract sold by insurance companies. CM Insurance Services, Inc. owns all of the issued and outstanding common stock. G.R. PHELPS & CO., INC.: A Connecticut corporation incorporated December 27, 1976 as AGCO, Inc., renamed Connecticut Mutual Financial Services, Inc. on February 10, 1981, renamed again to G.R. Phelps & Co. on May 31, 1989. Type of business -broker/dealer and investment adviser. DHC, Inc. owns all the outstanding stock. STATE HOUSE I CORPORATION: A Delaware corporation incorporated December 26, 1991. This Company is organized to (a) act as a general partner of CML Investments I L.P. which will authorize, issue, sell and deliver, both by itself and jointly with CML Investments I Corp. bonds, notes or other obligations secured by primarily non-investment grade corporate debt obligations; (b) to act as general partner of State House I L.P. which will hold a limited partnership interest in CML Investments I L.P. DHC, Inc. owns all of the outstanding stock. SUNRIVER PROPERTIES, INC. - SHELL CORPORATION: This is an Oregon corporation incorporated February 8, 1965. It is not actively engaged in any business. However, its name is a valuable asset which is associated with a development project in which CML has a substantial interest. Connecticut Mutual owns all the outstanding stock. URBAN PROPERTIES INC.: A Delaware corporation incorporated March 30, 1970. Type of business - general partner in limited partnerships, real estate holding and development company. DHC, Inc. owns all the outstanding stock. (2) Upon effectiveness of this post-effective amendment No. 28 to the Registration Statement ("PEA No. 28"), there will be no persons controlled by or under common control with the Registrant. C-8 ITEM 26. Number of Holders of Securities.
Number of Record Holders Title of Class as of December 31, 1995 -------------- ------------------------ Connecticut Mutual Liquid Account 4,887 Connecticut Mutual Government 2,704 Securities Account Connecticut Mutual Income Account 1,829 Connecticut Mutual Total Return Account 14,131 Connecticut Mutual Growth Account 7,408 CMIA National Municipals Account 130 CMIA California Municipals Account 12 CMIA Massachusetts Municipals Account 8 CMIA New York Municipals Account 25 CMIA Ohio Municipals Account 33 CMIA LifeSpan Capital Appreciation Account 529 CMIA LifeSpan Balanced Account 332 CMIA LifeSpan Diversified Income Account 104 ------ Total Holders of Securities 32,132 ------ ------
ITEM 27. Indemnification. Reference is made to Article VI of Registrant's By-laws filed with Post-Effective Amendment Number 13. ITEM 28. Business and Other Connections of Investment Adviser. (a) With respect to G.R. Phelps & Co. Inc.: Not applicable. (b) Upon effectiveness of PEA No. 28, the business and other connections of Oppenheimer Funds, Inc., the investment adviser as of March 1, 1996, are as follows: (a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and certain subsidiaries and affiliates act in the same capacity to other registered investment companies as described in Parts A and B hereof and listed in Item 28(b) below. (b) There is set forth below information as to any other business, profession, vocation or employment of a substantial nature in which each officer and director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal years has been, engaged for his/her own account or in the capacity of director, officer, employee, partner or trustee. C-9 Name & Current Position Other Business and Connections with OppenheimerFunds, Inc. During the Past Two Years - --------------------------- ------------------------- Lawrence Apolito, Vice President None. Victor Babin, Senior Vice President None. Robert J. Bishop, Assistant Vice President Treasurer of the Oppenheimer Funds (listed below); previously a Fund Controller for OppenheimerFunds, Inc. (the "Manager"). Bruce Bartlett, Vice President Vice President and Portfolio Manager of Oppenheimer Total Return Fund, Inc., Oppenheimer Main Street Funds, Inc. and Oppenheimer Variable Account Funds; formerly a Vice President and Senior Portfolio Manager at First of America Investment Corp. George Bowen, Senior Vice President & Treasurer Treasurer of the New York-based Oppenheimer Funds; Vice President, Secretary and Treasurer of the Denver-based Oppenheimer Funds. Vice President and Treasurer of OppenheimerFunds Distributor, Inc. (the "Distributor") and HarbourView Asset Management Corporation ("HarbourView"), an investment adviser subsidiary of the Manager; 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 the Manager; President, Treasurer and Director of Centennial Capital Corporation; Vice President and Treasurer of Main Street Advisers. C-10 Michael A. Carbuto, Vice President Vice President and Portfolio Manager of Centennial California Tax Exempt Trust, Centennial New York Tax Exempt Trust and Centennial Tax Exempt Trust; Vice President of Centennial. William Colbourne, Assistant Vice President Formerly, Director of Alternative Staffing 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, Executive Vice President Formerly Co-Director of Fixed Income for State Street Research & Management Co. Robert A. Densen, Senior Vice President None. Robert Doll, Jr., Executive Vice President Vice President and Portfolio Manager of Oppenheimer Growth Fund, Oppenheimer Variable Account Funds; Senior Vice President and Portfolio Manager of Oppenheimer Strategic Income & Growth Fund; Vice President of Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Officers Value Fund, Oppen-heimer Quest For Value Funds and Oppenheimer Quest Global Value Fund, Inc. John Doney, Vice President Vice President and Portfolio Manager of Oppenheimer Equity Income Fund. Andrew J. Donohue, Executive Vice President & General Counsel Secretary of the New York-based Oppenheimer Funds; Vice President of the Denver-based Oppenheimer Funds; Executive Vice President, Director and General Counsel of the Distributor; President and a director of Centennial; formerly Senior Vice President and Associate General Counsel of the Manager and the Distributor. C-11 Kenneth C. Eich, Executive Vice President/ Chief Financial Officer Treasurer of Oppenheimer Acquisition Corporation ("OAC"). George Evans, Vice President Vice President and Portfolio Manager of Oppenheimer Global Emerging Growth Fund. Scott Farrar, Assistant Vice President Assistant Treasurer of the Oppenheimer Funds; previously a Fund Controller for the Manager. Katherine P. Feld, Vice President and Secretary Vice President and Secretary of OppenheimerFunds Distributor, Inc.; Secretary of HarbourView, Main Street Advisers, Inc. and Centennial; Secretary, Vice President and Director of Centennial Capital Corp. Ronald H. Fielding, Senior Vice President Chairman of the Board and Director of Rochester Fund Distributors, Inc. ("RFD"); President and Director of Fielding Management Company, Inc. ("FMC"); President and Director of Rochester Capital Advisors, Inc. ("RCAI"); President and Director of Rochester Fund Services, Inc. ("RFS"); President and Director of Rochester Tax Managed Fund, Inc.; Vice President and Portfolio Manager of Rochester Fund Municipals and Rochester Portfolio Series - Limited Term New York Municipal Fund. Jon S. Fossel, Chairman of the Board and Director Director of OAC (the Manager's parent holding company); President, CEO and a director of HarbourView; a director of SSI and SFSI; Director, Trustee, and Managing General Partner of the Denver-based Oppenheimer Funds; President and Chairman of the Board of Main Street Advisers, Inc.; formerly Chief Executive Officer of the Manager. C-12 Robert G. Galli, Vice Chairman Trustee of the New York-based Oppenheimer Funds; 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 Oppenheimer Funds and Executive Vice President & General Counsel of the Manager and the Distributor. Linda Gardner, Assistant Vice President None. Ginger Gonzalez, Vice President Formerly 1st Vice President / Director of Creative Services for Shearson Lehman Brothers. Mildred Gottlieb, Assistant Vice President Formerly served as a Strategy Consultant for the Private Client Division of Merrill Lynch. Dorothy Grunwager, None. Assistant Vice President Caryn Halbrecht, Vice President Vice President and Portfolio Manager of Oppenheimer Insured Tax- Exempt Fund and Oppenheimer Intermediate Tax Exempt Fund; an officer of other Oppenheimer Funds; formerly Vice President of Fixed Income Portfolio Management at Bankers Trust. Barbara Hennigar, President and Chief Executive Officer of OppenheimerFunds Services, a division of the Manager President and Director of SFSI. Alan Hoden, Vice President None. Merryl Hoffman, Vice President None. Scott T. Huebl, Assistant Vice President None. C-13 Jane Ingalls, Assistant Vice President Formerly a Senior Associate with Robinson, Lake/Sawyer Miller. Bennett Inkeles, Assistant Vice President Formerly employed by Doremus & Company, an advertising agency. Frank Jennings, Vice President Portfolio Manager of Oppenheimer Global Growth & Income Fund. Formerly a Managing Director of Global Equities at Paine Webber's Mitchell Hutchins division. Stephen Jobe, Vice President None. Heidi Kagan, Assistant Vice President None. Avram Kornberg, Vice President Formerly a Vice President with Bankers Trust. Paul LaRocco, Assistant Vice President Portfolio Manager of Oppenheimer Variable Account Funds and Oppenheimer Variable Account Funds; Associate Portfolio Manager of Oppenheimer Discovery Fund. Formerly a Securities Analyst for Columbus Circle Investors. Mitchell J. Lindauer, Vice President None. Loretta McCarthy, Senior Vice President None. Bridget Macaskill, President, Chief Executive Officer and Director President, Director and Trustee of the Oppenheimer Funds; President and a Director of OAC and HarbourView; Director of Main Street Advisers, Inc.; Chairman and a Director of SSI. Sally Marzouk, Vice President None. C-14 Marilyn Miller, Vice President Formerly a Director of marketing for TransAmerica Fund Management Company. Robert J. Milnamow, Vice President Vice President and Portfolio Manager of Oppenheimer Main Street Funds, Inc. Formerly a Portfolio Manager with Phoenix Securities Group. Denis R. Molleur, Vice President None. Kenneth Nadler, Vice President None. David Negri, Vice President Vice President and Portfolio Manager of Oppenheimer Variable Account Funds, Oppenheimer Asset Allocation Fund, Oppenheimer Strategic Income Fund, Oppenheimer Strategic Income & Growth Fund; an officer of other Oppenheimer Funds. Barbara Niederbrach, Assistant Vice President None. Stuart Novek, Vice President Formerly a Director Account Supervisor for J. Walter Thompson. Robert A. Nowaczyk, Vice President None. Robert E. Patterson, Senior Vice President Vice President and Portfolio Manager of Oppenheimer Main Street Funds, Inc., Oppenheimer Multi- State Tax-Exempt Trust, Oppenheimer Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund, Oppenheimer New York Tax-Exempt Fund and Oppenheimer Tax-Free Bond Fund; Vice President of The New York Tax-Exempt Income Fund, Inc.; Vice President of Oppenheimer Multi-Sector Income Trust. Tilghman G. Pitts III, Executive Vice President and Director Chairman and Director of the Distributor. C-15 Jane Putnam, Vice President Associate Portfolio Manager of Oppenheimer Growth Fund; Vice President and Portfolio Manager of Oppenheimer Target Fund and Oppenheimer Variable Account Funds. Formerly Senior Investment Officer and Portfolio Manager with Chemical Bank. Russell Read, Vice President Formerly an International Finance Consultant for Dow Chemical. Thomas Reedy, Vice President Vice President of Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-Government Trust; an officer of other Oppenheimer Funds; formerly a Securities Analyst for the Manager. David Robertson, Vice President None. Adam Rochlin, Assistant Vice President Formerly a Product Manager for Metropolitan Life Insurance Company. Michael S. Rosen Vice President Vice President of RFS; President and Director of RFD; Vice President and Director of FMC; Vice President and director of RCAI; General Partner of RCA; Vice President and Director of Rochester Tax Managed Fund Inc.; Vice President and Portfolio Manager of Rochester Fund Series - The Bond Fund For Growth. David Rosenberg, Vice President Vice President and Portfolio Manager of Oppenheimer Limited-Term Government Fund, Oppenheimer U.S. Government Trust and Oppenheimer Integrity Funds. Formerly Vice President and Senior Portfolio Manager for Delaware Investment Advisors. Rhonda Rosenberg, Vice President Formerly a Vice President and Manager of municipal portfolio strategy for Lehman Brothers. C-16 Richard H. Rubinstein, Vice President Vice President and Portfolio Manager of Oppenheimer Asset Allocation Fund, Oppenheimer Fund and Oppenheimer Variable Account Funds; an officer of other Oppenheimer Funds; formerly Vice President and Portfolio Manager/Security Analyst for Oppenheimer Capital Corp., an investment adviser. Lawrence Rudnick, Vice President Formerly Vice President of Dollar Dry Dock Bank. James Ruff, Executive Vice President None. Ellen Schoenfeld, Assistant Vice President None. Diane Sobin, Vice President Vice President and Portfolio Manager of Oppenheimer Gold & Special Minerals Fund, Oppenheimer Total Return Fund, Inc. Oppenheimer Main Street Funds, Inc. and Oppenheimer Variable Account Funds; formerly a Vice President and Senior Portfolio Manager for Dean Witter InterCapital, Inc. Nancy Sperte, Senior Vice President None. Donald W. Spiro, Chairman Emeritus and Director Trustee of the New York-based Oppenheimer Funds; formerly Chairman of the Manager and the Distributor. Arthur Steinmetz, Senior Vice President Vice President and Portfolio Manager of Oppenheimer Strategic Income Fund, Oppenheimer Strategic Income & Growth Fund; an officer of other Oppenheimer Funds. Ralph Stellmacher, Senior Vice President Vice President and Portfolio Manager of Oppenheimer Champion Income Fund and Oppenheimer High Yield Fund; an officer of other Oppenheimer Funds. John Stoma, Vice President Formerly Vice President of Pension Marketing with Manulife Financial. C-17 James C. Swain, Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the Denver- based Oppenheimer Funds; President and a Director of Centennial; formerly President and Director of OAMC, and Chairman of the Board of SSI. James Tobin, Vice President None. Jay Tracey, Vice President Vice President of the Manager; Vice President and Portfolio Manager of Oppenheimer Discovery Fund Oppenheimer Global Emerging Growth Fund and Oppenheimer Enterprise Fund. Formerly Managing Director of Buckingham Capital Management. Gary Tyc, Vice President, Assistant Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI. Jeffrey Van Giesen, Vice President Formerly employed by Kidder Peabody Asset Management. Ashwin Vasan, Vice President Vice President and Portfolio Manager of Oppenheimer Multi-Sector Income Trust, Oppenheimer Multi- Government Trust and Oppenheimer International Bond Fund; an officer of other Oppenheimer Funds. Valerie Victorson, Vice President None. Dorothy Warmack, Vice President Vice President and Portfolio Manager of Daily Cash Accumulation Fund, Inc., Oppenheimer Cash Reserves, Centennial America Fund, L.P., Centennial Government Trust and Centennial Money Market Trust; Vice President of Centennial. Christine Wells, Vice President None. C-18 William L. Wilby, Senior Vice President Vice President and Portfolio Manager of Oppenheimer Variable Account Funds, Oppenheimer Global Fund and Oppenheimer Global Growth & Income Fund; Vice President of HarbourView; an officer of other Oppenheimer Funds. Susan Wilson-Perez, Vice President None. Carol Wolf, Vice President Vice President and Portfolio Manager of Oppenheimer Money Market Fund, Inc., Centennial America Fund, L.P., Centennial Government Trust, Centennial Money Market Trust and Daily Cash Accumulation Fund, Inc.; Vice President of Oppenheimer Multi-Sector Income Trust; Vice President of Centennial. Robert G. Zack, Senior Vice President and Assistant Secretary Associate General Counsel of the Manager; Assistant Secretary of the Oppenheimer Funds; Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer Funds. Eva A. Zeff, Assistant Vice President An officer of certain Oppenheimer Funds; formerly a Securities Analyst for the Manager. Arthur J. Zimmer, Vice President Vice President and Portfolio Manager of Oppenheimer Variable Account Funds, 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; an officer of other Oppenheimer Funds. C-19 The Oppenheimer Funds include the New York-based Oppenheimer Funds and the Denver-based Oppenheimer Funds set forth below: New York-based Oppenheimer Funds - -------------------------------- Oppenheimer Asset Allocation Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Discovery Fund Oppenheimer Enterprise 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 Multi-Government Trust Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Tax-Exempt Trust Oppenheimer New York Tax-Exempt Fund Oppenheimer Fund Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest for Value Funds Oppenheimer Target Fund Oppenheimer Tax-Free Bond Fund Oppenheimer U.S. Government Trust Denver-based Oppenheimer Funds - ------------------------------ 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 Income Fund Oppenheimer Equity Income Fund Oppenheimer High Yield Fund Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Funds, Inc. Oppenheimer Strategic Funds Trust Oppenheimer Strategic Income & Growth Fund Oppenheimer Tax-Exempt Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds C-20 Rochester-based Funds - --------------------- Rochester Fund Municipals Rochester Fund Series - The Bond Fund For Growth Rochester Portfolio Series -- Limited Term New York Municipal Fund The address of OppenheimerFunds, Inc., the New York-based OppenheimerFunds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203. The address of the Denver-based Oppenheimer Funds, Shareholder Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services, Centennial Asset Management Corporation, Centennial Capital Corp., and Main Street Advisers, Inc. is 3410 South Galena Street, Denver, Colorado 80231. The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York 14625-2807. ITEM 29. Principal Underwriters. (1) Registrant's distributor, Connecticut Mutual Financial Services, L.L.C. ("CMFS") is a wholly owned subsidiary of DHC, Inc. which in turn is a wholly owned subsidiary of Connecticut Mutual Life Insurance Company ("CML"). CMFS is the principal underwriter for Panaroma Separate Account, a registered investment company which is a separate account of CML and for Panorama Plus Separate Account, a registered investment company which is a separate account of CML each offering individual variable annuity contracts and the investment adviser to Connecticut Mutual Financial Services Series Fund I, Inc., a registered open-end investment company whose shares are offered to Panorama Separate Account and Panorama Plus Separate Account and not to the public. CMFS also serves as a broker/dealer in the sales of limited partnership interests, mutual fund shares and other investment vehicles for which it is not the principal underwriter. C-21 The Directors and principal officers of CMFS and their principal occupations during the last two years are as follows:
POSITION WITH PRINCIPAL OCCUPATION NAME CMFS (AND OTHER POSITIONS) ---- ------------- --------------------- J. Brinke Marcucilli* Director Senior Vice President and Chief Financial Officer, CML; Vice President and Chief Financial Officer, Agency Group of the Providian Corporation (1987-1994) Donald H. Pond, Jr.* Director and President Executive Vice President, CML David E. Sams, Jr.* Director President and Chief Executive Officer, CML (1993-Present); President and Chief Executive Officer - Agency Group Capital Holdings Corporation, Louisville, KY (1987-1993) Emilia Bruno* Treasurer Assistant Vice President, CML Ann F. Lomeli* Secretary Counsel and Secretary, CML
* Principal Business Address is 140 Garden Street, Hartford Connecticut 06154. (2) At the time of effectiveness of PEA No. 28, Oppenheimer Funds Distributor, Inc. will serve as the Registrant's principal underwriter. (a) OppenheimerFunds 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 OppenheimerFunds, Inc. 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: C-22
POSITIONS AND NAME & PRINCIPAL POSITIONS & OFFICES OFFICES WITH BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT - ---------------- ---------------- ---------- Christopher Blunt Vice President None 6 Baker Avenue Westport, CT 06880 George Clarence Bowen+ Vice President & Treasurer Vice President and Treasurer of the NY-based Oppenheimer funds / Vice President, Secretary and Treasurer of the Denver-based Oppenheimer funds 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 Bill Coughlin Vice President None 1400 Laurel Avenue Apt. W710 Minneapolis, MN 55403 Mary Crooks+ Vice President None Paul Delli-Bovi Vice President None 750 West Broadway Apt. 5M Long Beach, NY 11561
C-23 Andrew John Donohue* Executive Vice Secretary of President & Director the New York-based Oppenheimer funds / Vice President of the Denver- based Oppenheimer funds 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 Katherine P. Feld* Vice President & Secretary None Mark Ferro Vice President None 43 Market Street Breezy Point, NY 11697 Ronald H. Fielding++ Vice President None Reed F. Finley Vice President - None 1657 Graefield Financial Institution Div. Birmingham, MI 48009 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 Senior 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
C-24 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 Mark D. Johnson Vice President None 7512 Cromwell Dr. Apt 1 Clayton, MO 63105 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 Senior 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* Senior Vice President - None Director of Key Accounts
C-25 Charles Murray Vice President None 50 Deerwood Drive Littleton, CO 80127 Joseph Norton Vice President None 1550 Bryant Street San Francisco, CA 94103 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 22 Fall Meadow Dr. Pittsford, NY 14534 Bill Presutti Vice President None 19 Spinnaker Way Portsmouth, NH 03801 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 Ian Robertson Vice President None 4204 Summit Wa Marietta, GA 30066 Robert Romano Vice President None 1512 Fallingbrook Drive Fishers, IN 46038 Michael S. Rosen++ Vice President None James Ruff* President None
C-26 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 George Sweeney Vice President None 1855 O'Hara Lane Middletown, PA 17057 Scott McGregor Tatum Vice President None 7123 Cornelia Lane Dallas, TX 75214 David G. Thomas Vice President - None 111 South Joliet Circle Financial Institution Div. #304 Aurora, CO 80112 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
C-27 Gregory K. Wilson Vice President None 2 Side Hill Road Westport, CT 06880 William Harvey Young+ Vice President None
* Two World Trade Center, New York, NY 10048-0203 + 3410 South Galena St., Denver, CO 80231 ++ 350 Linden Oaks, Rochester, NY 14625-2807 (c) Not applicable. ITEM 30. Location of Accounts and Records. (a) Books or other documents required to be maintained by the Registrant by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained by the Registrant's custodians, Investors Bank & Trust Company, 89 South Street, Boston, MA 02111 (with respect to the CMIA Municipal Accounts Only) and State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110 and the Registrant's transfer agent, NFDS, 1005 Baltimore, 5th Floor, Kansas City, MO 64105, with the exception of certain portfolio trading documents (with respect to CMIA Municipal Accounts only) which are in the possession and custody of Eaton Vance Management, 24 Federal Street, Boston, MA 02110. Registrant's financial ledgers and other corporate records are maintained at its offices at 140 Garden Street, Hartford, CT 06154. Registrant is informed that all applicable accounts, books and documents (with respect to CMIA Municipal Accounts only) required to be maintained by registered investment advisers are in the custody and possession of Eaton Vance Management. (b) Upon the effectiveness of PEA No. 28, 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. C-28 ITEM 31. Management Services. Not applicable. ITEM 32. Undertakings. (a) Not applicable. (b) Not applicable. (c) The Company will furnish each person to whom a prospectus is delivered with a copy of the Company's latest annual report to shareholders, upon request and without charge. (d) The Registrant undertakes to comply with Section 16(c) of the Investment Company Act of 1940, as amended, as it relates to the assistance to be rendered to shareholders with respect to the call of a meeting to replace a director. C-29 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 ("1933 Act") and the Investment Company Act of 1940, the Registrant has duly caused this Post-Effective Amendment No. 28 to the Registration Statement ("PEA No. 28") to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on the 28th day of February, 1996. CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. By: *Donald H. Pond, Jr. ---------------------- Donald H. Pond, Jr. President Pursuant to the requirements of the Securities Act of 1933, this PEA No. 28 has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE --------- ----- ---- *Donald H. Pond, Jr. President and Director - ------------------------------- (Principal Executive Donald H. Pond, Jr. Officer) *Richard Hixon Ayers Director - ------------------------------- Richard Hixon Ayers *David Ellis Adams Carson Director - ------------------------------- David Ellis Adams Carson *Richard Warren Greene Director - ------------------------------- Richard Warren Greene *Beverly Lannquist Hamilton Director - ------------------------------- Beverly Lannquist Hamilton *David E. Sams, Jr. Director - ------------------------------- David E. Sams, Jr. *Linda M. Napoli Treasurer - ------------------------------- (Principal Financial Linda M. Napoli and Accounting Officer) *By:/s/ Michael A. Chong Attorney-in-fact February 28, 1996 -------------------- Michael A. Chong EXHIBIT INDEX Exhibit No. - ----------- 1. Amended and Restated Articles of Incorporation dated January 6, 1995 1.1. Articles Supplementary dated September, 1995 1.2. Articles Supplementary dated May, 1995 2. By-Laws 5.2. Form of Investment Advisory Agreement between Connecticut Mutual Total Return Account and OppenheimerFunds, Inc. and schedule of omitted substantially similar documents 5.3. Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and Pilgrim, Baxter & Associates, Ltd. (for CMIA Lifespan Balanced Account) and schedule of omitted substantially similar documents 5.4. Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and BEA Associates (for CMIA Lifespan Balanced Account) and schedule of omitted substantially similar documents 5.5. Form of Investment Subadvisory Agreement between OppenheimerFunds, Inc. and Babson-Stewart Ivory International (for CMIA Lifespan Balanced Account) and schedule of omitted substantially similar documents 6.5. Form of General Distributor's Agreement between Registrant and OppenheimerFunds Distributor, Inc. on behalf of Oppenheimer Disciplined Allocation Fund and schedule of omitted substantially similar documents 8.1. Master Custodian Agreement between Registrant, on behalf of each series of the Registrant (except the Municipal Accounts), and State Street Bank and Trust Company 8.2. Amendment (LifeSpan Funds) to Custodian Agreement between Registrant and State Street Bank and Trust Company 9.13. Form of Service Agreement between Registrant and OppenheimerFunds Services 11.1. Consent of Independent Public Accountants 15.7. Form of Service Plan and Agreement between OppenheimerFunds Distributor, Inc. for Class A Shares of Oppenheimer Disciplined Allocation Fund and schedule of substantially similar omitted documents 15.8. Form of Distribution and Service Plan and Agreement with OppenheimerFunds Distributor, Inc. for Class B Shares of Oppenheimer Disciplined Allocation Fund and schedule of substantially similar omitted documents 15.9. Form of Distribution and Service Plan and Agreement with OppenheimerFunds Distributor, Inc. for Class C Shares of Oppenheimer Disciplined Allocation Fund and schedule of substantially similar omitted documents 17. Financial Data Schedule 18.1. Rule 18f-3 Multiple Class Plan (Class A, B and C shares) for the respective series of the Registrant EX-1 2 EXHIBIT 1 ARTICLES OF AMENDMENT AND RESTATEMENT OF CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Connecticut Mutual Investment Accounts, Inc., a Maryland corporation having its principal place of business in Maryland in Baltimore City, Maryland (which is hereinafter called the "Corporation") hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Charter of the Corporation is hereby amended by: Changing and reclassifying each of the shares of Common Stock (par value $0.10 per share) of the Corporation which is issued and outstanding as of the close of business on the effective date of this amendment into one share of Common Stock (par value $0.001 per share) and by transferring from the account designated "common stock" to the account designated "capital surplus" $0.99 for each share of common stock outstanding immediately after the change and reclassification. SECOND: The Charter of the Corporation is hereby further amended and completely restated so that the same shall read as follows: ARTICLE I NAME The name of the corporation (which is hereinafter called the "Corporation") is: CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. ARTICLE II PURPOSES AND POWERS (a) The purposes for which the Corporation is formed and the business and objects to be carried on and promoted by it are: (1) To engage generally in the business of investing, reinvesting, owning, holding or trading in securities, as defined in the Investment Company Act of 1940, as from time to time amended (hereinafter referred to as the "Investment Company Act"), as an investment company classified under the Investment Company Act as a management company. (2) To engage in any one or more businesses or transactions, or to acquire all or any portion of any entity engaged in any one or more businesses or transactions, which the Board of Directors may from time to time authorize or approve, whether or not related to the business described elsewhere in this Article or to any other business at the time or theretofore engaged in by the Corporation. (3) To hold, invest and reinvest its assets in securities, including securities of other investment companies and other instruments and obligations, and in connection therewith, to hold part or all of its assets in cash. (4) To subscribe for, invest in, purchase or otherwise acquire, own, hold, sell, exchange, pledge or otherwise dispose of, securities of every nature and kind, including, without limitation, all types of stocks, bonds, debentures, notes, other securities or obligations or evidences or indebtedness or ownership issued or created by any and all persons, associations, agencies, trusts or corporations, public or private, whether created, established or organized under the laws of the United States, any of the States, or any territory or district or colony or possession thereof, or under the laws of any foreign country, and also foreign and domestic government and municipal obligations, bank acceptances and commercial paper, to pay for the same in cash or by the issue of stock, bonds, or notes of this Corporation or otherwise; and while owning and holding any such securities, to exercise all the rights, powers and privileges of a stockholder or owner, including, and without limitation, the right to delete and assign to one or more persons, firms, associations, or corporations the power to exercise any of said rights, powers and privileges in respect of any such securities; to borrow money or otherwise obtain credit and, if required, to secure the same by mortgaging, pledging or otherwise encumbering as security the assets of this Corporation. (5) To issue and sell shares of its own capital stock in such amounts and on such terms and conditions, for such purposes and for such amount or kind of consideration now or hereafter permitted by the Maryland General Corporation Law and by this charter, as its Board of Directors may determine, provided, however, that the value of the consideration per share to be received by the Corporation upon the sale or other disposition of any shares of its capital stock shall be not less than the par value per share of such capital stock outstanding at the time of such event. (6) To redeem, purchase or otherwise acquire, hold, dispose of, resell, transfer, reissue or cancel (all without the vote or consent of the stockholders of the Corporation) shares of its capital stock, in any manner and to the extent now or hereafter permitted by the General Corporation Law of the State of Maryland and by the Corporation's charter. (7) To do any and all such further acts or things and to exercise any and all such further powers or rights as may be necessary, incidental, relative, conducive, appropriate or desirable for the accomplishment, carrying out or attainment of any of the foregoing purposes or objects. (b) The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other Article of the charter of the Corporation, and each shall be regarded as independent; and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to and not in limitation of the general powers of corporations under the General Laws of the State of Maryland. ARTICLE III PRINCIPAL OFFICE AND RESIDENT AGENT The present address of the principal office of the Corporation in this State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in this State are The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. Said resident agent is a Maryland corporation. ARTICLE IV CAPITAL STOCK (a) The total number of shares of stock of all classes and series which the Corporation initially has authority to issue is Three Billion (3,000,000,000) shares of capital stock (par value $0.001 per share), amounting in aggregate par value to $3,000,000. All of such shares are initially classified as "Common Stock". The Board of Directors may classify or reclassify any unissued shares of capital stock (whether or not such shares have been previously classified or reclassified) from time to time by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares of stock. (b) Unless otherwise prohibited by law, so long as the Corporation is registered as an open-end company under the Investment Company Act, the Board of Directors shall have the power and authority, without the approval of the holders of any outstanding shares, to increase or decrease the number of shares of capital stock or the number of shares of capital stock of any class or series that the Corporation has authority to issue. (c) The authorized shares of Common Stock shall be classified into the following series of Common Stock, each series comprising the number of shares indicated, subject to the authority of the Board of Directors to classify or reclassify any unissued shares of capital stock and to the authority of the Board of Directors to increase or decrease the number of shares of capital stock or the number of shares of capital stock of any class or series that the Corporation has the authority to issue:
SERIES NUMBER OF SHARES IN SERIES Connecticut Mutual Government Account Common Stock 300,000,000 Connecticut Mutual Income Account| Common Stock 300,000,000 Connecticut Mutual Total Return Account| Common Stock 300,000,000 Connecticut Mutual Growth Account| Common Stock 300,000,000 Connecticut Mutual Liquid Account| Common Stock 800,000,000 CMIA National Municipals Account Common| Stock 200,000,000 CMIA California Municipals Account Common Stock | 200,000,000 CMIA Massachusetts Municipals Account Common Stock | 200,000,000 CMIA New York Municipals Account Common| Stock 200,000,000 CMIA Ohio Account Municipals Common| Stock 200,000,000
Any series of Common Stock shall be referred to herein individually as a "Series" and collectively, together with any further series from time to time established, as the "Series". (d) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the shares of Common Stock classified into the Series listed above and any additional Series of Common Stock of the Corporation (unless provided otherwise by the Board of Directors with respect to any such additional Series at the time it is established and designated): (1) ASSETS BELONGING TO SERIES. All consideration received by the Corporation from the issue or sale of shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any investment or reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Corporation. Such consideration, assets, income, earnings, profits and proceeds, together with any General Items (as defined below) allocated to that Series as provided in the following sentence, are herein referred to collectively as "assets belong to" that Series. In the event that there are any assets, income, earnings, profits or proceeds which are not readily identifiable as belonging to any particular Series (collectively, "General Items"), such General Items shall be allocated by or under the supervision of the Board of Directors to and among any one or more of the Series established and designated from time to time in such manner and on such basis as the Board of Directors, in its sole discretion, deems fair and equitable; and any General Items so allocated to a particular Series shall belong to that Series. Each such allocation by the Board of Directors shall be conclusive and binding for all purposes. (2) LIABILITIES OF SERIES. The assets belonging to each particular Series shall be charged with the liabilities of the Corporation in respect of that Series and all expenses, costs, charges and reserves attributable to that Series, and any general liabilities, expenses, costs, charges or reserves of the Corporation which are not readily identifiable as pertaining to any particular Series, shall be allocated and charged by or under the supervision of the Board of Directors to and among any one or more of the Series established and designated from time to time in such manner and on such basis as the Board of Directors, in its sole discretion, deems fair and equitable. The liabilities, expenses, costs, charges and reserves allocated and so charged to a Series are herein referred to collectively as "liabilities of" that Series. Each allocation of liabilities, expenses, costs, charges and reserves by or under the supervision of the Board of Directors shall be conclusive and binding for all purposes. (3) DIVIDENDS AND DISTRIBUTIONS. Dividends and capital gains distributions on shares of a particular Series may be paid with such frequency, in such form and in such amount as the Board of Directors may determine by resolution adopted from time to time, or pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Board of Directors may determine, after providing for actual and accrued liabilities of that Series. All dividends on shares of a particular Series shall be paid only out of the income belonging to that Series and all capital gains distributions on shares of a particular Series shall be paid only out of the capital gains belonging to that Series. All dividends and distributions on shares of a particular Series shall be distributed pro rata to the holders of that Series in proportion to the number of shares of that Series held by such holders at the date and time of record established for the payment of such dividends or distributions, except that in connection with any dividend or distribution program or procedure, the Board of Directors may determine that no dividend or distribution shall be payable on shares as to which the stockholder's purchase order and/or payment have not been received by the time or times established by the Board of Directors under such program or procedure. Dividends and distributions may be paid in cash, property or additional shares of the same or another Series, or a combination thereof, as determined by the Board of Directors or pursuant to any program that the Board of Directors may have in effect at the time for the election by stockholders of the form in which dividends or distributions are to be paid. Any such dividend or distribution paid in shares shall be paid at the current net asset value thereof. (4) VOTING. On each matter submitted to a vote of the stockholders, each holder of shares shall be entitled to one vote for each share standing in his name on the books of the Corporation, irrespective of the Series thereof, and all shares of all Series shall vote as a single class ("Single Class Voting"); provided, however, that (i) as to any matter with respect to which a separate vote of any Series is required by the Investment Company Act or by the Maryland General Corporation Law, such requirement as to a separate vote by that Series shall apply in lieu of Single Class Voting, (ii) in the event that the separate vote requirement referred to in clause (i) above applies with respect to one or more Series, then, subject to clause (iii) below, the shares of all other Series shall vote as a single class; and (iii) as to any matter which does not affect the interest of a particular Series, including liquidation of another Series as described in subsection (7) below, only the holders of shares of the one or more affected Series will be entitled to vote. (5) REDEMPTION BY STOCKHOLDERS. Each holder of shares of a particular Series shall have the right at such times as may be permitted by the Corporation to require the Corporation to redeem all or any part of his shares of that Series, at a redemption price per share equal to the net asset value per share of that Series next determined after the shares are properly tendered for redemption, less such redemption fee or sales charges, if any, as may established by the Board of Directors in its sole discretion in accordance with any applicable provisions of the Investment Company Act. Payment of the redemption price shall be in cash; provided, however, that if the Board of Directors determines, which determination shall be conclusive, that conditions exist which may payment wholly in cash unwise or undesirable, the Corporation may, to the extent and in the manner permitted by the Investment Company Act,make payment wholly or partly in securities or other assets belonging to the Series of which the shares being redeemed are a part, at the value of such securities or assets used in such determination of net asset value. Notwithstanding the foregoing, the Corporation may postpone payment of the redemption price and may suspend the right of the holders of shares of any Series to require the Corporation to redeem shares of that Series during any period or at any time when and to the extent permissible under the Investment Company Act. (6) REDEMPTION BY CORPORATION. The Board of Directors may cause the Corporation to redeem at their net asset value the shares of any Series held in an account (i) if the redemption is, in the opinion of the Board of Directors of the Corporation, desirable in order to prevent the Corporation from being deemed a "personal holding company" within the meaning of the Internal Revenue Code of 1986, as from time to time amended, (ii) if the number of shares in the account maintained by the Corporation or its transfer agent for any stockholder is less than a specified number determined by the Board of Directors of the Corporation, from time to time, but in no event more than one hundred (100) shares, and the stockholder has been given at least thirty (30) days' written notice of the redemption and has failed to make additional purchases of shares in an amount sufficient to bring the number of shares in his account to the specified number of shares or more before the redemption is effected by the Corporation or (iii) if the stockholder has failed to furnish a correct certified social security or tax identification number required by the Corporation to be obtained. (7) LIQUIDATION. In the event of the liquidation of a particular Series, the stockholders of the Series that is being liquidated shall be entitled to receive, as a class, when and as declared by the Board of Directors, the excess of the assets belonging to that Series over the liabilities of that Series. The holders of shares of any particular Series shall not be entitled thereby to any distribution upon liquidation of any other Series. The assets so distributable to the stockholders of any particular Series shall be distributed among such stockholders in proportion to the number of shares of that Series held by them and recorded on the books of the Corporation. The liquidation of any particular Series in which there are shares then outstanding may be authorized by vote of a majority of the Board of Directors then in office, and, if required under Maryland or other applicable law, subject to the approval of a majority of the outstanding voting securities of that Series, as defined in the Investment Company Act, and without the vote of the holders of shares of any other Series. The liquidation of a particular Series may be accomplished, in whole or in part, by the transfer of assets of such Series another Series or by the exchange of shares of such Series for the shares of another Series. (8) NET ASSET VALUE PER SHARE. The net asset value per share of any Series shall be the quotient obtained by dividing the value of the net assets of that Series (being the value of the assets belonging to that Series less the liabilities of that Series) by the total number of shares of that Series outstanding, all as determined by or under the direction of the Board of Directors in accordance with generally accepted accounting principles and the Investment Company Act. Subject to the applicable provisions of the Investment Company Act, the Board of Directors, in its sold discretion, may prescribe and shall set forth in the By-Laws of the Corporation or in a duly adopted resolution of the Board of Directors such bases and times for determining the value of the assets belonging to, and the net asset value per share of outstanding shares of, each Series, or the net income attributable to such shares, as the Board of Directors deems necessary or desirable. The Board of Directors shall have full discretion, to the extent not inconsistent with the Maryland General Corporation Law and the Investment Company Act, to determine which items shall be treated as income and which items as capital and whether any item of expense shall be charged to income or capital. Each such determination and allocation shall be conclusive and binding for all purposes. The Board of Directors may determine to maintain the net asset value per share of any Series at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the Investment Company Act for the continuing declaration of income attributable to that Series as dividends and for the handling of any losses attributable to that Series. Such procedures may provide that in the event of any loss, each stockholder shall be deemed to have contributed to the capital of the Corporation attributable to that Series his pro rata portion of the total number of shares required to be canceled in order to permit the net asset value per share of that Series to be maintained, after reflecting such loss, at the designated constant dollar amount. Each stockholder of the Corporation shall be deemed to have agreed, by his investment in any Series with respect to which the Board of Directors shall have adopted any such procedure, to make the contribution referred to in the preceding sentence in the event of any such loss. (9) CONVERSION OF EXCHANGE RIGHTS. Subject to compliance with the requirements of the Investment Company Act, the Board of Directors shall have the authority to provide that holders of shares of any Series shall have the right to convert or exchange said shares into shares of one or more other Series of shares in accordance with such requirements and procedures as may be established by the Board of Directors. (e) The Series identified in paragraph (c) of this Article IV and any additional Series of Common Stock (unless otherwise specified in the articles supplementary designating such Series) shall each initially have three classes of shares, which shall be designated Class A, Class B and Class C, each consisting, until further changed, of the lesser of (x) the total number of shares of each such Series designated and specified in Paragraph (c) above or (y) the number of shares that could be issued by issuing all of the shares of that Series currently or hereafter classified less the total number of shares of all other classes of such Series then issued and outstanding. Any class of a Series of Common Stock shall be referred to herein individually as a "Class" and collectively, together with any further class or classes of such Series from time to time established, as the "Classes". For each of the Series listed above, all of the shares of such Series that are currently issued and outstanding shall be referred to as Class A shares. (f) All Classes of a particular Series of Common Stock of the Corporation shall represent the same interest in the Corporation and have identical voting, dividend, liquidation, and other rights with any other shares of Common Stock of that Series; provided, however, that notwithstanding anything in the charter of the Corporation to the contrary: (1) The Class A shares are subject to such front-end sales loads as are currently in effect for such shares and may be subject to such front-end sales loads and fees and expenses under a Rule 12b-1 plan, established by the Board of Directors in accordance with the Investment Company Act and applicable rules and regulations of the National Association of Securities Dealers, Inc., as may be approved by the stockholders of such Class from time to time to the extent required by applicable Maryland law and the Investment Company Act. The Class A shares are also subject to such contingent deferred sales charges as are currently in effect for such shares or as may be established by the Board of Directors in accordance with the Investment Company Act and applicable rules and regulations of the National Association of Securities Dealers, Inc., as may be approved by the stockholders of such Class from time to time to the extent required by applicable Maryland law and the Investment Company Act. (2) The Class B and Class C shares shall be subject to such fees and expenses under a Rule 12b-1 plan as may be established from time to time by the Board of Directors and such contingent deferred sales charges as may be established from time to time by the Board of Directors in accordance with the Investment Company Act and applicable rules and regulations of the National Association of Securities Dealers, Inc. (3) Expenses related solely to a particular Class of a Series (including, without limitation, distribution expenses under a Rule 12b-1 plan and administrative expenses under an administration or service agreement, plan or other arrangement, however designated) shall be borne by that Class and shall be appropriately reflected (in the manner determined by the Board of Directors) in the net asset value, dividends, distribution and liquidation rights of the shares of that Class. (4) At such time as may be determined by the Board of Directors in accordance with the Investment Company Act and applicable rules and regulations of the National Association of Securities Dealers, Inc. and reflected in the current registration statement relating to a Series, shares of a particular Class of a Series may be automatically converted into shares of another Class; provided, however, that such conversion shall be subject, at the election of the Board of Directors, to the continuing availability of a private letter ruling of the Internal Revenue Service or an opinion of counsel to the effect that such conversion does not constitute a taxable event under federal income tax law and shall otherwise be in accordance with the Investment Company Act. The Board of Directors, in its sole discretion, may suspend any conversion rights if such opinion is no longer available. (5) As to any matter with respect to which a separate vote of any Class of a Series is required by the Investment Company Act or by the Maryland General Corporation Law (including, without limitation, approval of any plan, agreement or other arrangement referred to in subsection (3) above), such requirement as to a separate vote by that Class shall apply in lieu of Single Class Voting, and if permitted by the Investment Company Act or the Maryland General Corporation Law, the Classes of more than one Series shall vote together as a single class on any such matter which shall have the same effect on each such Class. As to any matter which does not affect the interest of a particular Class of a Series, only the holders of shares of the affected Classes of that Series shall be entitled to vote. (g) The Corporation may issue and sell fractions of shares of capital stock having pro rata all the rights of full shares, including, without limitation, the right to vote and to receive dividends, and whereever the words "share" or "shares" are used in the charter or By-Laws of the Corporation, they shall be deemed to include fractions of shares where the context does not clearly indicate that only full shares are intended. (h) The Corporation shall not be obligated to issue certificates representing shares of any Class or Series of capital stock. At the time of issue or transfer of shares without certificates, the Corporation shall provide the stockholder with such information as may be required under the Maryland General Corporation Law. ARTICLE V PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF THE CORPORATION AND OF THE DIRECTORS AND STOCKHOLDERS (a) The number of directors of the Corporation may be increased or decreased pursuant to the By-Laws of the Corporation, but shall never be less than the minimum number permitted by the General Laws of the State of Maryland now or hereafter in force. (b) The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of its stock of any class or series, whether now or hereafter authorized, or securities convertible into shares of its stock of any class or series, whether now of hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. (c) No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding. (d) The Board of Directors of the Corporation shall, consistent with applicable law, power in its sole discretion to determine from time to time in accordance with sound accounting practice or other reasonable valuation methods what constitutes annual or other net profits, earnings, surplus, or net assets in excess of capital; to determine the that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by statute or by the By-Laws, and, except as so provided, no stockholder shall have any right to inspect any book, account or document of the Corporation unless authorized so to do by resolution of the Board of Directors. (e) Notwithstanding any provision of Maryland law requiring the authorization of any action by a greater proportion than a majority of the total number of shares of all classes and series of capital stock or of the total number of shares of any class or series of capital stock entitled to vote as a separate class, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes and series outstanding and entitled to vote thereon, or of the class or series entitled to vote thereon as a separate class, as the case may be, except as otherwise provided in the charter of the Corporation. (f) The Corporation shall indemnify (i) its directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by law, and (ii) other employees and agents to such extent as shall be authorized by the Board of Directors or the By-Laws and as permitted by law. Nothing contained herein shall be construed to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such by-laws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of the charter of the Corporation or repeal of any of its provisions shall limit or eliminate the right of indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal. (g) To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, and the Investment Company Act, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages; provided, however, that nothing herein shall be construed to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. No amendment of the charter of the Corporation or repeal of any of its provisions shall limit or eliminate the limitation of liability provided to directors and officers hereunder with respect to any act or omission occurring prior to such amendment or repeal. (h) The Corporation reserves the right from time to time to make any amendments of its charter which may now or hereafter be authorized by law, including any amendments changing the terms or contract rights, as expressly set forth in its charter, of any of its outstanding stock by classification, reclassification or otherwise. (i) The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force. ARTICLE VI PERPETUAL EXISTENCE The duration of the Corporation shall be perpetual. THIRD: The provisions hereinabove set forth are all the provisions of the Charter of the Corporation currently in effect. FOURTH: The amendment does not increase the authorized stock of the Corporation. FIFTH: In accordance with the provisions of Section 2-607 of the Maryland General Corporation Law, the foregoing amendment was advised by the Board of Directors and approved by the stockholders of the Corporation. SIXTH: The current address of the principal office of the Corporation in Maryland and the name and address of the Corporation's current resident agent are as set forth in the amended and restated Charter of the Corporation. There are six directors currently in office, whose names are as follows: Donald H. Pond David E. Sams, Jr. Richard H. Ayers David E. A. Carson Richard W. Gleen Beverly L. Hamilton IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on this 6th day of January, 1995. CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. /S/ DONALD H. POND Name: Donald H. Pond Title: President ATTEST: /S/ ANN F. LOMELI Name: Ann F. Lomeli Title: Secretary THE UNDERSIGNED, the President of Connecticut Mutual Investment Accounts, Inc. who executed on behalf of the Corporation the foregoing Articles of Amendment and Restatement of which this certificate is made a part, hereby acknowledges in the name and on behalf of the Corporation the foregoing Articles of Amendment and Restatement to be the corporate act of the Corporation and hereby certifies to the best of his knowledge, information and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /S/DONALD H. POND Name: Donald H. Pond Title: President EX-1.1 3 EXHIBIT 1.1 EXHIBIT 1.1 CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. ARTICLES SUPPLEMENTARY Connecticut Mutual Investment Accounts, Inc., a Maryland corporation (the "Corporation"), having its principal office in Baltimore, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article IV of the Corporation's Articles of Incorporation, the Board of Directors has duly divided and re-classified three billion (3,000,000,000) shares of the Class A Common Stock of each of the series as set forth below of common stock of the Corporation into Class B Common Stock and has provided for the issuance of such class as follows:
Number of Number of Series Class A Shares Class B Shares - ------ -------------- -------------- Liquid Account 250,000,000 0 Government Securities Account 200,000,000 50,000,000 Income Account 200,000,000 50,000,000 Total Return Account 200,000,000 50,000,000 Growth Account 200,000,000 50,000,000 CMIA National Municipals Account 200,000,000 0 CMIA California Municipals Account 200,000,000 0 CMIA Massachusetts Municipals Account 200,000,000 0 CMIA New York Municipals Account 200,000,000 0 CMIA Ohio Municipals Account 200,000,000 0 CMIA LifeSpan Capital Appreciation Account 200,000,000 50,000,000 CMIA LifeSpan Balanced Account 200,000,000 50,000,000 CMIA LifeSpan Diversified Income Account 200,000,000 50,000,000
-1- SECOND: The terms of the Common Stock of each Class are as set forth in Article IV of the Articles of Amendment and Restatement of the Corporation. IN WITNESS WHEREOF, Connecticut Mutual Investment Accounts, Inc. has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on September 26, 1995 WITNESS: CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. By:/s/Ann F. Lomeli By:/s/Donald H. Pond ------------- -------------- Ann F. Lomeli Donald H. Pond Secretary President THE UNDERSIGNED, President of Connecticut Mutual Investment Accounts, Inc., who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/Donald H. Pond -------------- Donald H. Pond President -2- EX-1.2 4 EXHIBIT 1.2 CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. ARTICLES SUPPLEMENTARY Connecticut Mutual Investment Accounts, Inc., a Maryland corporation (the "Corporation"), having its principal office in Baltimore, Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article IV of the Corporation's Articles of Incorporation, the Board of Directors has duly divided and re-classified three billion (3,000,000,000) shares of the authorized and unissued shares of the Connecticut Mutual Investment Accounts, Inc. into the following new and existing classes and has provided for the issuance of such classes:
CLASS NUMBER OF SHARES Liquid Account 600,000,000 Government Securities Account 200,000,000 Income Account 200,000,000 Total Return Account 200,000,000 Growth Account 200,000,000 CMIA National Municipals Account 200,000,000 CMIA California Municipals Account 200,000,000 CMIA Massachusetts Municipals Account 200,000,000 CMIA New York Municipals Account 200,000,000 CMIA Ohio Municipals Account 200,000,000 CMIA LifeSpan Capital Appreciation Account 200,000,000 CMIA LifeSpan Balanced Account 200,000,000 CMIA LifeSpan Diversified Income Account 200,000,000
SECOND: The terms of the Common Stock in each such classes are as set forth in Article IV of the Company's Articles of Incorporation. IN WITNESS WHEREOF, Connecticut Mutual Investment Accounts, Inc. has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on this May 8, 1995 WITNESS: CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. /S/ ANN F. LOMELI By: /S/ DONALD H. POND Ann F. Lomeli Donald H. Pond Secretary President THE UNDERSIGNED, President of Connecticut Mutual Investment Accounts, Inc., who executed on behalf of the Corporation the Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and fact set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /S/ DONALD H. POND Donald H. Pond President EX-2 5 EXHIBIT 2 BYLAWS OF CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. AS AMENDED BY RESOLUTIONS OF THE BOARD OF DIRECTORS AND BY THE ACTION OF SHAREHOLDERS THROUGH APRIL 30, 1993 AS FURTHER AMENDED JANUARY 29, 1996 CERTIFIED COPY BYLAWS OF CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. ARTICLE I OFFICES................................. 1 Section 1. Principal Executive Office.............. 1 Section 2. Other Offices........................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS................ 2 Section 1. Meetings................................ 1 Section 2. Place of Meetings....................... 2 Section 3. Notice of Meetings; Waiver of Notice.... 2 Section 4. Quorum.................................. 3 Section 5. Organization............................ 4 Section 6. Order of Business....................... 4 Section 7. Voting.................................. 4 Section 8. Fixing of Record Date................... 5 Section 9. Inspectors.............................. 5 Section 10. Consent of Stockholders in Lieu of meeting................................ 6 ARTICLE III BOARD OF DIRECTORS...................... 7 Section 1. General Powers.......................... 7 Section 2. Number of Directors..................... 7 Section 3. Election and Term of Directors.......... 7 Section 4. Resignation............................. 8 Section 5. Removal of Directors.................... 8 Section 6. Vacancies............................... 8 Section 7. Place of Meetings....................... 9 Section 8. Manner of Acting........................ 9 Section 9. Regular Meetings........................ 9 Section 10. Special Meetings........................ 9 Section 11. Annual Meeting.......................... 9 Section 12. Notice of Special Meetings.............. 10 Section 13. Waiver of Notice of Meetings..,,....... 10 Section 14. Quorum and Voting....................... 10 Section 15. Organization............................ 11 Section 16. Written Consent of Directors in Lieu of Meeting................................. 11 Section 17. Compensation............................ 12 Section 18 Investment Policies..................... 12 ARTICLE IV. COMMITTEES............................... 13 Section 1. Executive Committee...................... 13 Section 2. Other Committees of the Board............ 14 Section 3. General.................................. 14 ARTICLE V OFFICERS, AGENTS, and EMPLOYEES.......... 15 Section 1. Number and Qualifications................ 15 Section 2. Resignations............................. 15 Section 3. Removal of Officer, Agent, or Employee... 16 Section 4. Vacancies................................ 16 Section 5. Compensation............................. 16 Section 6. Bonds or other Security.................. 16 Section 7. President................................ 16 Section 8. Vice President........................... 17 Section 9. Treasurer................................ 17 Section 10. Secretary................................ 17 Section 11. Delegation of Duties..................... 18 ARTICLE VI INDEMNIFICATION.......................... 18 Section 1. Right of Indemnification................. 18 Section 2. Disabling Conduct........................ 19 Section 3. Directors' Standards of Conduct.......... 20 Section 4. Expenses Prior to Determination.......... 20 Section 5. Provisions Not Exclusive................. 21 Section 6. General.................................. 21 ARTICLE VII CAPITAL STOCK............................ 21 Section 1. Stock Certificates....................... 21 Section 2. Books of Account and Record of Stockholders.......................... 22 Section 3. Transfers of Shares...................... 22 Section 4. Rules and regulations.................... 23 Section 5. Lost, Destroyed, or Mutilated Certificates............................. 23 Section 6. Fixing of a Record Date for Dividends and Distributions........................ 23 Section 7. Registered Owner of Shares............... 24 Section 8. Information to Stockholders and Others... 24 Section 9. Involuntary Redemption of Shares......... 24 ARTICLE VIII SEAL..................................... 25 ARTICLE IX FISCAL YEAR.............................. 25 ARTICLE X DEPOSITORIES and CUSTODIANS.............. 25 Section 1. Depositories............................. 25 Section 2. Custodians............................... 25 ARTICLE XI EXECUTION OF INSTRUMENTS................. 25 Section 1. Checks, Notes, Drafts, etc............... 25 Section 2. Sale or Transfer of Securities.......... 26 Section 3. Loans................................... 26 Section 4. Voting as Securityholder................ 26 Section 5. Expenses................................ 27 ARTICLE XII INDEPENDENT PUBLIC ACCOUNTANTS (deleted) 27 ARTICLE XIII ANNUAL STATEMENT........................ 27 ARTICLE XIV AMENDMENTS.............................. 28 BYLAWS OF CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. ARTICLE I OFFICES Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of the Corporation shall be at 140 Garden Street, City of Hartford, State of Connecticut. Section 2. OTHER OFFICES. The Corporation may have such other offices in such places as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. MEETINGS. Meetings of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may be brought before the meeting may, but are not required to be held annually; specifically, the Corporation shall not be required to hold a meeting in any year in which none of the following is required to be acted on by stockholders under the Investment Company Act of 1940: (1) the election of directors; (2) the approval of the Corporation's investment advisory agreement; (3) ratification of the selection of independent public accountants; and (4) approval of the Corporation's distribution agreement. Any business of the Corporation may be transacted at the meeting without being specifically designated in the notice, except such business as is specifically required by statute to be stated in the notice. Meetings of the stockholders, unless otherwise provided by law or by the Articles of Incorporation, may be called for any purpose or purposes by a majority of the Board of Directors, by the President, or upon the written request of the holder of at least 25% of the outstanding capital stock of the Corporation entitled to vote at such meeting. Section 2. PLACE OF MEETINGS. Meetings of the stockholders shall be held at such place within the United States as the Board of Directors may from time to time determine. Section 3. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of the place, date, and time of the holding of each meeting of the stockholders and the purpose or purposes of each meeting shall be given personally or by mail, not less than ten nor more than ninety days before the date of such meeting, to each stockholder entitled to vote at such meeting and to each other stockholder entitled to notice of the meeting. Notice by mail shall be deemed to be duly given when deposited in the United States mail addressed to the stockholder at his address as it appears on the records of the Corporation with postage thereon prepaid. Notice of any meeting of stockholders shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, or who shall, either before or after the meeting, submit a signed waiver of notice that is filed with the records of the meeting. When a meeting is adjourned to another time and place, unless the Board of Directors, after the adjournment, shall fix a new record date for an adjourned meeting, or unless the adjournment is for more than thirty days, notice of such adjourned meeting need not be given if the time and place to which the meeting shall be adjourned were announced at the meeting at which the adjournment is taken. Section 4. QUORUM. At all meetings of the stockholders, the holders of a majority of the shares of stock of the Corporation entitled to vote at the meeting, or a majority of the holders of any class of stock with respect to matters on which holders of such class of stock are entitled to vote separately, who are present in person or by proxy shall constitute a quorum for the transaction of any business, except as otherwise provided by statute or by the Articles of Incorporation or these Bylaws. In the absence of quorum no business may be transacted, except that the holders of a majority of the shares of stock who are present in person or by proxy and who are entitled to vote may adjourn the meeting from time to time without notice other than announcement thereat except as otherwise required by these Bylaws, until the holders of the requisite amount of shares of stock shall be so present. At any such adjourned meeting at which a quorum may be present, any business may have been transacted that might have been transacted at the meeting as originally called. The absence from any meeting, in person or by proxy, of holders of the number of shares of stock of the Corporation in excess of a majority thereof that may be required by the laws of the State of Maryland, the Investment Company Act of 1940, as amended, or other applicable statute, the Articles of Incorporation, or these Bylaws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters that may properly come before the meeting, if there shall be present thereat, in person or by proxy,holders of the number of shares of stock of the Corporation required for Action in respect of such other matter or matters. Section 5. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board, if one has been designated by the Board, or in his absence or inability to act, the President, or in the absence or inability to act of both the Chairman of the Board and the President, a Vice-President, shall act as chairman of the meeting. The Secretary, or in his absence or inability to act, any person appointed by the chairman of the meeting, shall act as secretary of the meeting and keep the minutes thereof. Section 6. ORDER OF BUSINESS. The order of business at all meetings of the stockholders shall be determined by the chairman of the meeting. Section 7. VOTING. Except as otherwise provided by statute or the Articles of Incorporation, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the stockholders to one vote for each full share, and a fractional vote for each fractional share, standing in his name on the record of stockholders of the Corporation as of the record date determined pursuant to Section 8 of this Article II or, if such record date shall not have been so fixed, then at the later of (i) the close of business on the day on which notice of the meeting is mailed or (ii) the thirtieth day before the meeting; provided that stockholders of each class shall not be entitled to vote on matters that do not affect that class and that only affect another class or classes. Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy signed by such stockholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where such proxy states that it is irrevocable and where an irrevocable proxy is permitted by law. Except as otherwise provided by statute, the Articles of Incorporation, or these Bylaws, any corporate action to be taken by vote of the stockholders shall be authorized by a majority of the total votes cast at a meeting of stockholders by the holders of shares present in person or represented by proxy and entitled to vote on such action; provided that, to the extent required by the Investment Company Act of 1940, as now in existence or hereinafter amended, if any action is required to be taken by the vote of a majority of the outstanding shares of all the stock or of any class of stock, then such action shall be taken if approved by the lesser of (i) 67 percent or more of the shares present at a meeting in person or represented by proxy, at which more than 50 percent of the outstanding shares are represented or (ii) more than 50 percent of the outstanding shares. If a vote shall be taken on any question other than the election of directors, which shall be by written ballot, then unless required by statute or these Bylaws, or determined by the chairman of the meeting to be advisable, any such vote need not be by ballot. On a vote by ballot, such ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. Section 8. FIXING OF RECORD DATE. The Board of Directors may fix, in advance, a record date not more than ninety nor less than ten days before the date then fixed for the holding of any meeting of the stockholders. All persons who were holders of record of shares at such time, and no others, shall be entitled to vote at such meeting and any adjournment thereof. Section 9. INSPECTORS. The Board may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and entitled to vote; the number of shares represented at the meeting; the existence of a quorum; the validity and effect of proxies; and shall receive votes, ballots, or consents; hear and determine all challenges and questions rising in connection with the right to vote; count and tabulate all votes, ballots or consents; determine the result; and do such acts as are proper to conduct the election or vote in fairness to all stockholders. On request of the chairman of the meeting or of any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as inspector of an election of director. Inspectors need not be stockholders. Section 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as otherwise provided by statute or the Articles of Incorporation, any action required to be taken at any meeting of stockholders, or any action that may be taken at any meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if the following are filed with the records of stockholders' meetings: (i) a unanimous written consent that sets forth the action and is signed by each stockholder entitled to vote on the matter and (ii) a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote thereat. ARTICLE III BOARD OF DIRECTORS Section 1. GENERAL POWERS. Except as otherwise provided in the Articles of Incorporation, the business and affairs of the Corporation shall be managed by the Board of Directors. The Board may exercise all the powers of the Corporation and do all such lawful acts and things as are not by statute or the Article of Incorporation directed or required to be exercised or done by the stockholders. Section 2. NUMBER OF DIRECTORS. The number of directors may be changed from time to time by resolution of the Board of Directors adopted by a majority of the Directors then in office; provided, however, that the number of directors shall in no event be less than three (3). Any vacancy created by an increase in directors may be filled in accordance with Section 6 of this Article III. No reduction in the number of directors shall have the effect of removing any director from office before the expiration of his term unless such director is specifically removed pursuant to Section 5 of this Article III at the time of such reduction. Directors need not be stockholders. Section 3. ELECTION AND TERM OF DIRECTORS. Each director shall serve indefinitely and until his successor is duly elected and qualified (or, if earlier, the death, resignation, or removal of such director as hereinafter provided in these Bylaws or as otherwise provided by statute or the Articles of Incorporation), except that the Board of Directors may determine a shorter tenure of office for any of its members so long as such shorter period is stated in the notice for the meeting of stockholders at which such election takes place. Elections of Directors shall be by written ballot at a stockholders' meeting held for that purpose. Section 4. RESIGNATION. A director of the Corporation may resign at any time by giving written notice of his resignation to the Board, to the Chairman of the Board, to the President, or to the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. REMOVAL OF DIRECTORS. A director of the Corporation may be removed by the stockholders by a vote of a majority of the votes entitled to be cast on the matter at any meeting of stockholders, duly called, and at which a quorum is present. Section 6. VACANCIES. Any vacancies in the Board, whether arising from death, resignation, removal, an increase in the number of directors, or from any other cause, shall be filled by a vote of the majority of the Board of directors then in office even if such majority is less than a quorum, provided that no vacancies shall be filled by action of the remaining directors, if after the filling of said vacancy or vacancies, less than two-thirds of the directors then holding office shall have been elected by the stockholders of the Corporation. In the event that at any time less than a majority of the directors shall have been elected by the stockholders, a meeting of the stockholders shall be held as promptly as possible and, in any event within sixty days, for the purpose of electing additional directors. Any directors elected or appointed to fill a vacancy shall hold office indefinitely and until a successor shall have been chosen and shall have qualified (unless elected for a definite term) or, if earlier, until the death, resignation, or removal, as hereinafter provided in these Bylaws, or as otherwise provided by statute or the Articles of Incorporation, of such director. Section 7. PLACE OF MEETINGS. Meetings of the Board may be held at such place as the Board may from time to time determine or as shall be specified in the notice of such a meeting. Section 8. MANNER OF ACTING. Any member of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at the meeting. This paragraph shall not be applicable to meetings held for the purpose of voting in respect of approval of (1) contracts or agreements whereby a person undertakes to serve or act as investment adviser for or principal underwriter for the Corporation or (2) a plan for the distribution of the Corporation's securities pursuant to Rule 12b-1 of the Investment Company Act of 1940. Section 9. REGULAR MEETINGS. Regular meetings of the Board may be held without notice at such time and place as may be determined by the Board of Directors. Section 10. SPECIAL MEETINGS. Special meetings of the Board may be called by two or more directors of the Corporation, by the Chairman of the Board, or by the President. Section 11. ANNUAL MEETING. The annual meeting of each newly elected Board of Directors may be held as soon as practicable after the meeting of stockholders at which the directors were elected. No notice of such annual meeting shall be necessary if held immediately after the adjournment, and at the site, of the meeting of stockholders and only if at least a majority of the Board of Directors were elected or re-elected at such meeting. If not so held, notice shall be given as hereinafter provided for special meetings of the Board of Directors. Section 12. NOTICE OF SPECIAL MEETINGS. Notice of each special meeting of the Board shall be given by the Secretary as hereinafter provided, which notice shall state the time and place of the meeting. Notice of each such meeting shall be delivered to each director, either personally or by telephone, cable, or wireless, at least twenty-four hours before the time at which such meeting is to be held, or by first-class mail, postage prepaid, addressed to him at his residence or usual place of business, at least three days before the day on which such meeting is to be held. Section 13. WAIVER OF NOTICE OF MEETING. Notice of any special meeting need not be given to any director who shall, either before or after the meeting, sign a written waiver of notice or who shall attend such meeting. Except as otherwise specifically required by these Bylaws, a notice or waiver of notice of any meeting need not state the purpose of such meeting. Section 14. QUORUM AND VOTING. One-third, but not less than two, of the members of the entire Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and, except as otherwise expressly required by the Articles of Incorporation, these Bylaws, the Investment Company Act of 1940, as amended, or other applicable statute, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board; provided, however, that the approval of any contract with an investment adviser or principal underwriter, as such terms are defined in the Investment Company Act of 1940, as amended, that the Corporation enters into or any renewal or amendment thereof, the approval of the fidelity bond required by the Investment Company Act of 1940, as amended, and the selection of the Corporation's independent public accountant shall each require the affirmative vote of a majority of the directors who are not parties to any such contract or "interested persons" of any such party, as defined in the Investment Company Act of 1940 and the Rules thereunder), so long as the Corporation is subject to such Act and such Act so requires. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting to another time and place until a quorum shall be present thereat. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors. Any such notice shall be given as provided for in Section 12 hereof. At any adjourned meeting which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 15. ORGANIZATION. The Board may, by resolution adopted by a majority of the entire Board, designate a Chairman of the Board, who shall preside at each meeting of the Board. In the absence or inability of the Chairman of the Board to preside at a meeting, the President, or, in his absence or inability to act, another director chosen by a majority of the directors present, shall act as chairman of the meeting and preside thereat. The Secretary (or, in his absence or inability to act, any person appointed by the chairman) shall act as secretary of the meeting and keep the minutes thereof. Section 16. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Except as otherwise required by the Investment Company Act of 1940, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or of the committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. Section 17. COMPENSATION. Directors may receive compensation for services to the Corporation in their capacities as director or otherwise in such manner and in such amount as may be fixed from time to time by the Board. Section 18. INVESTMENT POLICIES. It shall be the duty of the Board of Directors to ensure that the purchase, sale, retention and disposal of portfolio securities and the other investment practices of the Corporation are at all times consistent with the investment policies and restrictions with respect to securities investment and otherwise of the Corporation (or if the stock is issued in classes or series, the policies and restrictions applicable to such class or series) as recited in these Bylaws and the current Registration Statement of the Corporation filed from time to time with the Securities and Exchange Commission and as required by the Investment Company Act of 1940, as amended. The Board, however, may delegate the duty of management of the assets and the administration of its day-to-day operations to an individual or corporate management company and/or investment adviser pursuant to written contract or contracts which have obtained the requisite approval, including the requisite approval of renewals thereof, of the Board of Directors and/or the stockholders of the Corporation in accordance with the provisions of the Investment Company Act of 1940, as amended. ARTICLE IV COMMITTEES Section 1. EXECUTIVE COMMITTEE. The Board may, by resolution adopted by a majority of the entire Board, designate an Executive Committee consisting of two or more of the directors of the Corporation, which committee shall have and may exercise all the powers and authority of the Board with respect to all matters other than: (a) the submission to stockholders of any action requiring authorization of stockholders pursuant to regulation or statute or the Articles of Incorporation; (b) the filling of vacancies on the Board of Directors; (c) the fixing of compensation of the directors for serving on the Board or on any committee of the Board, including the Executive Committee; (d) the approval or termination of any contract with an investment adviser or principal underwriter, as such terms are defined in the Investment Company Act of 1940, as amended, or the taking of any other action required to be taken by the Board of Directors or a portion thereof by the Investment Company Act of 1940, as amended; (e) the amendment or repeal of these Bylaws or the adoption of new Bylaws; (f) the amendment or repeal of any resolution of the Board that by its terms may be amended or repealed only by the Board; and (9) the declaration of dividends and the issuance of capital stock of the Corporation. The Executive Committee shall keep written minutes of its proceedings and shall report such minutes to the Board. All such proceedings shall be subject to revision or alteration by the Board; provided, however, that third parties shall not be prejudiced by such revision or alteration. Section 2. OTHER COMMITTEES OF THE BOARD. The Board of Directors may from time to time, by resolution adopted by a majority of the whole Board, designate one or more other committees of the Board, each such committee to consist of such number of directors and to have such powers and duties as the Board of Directors may, by resolution, prescribe. Section 3. GENERAL. One-third, but not less than two, of the members of any committee shall be present in person at any meeting of such committee in order to constitute a quorum for the transaction of business at such meeting and the act of a majority present shall be the act of such committee. The Board may designate a chairman of any committee and such chairman or any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. The Board shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committee consisting wholly or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority or power of the Board in the management of the business or affairs of the Corporation. ARTICLE V OFFICERS, AGENTS, AND EMPLOYEES Section 1. NUMBER AND QUALIFICATIONS. Three officers of the Corporation shall be a President, who shall be a director of the Corporation, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors may elect or appoint one or more Vice Presidents and may also appoint such other officers, agents and employees as it may deem necessary or proper. Any two or more offices may be held by the same person, except the offices of President and Vice President, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. Such officers shall be elected annually by the Board of Directors for a one year term, each to hold office until his successor shall have been duly elected and shall have qualified or, if earlier, until the death, resignation, or removal of such officer, as hereinafter provided in these Bylaws or as otherwise provided by statute or the Article of Incorporation. The Board may from time to time elect, or delegate to the President the power to appoint, such officers (including one or more Assistant Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries) and such agents as may be necessary or desirable for the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board or by the appointing authority. Section 2. RESIGNATIONS. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board, the Chairman of the Board, the President, or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3. REMOVAL OF OFFICER, AGENT, OR EMPLOYEE. Any officer, agent, or employee of the Corporation may be removed by the Board of Directors with or without cause at any time, and the Board may delegate such power of removal as to agents and employees not elected or appointed by the Board of Directors. Such removal shall be without prejudice to such person's contract rights, if any, but the appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights. Section 4. VACANCIES. A vacancy in any office, whether arising from death, resignation, removal, or from any other cause, may be filled for the unexpired portion of the term of the office which shall be vacant, in the manner prescribed in these Bylaws for the regular election or appointment to such office. Section 5. COMPENSATION. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer in respect of other officers under his control. Section 6. BONDS OR OTHER SECURITY. If required by the Board, any officer, agent, or employee of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety or sureties as the Board may require. Section 7. PRESIDENT. The President shall be the chief executive officer of the Corporation. Only members of the Board of Directors are eligible to be President. In the absence of the Chairman of the Board (or if there be none), he shall preside at all meetings of the stockholders and of the Board of Directors. He shall have, subject to the control of the Board of Directors, general charge of the business and affairs of the Corporation. He may employ and discharge employees and agents of the Corporation, except such as shall be appointed by the Board, and he may delegate these powers. Section 8. VICE PRESIDENT. Each Vice President shall have such powers and perform such duties as the Board of Directors or the President may from time to time prescribe. Section 9. TREASURER. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation, except those that the Corporation has placed in the custody of a bank or trust company or member of a national securities exchange (as that term is defined in the Securities Exchange Act of 1934) pursuant to written agreement designating such bank or trust company or member of a national securities exchange as custodian of the property of the Corporation; (b) keep full and accurate account of receipts and disbursements in books belonging to the Corporation; (c) cause all moneys and other valuables to be deposited to the credit of the Corporation; (d) receive, and give receipts for, moneys due and payable to the Corporation from any source; (e) disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board, taking proper vouchers therefor; and (f) in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board or the President. Section 10. SECRETARY. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, of the committees of the Board, and of the stockholders; (b) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and, (e) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of the President. Section 11. DELEGATION OF DUTIES. In case of the absence of any officer of the Corporation, or for any other reason that the Board may seem sufficient, the Board may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any director. ARTICLE VI INDEMNIFICATION Section 1. RIGHT OF INDEMNIFICATION. Every person who is or was an officer, director, employee, or agent of the Corporation shall have a right to be indemnified by the Corporation to the fullest extent permitted by applicable law against all liability, judgments, fines, penalties, settlements and reasonable expenses incurred by him in connection with or resulting from any threatened or actual claim, action, suit or proceeding, whether criminal, civil, or administrative, in which he may become involved as a party or otherwise by reason of his being or having been a director, officer or employee, except as provided in Sections 2 and 3 of these Bylaws. Section 2. DISABLING CONDUCT. No such person shall be indemnified for any liabilities or expenses arising by means of "disabling conduct," whether or not there is an adjudication of liability. "Disabling conduct" means willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of office. Whether any such liability arose out of disabling conduct shall be determined: (a) by a final decision on the merits (including, but not limited to, a dismissal for insufficient evidence of any disabling conduct) by a court or other body before which the proceeding was brought that the person seeking indemnification ("indemnitee") was not liable by reason of such disabling conduct; or (b) in the absence of such a decision, by a reasonable determination, based upon the review of the facts, that such person was not liable by reason of disabling conduct, (i) by the vote of a majority of a quorum of directors who are neither "interested persons" of the Corporation (as defined in the Investment Company Act of 1940) nor parties to the action, suit or proceeding in question ("disinterested, non-party directors"), or (ii) by independent legal counsel in a written opinion if a quorum of disinterested, non-party directors so directs or if such quorum is not obtainable; or (iii) by a majority vote of the shareholders, or (iv) by any other reasonable and fair means not inconsistent with any of the above. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that any liability or expense arose by reason of disabling conduct. Section 3. DIRECTORS' STANDARDS OF CONDUCT. No person who is or was a director shall be indemnified under this Article VI for any liabilities or expenses incurred by reason of advice in that capacity if it is proved that (1) the act or omission of the person was material to the cause of action adjudicated in the proceeding, and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty; or (2) the person actually received an improper personal benefit in money, property, or services; or (3) in the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. Section 4. EXPENSES PRIOR TO DETERMINATION. Any liabilities or expenses of the type described in Section 1 may be paid by the Corporation in advance of the final disposition of the claim, action, suit or proceeding, as authorized by the directors in a specific case, (a) upon receipt of a written undertaking by or on behalf of the indemnitee to repay the advance, unless it shall be ultimately determined that such person is entitled to indemnification; and (b) provided that (i) the indemnitee shall provide security for that undertaking, or (ii) the Corporation shall be insured against losses arising by reason of any lawful advance, or (iii) a majority of a quorum of disinterested, non-party directors, or independent legal counsel in a written option, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe the indemnitee ultimately will be found entitled to indemnification. A determination pursuant to subparagraph (c)(iii) of this Section 4 shall not prevent the recovery from any indemnitee of any amount advanced to such person as indemnification if such person is subsequently determined not to be entitled to indemnification; nor shall a determination pursuant to said paragraph prevent the payment of indemnification if such person is subsequently found to be entitled to indemnification. Section 5. PROVISIONS NOT EXCLUSIVE. The indemnification provided by this Article VI shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under any law, agreement, vote of shareholders, or otherwise. Section 6. GENERAL. No indemnification provided by this Article shall be inconsistent with the Investment Company Act of 1940, the Securities Act of 1933 or the Maryland Corporations and Associations Code. Any indemnification provided by this Article shall continue as to a person who has ceased to be a director, officer, or employee, and shall inure to the benefit of the heirs, executors and administrators of such person. ARTICLE VII CAPITAL STOCK Section 1. STOCK CERTIFICATES. Each holder of stock of the Corporation shall be entitled upon request to have a certificate or certificates, in such form as shall be approved by the Board, representing the number of shares of stock of the Corporation owned by him; provided, however, that certificates for fractional shares will not be delivered in any case. The certificates representing shares of stock shall be signed by or in the name of the Corporation by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation. Any or all of the signatures or the seal on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate shall be issued, it may be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still in office at the date of issue. Section 2. BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. There shall be kept at the principal executive office of the Corporation correct and complete books and records of account of all the business and transactions of the Corporation. There shall be made available upon request of any stockholder, in accordance with Maryland law, a record containing the number of shares of stock issued during a specified period not more than twelve months before the date of the request and the consideration received by the Corporation for each such share. Section 3. TRANSFERS OF SHARES. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and on the payment of all taxes thereon. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purpose including, without limitation, the right to receive dividends or other distributions and to vote as such owner and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person. Section 4. RULES AND REGULATIONS. The Board may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. Section 5. LOST, DESTROYED, OR MUTILATED CERTIFICATES. Upon notification by the holder of any certificate representing shares of stock of the Corporation of any loss, destruction, or mutilation of such certificate, the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it that the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the Board may, in its discretion, require such owner or his legal representative to give to the Corporation bond in such sum as the Board may determine to be sufficient, and in such form and with such surety or sureties, as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or issuance of a new certificate. Anything herein to the contrary notwithstanding, the Board, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of Maryland. Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The Board may fix, in advance, a date not more than sixty days preceding the date fixed for the payment of any dividend or the making of any distribution or the allotment of rights to subscribe for securities of the Corporation, or for the delivery of evidence of rights or evidences of interests arising out of any change, conversion, or exchange of common stock or other securities, as the record date for the determination of the stockholders entitled to receive any such dividend, distribution, allotment, rights, or interests, and in such case only the stockholders on record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights, or interests. Section 7. REGISTERED OWNER OF SHARES. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. Section 8. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder of the Corporation or his agent may inspect and copy during usual business hours the Corporation's Bylaws, minutes of the proceedings of its stockholders, annual statements of its affairs, and voting trust agreements on file at its principal office. Section 9. INVOLUNTARY REDEMPTION OF SHARES. Subject to policies established by the Board of Directors, the Corporation shall have the right to involuntarily redeem shares of its common stock if at any time the value of a stockholder's investment in the Corporation is less than $500. ARTICLE VIII SEAL The seal of the Corporation shall be circular in form and shall bear, in addition to any other emblem or device approved by the Board of Directors, the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Maryland." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE IX FISCAL YEAR Unless otherwise determined by the Board, the fiscal year of the Corporation shall end on the 31st day of December each year. ARTICLE X DEPOSITORIES AND CUSTODIANS Section 1. DEPOSITORIES. The funds of the Corporation shall be deposited with such banks or other depositories as the Board of Directors of the Corporation may from time to time determine. Section 2. CUSTODIANS. All securities and other investments shall be deposited in the safekeeping of such banks or other companies as the Board of Directors of the Corporation may from time to time determine. Every arrangement entered into with any bank or other company for the safekeeping of the securities and investments of the Corporation shall contain provisions complying with the Investment Company Act of 1940, as amended, and the general rules and regulations thereunder. ARTICLE XI EXECUTION OF INSTRUMENTS Section 1. CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts, acceptances, bills of exchange, and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors by resolution shall from time to time designate. Section 2. SALE OR TRANSFER OF SECURITIES. Stock certificates, bonds, or other securities at any time owned by the Corporation may be held on behalf of the Corporation or sold, transferred, or otherwise disposed of pursuant to authorization by the Board and, when so authorized to be held on behalf of the Corporation or sold, transferred or otherwise disposed of, may be transferred from the name of the Corporation by the signature of the President, a Vice President, the Treasurer, the Assistant Treasurer, the Secretary, or the Assistant Secretary. Section 3. LOANS. No loan or advance shall be contracted on behalf of the Corporation, and no note, bond or other evidence of indebtedness shall be executed or delivered in its name, except as may be authorized by the Board of Directors. Any such authorization may be general or limited to specific loans or advances, or notes, bonds or other evidences of indebtedness. Any officer or agent of the Corporation so authorized may effect loans and advances on behalf of the Corporation and in return for any such loans or advances may execute and deliver notes, bonds or other evidences of indebtedness of the Corporation. Section 4. VOTING AS SECURITYHOLDER. The President and such other person or persons as the Board of Directors may from time to time authorize, shall each have full power and authority on behalf of the Corporation, to attend any meeting of securityholders of any corporation in which the Corporation may hold securities, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such securities, and to execute any instrument expressing consent to or dissent from any action of any such corporation without a meeting, subject to such restrictions or limitations as the Board of Directors may from time to time impose. Section 5. EXPENSES. Each class of shares of the Corporation shall be charged with all the expenses, costs, charges, reserves or other liabilities directly attributable to that class and with that proportion of the other expenses of the Corporation, including general administrative expenses and fees of the investment advisor, accountants and attorneys, which the total net assets of each class of shares bears to the total net assets of all classes of shares. The foregoing charges when determined in the manner prescribed by the Board of Directors shall be conclusive and binding for all purposes. ARTICLE XII INDEPENDENT PUBLIC ACCOUNTS (DELETED) ARTICLE XIII ANNUAL STATEMENT The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual period of the Corporation and at such other times as may be directed by the Board. (The firm of independent public accountants that shall sign or certify the financial statements of the Corporation that are filed with the Securities and Exchange Commission shall be selected annually by the Board of Directors in accordance with the provisions of the Investment Company Act of 1940, as amended.) A report to the stockholders based upon each such examination shall be mailed to each stockholder of the Corporation of record on such date with respect to each report as may be determined by the Board, at his address as the same appears on the books of the Corporation. Such annual statement shall also be available at the annual meeting of stockholders and be placed on file at the Corporation's principal office in the State of Maryland. Each such report shall show the assets and liabilities of the Corporation as of the close of the annual or quarterly period covered by the report and the securities in which the funds of the Corporation were then invested. Such report shall also show the Corporation's income and expenses for the period from the end of the Corporation's preceding fiscal year to the close of the annual or quarterly period covered by the report and any other information required by the Investment Company Act of 1940, as amended, and shall set forth such other matters as the Board or such firm of independent public accountants shall determine. ARTICLE XIV AMENDMENTS These Bylaws or any of them may be amended, altered, or repealed at any meeting of the stockholders at which a quorum is present or represented, provided that notice of the proposed amendment, alteration, or repeal be contained in the notice of such meeting. These Bylaws, or any of them, may also be amended, altered, or repealed by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board of Directors. A certified copy of these Bylaws, as they may be amended from time to time, shall be kept at the principal office of the Corporation. AMENDMENT TO THE BY-LAWS OF CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. Article II, Section 7 of the By-Laws is amended by adding the following provision to the second paragraph: "A proxy with respect to shares held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. The placing of a stockholder's name on a proxy pursuant to telephonic or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such stockholder." Authorized by vote of the Board of Directors on January 29, 1996 EX-5.2 6 EXHIBIT 5.2 EXHIBIT 5.2 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made as of the ____ day of _________, 1996, by and between Connecticut Mutual Investment Accounts, Inc. on behalf of Connecticut Mutual Total Return Account (the "Fund") and OppenheimerFunds, Inc. ("OFI"). WHEREAS, the Fund is a series of Connecticut Mutual Investment Accounts, Inc. (the "Company"), 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 OFI is a registered investment adviser; 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 OFI and OFI hereby undertakes to act as the investment adviser of the Fund and to perform for the Fund such other duties and functions as are hereinafter set forth. OFI shall, in all matters, give to the Fund and its Board of Directors the benefit of its best judgment, effort, advice and recommendations and shall, at all times conform to, and use its best efforts to enable the Fund to conform to (i) the provisions of the Investment Company Act and any rules or regulations thereunder; (ii) any other applicable provisions of state or federal law; (iii) the provisions of the Company's Articles of Incorporation and By-Laws as amended from time to time; (iv) policies and determinations of the Board of Directors of the Company; (v) the fundamental policies and investment restrictions of the Fund as reflected 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 OFI shall be available upon reasonable notice for consultation with any of the Directors and officers of the Company with respect to any matters dealing with the business and affairs of the Fund including the valuation of any of the Fund's portfolio securities which are either not registered for public sale or not being traded on any securities market. 2. INVESTMENT MANAGEMENT. (a) OFI shall, subject to the direction and control by the Company's Board of Directors, (i) regularly provide, alone or in consultation with any subadvisor or subadvisors appointed pursuant to this Agreement and subject to the provisions of any investment subadvisory agreement respecting the responsibilities of such subadvisor or subadvisors, investment advice and recommendations to the Fund with respect to its investments, investment policies and the purchase and sale of securities; (ii) supervise continuously the investment program of the Fund and the composition of its portfolio and determine what securities shall be purchased or sold by the Fund; and (iii) arrange, subject to the provisions of paragraph "7" hereof, for the purchase of securities and other investments for the Fund and the sale of securities and other investments held in the portfolio of the Fund. (b) Provided that the 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, OFI may obtain investment information, research or assistance from any other person, firm or corporation to supplement, update or otherwise improve its investment management services. (c) Provided that nothing herein shall be deemed to protect OFI from willful misfeasance, bad faith or gross negligence in the performance of its duties, or reckless disregard of its obligations and duties under the Agreement, OFI 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 OFI or any officer thereof from acting as investment adviser for any other person, firm or corporation and shall not in any way limit or restrict OFI or any of its directors, officers or employees from buying, selling or trading any securities for its own account or for the account of others for whom it or they may be acting, provided that such activities will not adversely affect or otherwise impair the performance by OFI of its duties and obligations under this Agreement and under the Investment Advisers Act of 1940. 3. OTHER DUTIES OF OFI. OFI shall, at its own expense, employ, and supervise the activities of, all administrative and clerical personnel or other firms, agents or contractors, 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 (other than those the Fund's custodian or transfer agent is contractually obligated to compile and maintain); the preparation and filing of such reports with respect thereto as shall be required by the Commission; composition of periodic reports with respect to its operations for the shareholders of the Fund; composition of proxy materials for meetings of the Fund's shareholders and the composition of such registration statements as may be required by federal securities laws for continuous public sale of shares of the Fund. OFI shall, at its own cost and expense, also provide the Fund with adequate office space, facilities and equipment. 4. ALLOCATION OF EXPENSES. All other costs and expenses not expressly assumed by OFI under this Agreement, or to be paid by the principal 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) premiums for fidelity and other insurance coverage requisite to its operations; (iv) the fees and expenses of its Directors; (v) legal and audit expenses; (vi) custodian and transfer agent fees and expenses; (vii) expenses incident to the redemption of its shares; (viii) expenses incident to the issuance of its shares against payment therefor by or on behalf of the subscribers thereto; (ix) fees and expenses, other than as hereinabove provided, incident to the registration under federal securities laws of shares of the Fund for public sale; (x) expenses of printing and mailing reports, notices and proxy materials to shareholders of the Fund; (xi) except as noted above, all other expenses incidental to holding meetings of the Fund's shareholders; and (xii) such extraordinary non-recurring expenses as may arise, including litigation, affecting the Fund and any obligation which the Fund may have to indemnify its officers and Directors with respect thereto. Any officers or employees of OFI or any entity controlling, controlled by or under common control with OFI, who may also serve as officers, Directors or employees of the Fund shall not receive any compensation from the Fund for their services. 5. COMPENSATION OF OFI. The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets value of the Fund as of the close of each business day and payable monthly at the annual rates set for the in Appendix A. 6. USE OF NAME "OPPENHEIMER." OFI 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 OFI's rights to the name "Oppenheimer" under applicable law, such license shall allow OFI to inspect, and subject to control by the Fund's Board of Directors, control the name and quality of services offered by the Fund under such name. Such license may, upon termination of this Agreement, be terminated by OFI, in which event the 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 OFI in connection with any of its activities, or licensed by OFI to any other party. 7. PORTFOLIO TRANSACTIONS AND BROKERAGE. (a) OFI is authorized, in arranging the Fund's portfolio transactions, to employ or deal with such members of securities or commodities exchanges, brokers or dealers including "affiliated" broker dealers (as that term is defined in the Investment Company Act) (hereinafter "broker-dealers"), 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 may be of significant assistance to the performance by OFI of its investment management functions. (b) OFI shall select broker-dealers to effect the Fund's portfolio transactions on the basis of its estimate of their ability to obtain best execution of particular and related portfolio transactions. The abilities of a broker-dealer to obtain best execution of particular portfolio transaction(s) will be judged by OFI on the basis of all relevant factors and considerations including, insofar as feasible, the execution capabilities required by the transaction or transactions; the ability and willingness of the broker-dealer to facilitate the Fund's portfolio transactions by participating therein for its own account; the importance to the Fund of speed, efficiency or confidentiality; the broker-dealer's apparent familiarity with sources from or to whom particular securities might be purchased or sold; as well as any other matters relevant to the selection of a broker-dealer for particular and related transactions of the Fund. (c) OFI shall have discretion, in the interests of the Fund, to allocate brokerage on the Funds portfolio transactions to broker-dealers (other than affiliated broker-dealers) qualified to obtain best execution of such transactions who provide brokerage and/or research services (as such services are defined in Section 28(e)(3) of the Securities Exchange Act of 1934) for the Fund and/or other accounts for which OFI and 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 OFI determines, in good faith, that such commission is reasonable in relation to the value of the brokerage and/or research services provided by such broker-dealer, viewed in terms of either that particular transaction or the overall responsibilities of OFI and its investment advisory affiliates with respect to the accounts as to which they exercise investment discretion. In reaching such determination, OFI will not be required to place or attempt to place a specific dollar value on the brokerage and/or research services provided or being provided by such broker-dealer. In demonstrating that such determinations were made in good faith, OFI shall be prepared to show that all commissions were allocated for the purposes contemplated by this Agreement and that the total commissions paid by the Fund over a representative period selected by the Fund's Directors were reasonable in relation to the benefits to the Fund. (d) OFI shall have no duty or obligation to seek advance competitive bidding for the most favorable commission rate applicable to any particular portfolio transactions or to select any broker-dealer on the basis of its purported or "posted" commission rate but will, to the best of its ability, endeavor to be aware of the current level of the charges of eligible broker-dealers and to minimize the expense incurred by the Fund for effecting its portfolio transactions to the extent consistent with the interests and policies of the Fund as established by the determinations of the Board of Directors 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 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," OFI may also consider sales of Fund shares and shares of the other investment companies managed by OFI or its affiliates as a factor in the selection of broker-dealers for the Fund's portfolio transactions. 8. DURATION. This Agreement will take effect on the date first set forth above and will continue in effect until December 31, 1997, and thereafter, from year to year, so long as such continuance shall be approved at least annually in the manner contemplated by Section 15 of the Investment Company Act. 9. TERMINATION. This Agreement may be terminated (i) by OFI at any time without penalty upon giving the Fund sixty days' written notice (which notice may be waived by the Fund); or (ii) by the Fund at any time without penalty upon sixty days' written notice to OFI (which notice may be waived by OFI) provided that such termination by the Fund shall be directed or approved by the vote of a majority of all of the Directors of the Fund then in office or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding voting securities of the Fund. 10. ASSIGNMENT OR AMENDMENT. This Agreement may not be amended without the affirmative vote or written consent of the holders of the "majority" of the outstanding voting securities of the Fund and shall automatically and immediately terminate in the event of its "assignment," as defined in the Investment Company Act. 11. DISCLAIMER OF SHAREHOLDER LIABILITY. OFI understands that the obligations of the Fund under this Agreement are not binding upon any Director or shareholder of the Fund personally, but bind only the Fund and the Fund's property. OFI represents that it has notice of the provisions of the Company's Articles of Incorporation disclaiming shareholder liability for acts or obligations of the Fund. 12. DEFINITIONS. The terms and provisions of this Agreement shall be interpreted and defined in a manner consistent with the provisions and definitions of the Investment Company Act. CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. on behalf of Connecticut Mutual Total Return Account By: -------------------------------- OppenheimerFunds, Inc. By: -------------------------------- APPENDIX A The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $300,000,000 0.625% Next $100,000,000 0.500% Amount over $400,000,000 0.450% SCHEDULE OF OMITTED INVESTMENT ADVISORY AGREEMENTS Due to the substantial similarity of the investment agreements among OppenheimerFunds, Inc. ("OFI") and the Registrant, on behalf of the respective series of the Registrant, the following form of investment advisory agreement on behalf of Connecticut Mutual Total Return Account and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Investment Advisory Agreement among OFI and the Registrant, on behalf of Connecticut Mutual Liquid Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $200,000,000 0.50% Next $100,000,000 0.45% Amount over $300,000,000 0.40% 2. Investment Advisory Agreement among OFI and the Registrant, on behalf of Connecticut Mutual Income Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $300,000,000 0.625% Next $100,000,000 0.500% Amount over $400,000,000 0.450% 3. Investment Advisory Agreement among OFI and the Registrant, on behalf of Connecticut Mutual Government Securities Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $300,000,000 0.625% Next $100,000,000 0.500% Amount over $400,000,000 0.450% 4. Investment Advisory Agreement among OFI and the Registrant, on behalf of Connecticut Mutual Growth Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $300,000,000 0.625% Next $100,000,000 0.500% Amount over $400,000,000 0.450% 5. Investment Advisory Agreement among OFI and the Registrant, on behalf of CMIA LifeSpan Balanced Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $250,000,000 0.85% Amount over $250,000,000 0.75% -2- 6. Investment Advisory Agreement among OFI and the Registrant, on behalf of CMIA LifeSpan Capital Appreciation Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $250,000,000 0.85% Amount over $250,000,000 0.75% 7. Investment Advisory Agreement among OFI and the Registrant, on behalf of CMIA LifeSpan Diversified Income Account. Advisory Fee (Appendix A): The Fund agrees to pay OFI and OFI agrees to accept as full compensation for the performance of all functions and duties on its part to be performed pursuant to the provisions hereof, a fee computed on the aggregate net assets of the Fund as of the close of each business day payable monthly at the following annual rates: Net Asset Value Annual Rate --------------- ----------- First $250,000,000 0.75% Amount over $250,000,000 0.65% -3- EX-5.3 7 EXHIBIT 5.3 Exhibit 5.3 CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. FORM OF INVESTMENT ADVISORY AGREEMENT FOR SUBADVISER AGREEMENT made as of the ____ day of _______________, 1996, by and among OppenheimerFunds, Inc. (the "Investment Adviser") and Pilgrim Baxter & Associates, Ltd. (the "Subadviser"). Connecticut Mutual Investment Accounts, Inc., a Maryland corporation (the "Company"), is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The CMIA LifeSpan Balanced Account (the "Account") is a series of the Company. The Investment Adviser and the Subadviser are investment advisers registered under the Investment Advisers Act of 1940 (the "Advisers Act"). Pursuant to authority granted the Investment Adviser by the Company's Board of Directors and pursuant to the provisions of the Investment Advisory Agreement between the Investment Adviser and Company, on behalf of the Account, the Investment Adviser has selected the Subadviser to act as an investment subadviser of the Account and to provide certain other services, as more fully set forth below, and the Subadviser is willing to act as such sub-investment adviser and to perform such services under the terms and conditions hereinafter set forth. Accordingly, the Investment Adviser and the Subadviser agree as follows: 1. The Subadviser will regularly provide the Account with advice concerning the investment management of the Small Capitalization U.S. equity portfolio of the Account (the "Sub-Account"), designated by the Investment Adviser. Such advice shall be consistent with the investment objectives and policies of the Account as set forth in the Account's Prospectus and Statement of Additional Information, and any investment guidelines or other instructions received in writing from the Investment Adviser. The Subadviser will determine what securities shall be purchased for the Sub-Account, and what securities shall be held or sold by the Sub-Account, subject always to the provisions of Section 9 hereof. The Investment Adviser shall oversee the management of the Sub-Account by the Subadviser. The Investment Adviser shall manage directly, or by engaging other subadvisers, and the Subadviser shall not be responsible for the management of, any portion of the Account not designated as part of the Sub-Account. The Subadviser shall not be responsible for the provision of administrative, bookkeeping or accounting services to the Account, except as otherwise provided herein, as required by the Advisers Act as may be necessary for the Subadviser to supply to the Investment Adviser, the Company or the Company's Board of Directors the information required to be supplied under this Agreement. Any records required to be maintained shall be the property of the Company and shall be surrendered promptly to the Company upon request. In the performance of the Subadviser's duties hereunder, the Subadviser is and shall be an independent contractor and unless otherwise expressly provided herein or otherwise authorized in writing, shall have no authority to act for or represent the Company, the Account or the Investment Adviser in any way or otherwise be deemed to be an agent of the Company, the Account or the Investment Adviser. The Subadviser will make its officers and employees available to meet with the Company's officers and Board of Directors at least quarterly on due notice to review the investments and investment program of the Account in the light of current and prospective economic and market conditions. 2. The Subadviser will bear its own costs of providing services hereunder. Other than as herein specifically indicated, the Subadviser shall not be responsible for the Account's expenses, including brokerage and other expenses incurred in placing orders for the purchase and sale of securities. Specifically, the Subadviser will not be responsible for expenses of the Account including, but not limited to, the following: legal expenses; auditing and accounting expenses; expenses of maintenance of the Account's books and records relating to the Account, including computation of the Account's daily net asset value per share and dividends; interest, taxes, governmental fees and membership dues; fees of custodians, transfer agents, registrars or other agents; expenses of preparing share certificates; expenses relating to the redemption or repurchase of the Account's shares; expenses of registering and qualifying Account shares for sale under applicable federal and state law; expenses of preparing, setting in print, printing and distributing prospectuses, reports, notices and dividends to Account shareholders; cost of stationery; costs of shareholders and other meetings of the Account; traveling expenses of officers, Directors and employees of the Company or Account, if any; fees of the Company's Directors and salaries of any officers or employees of the Company or Account; and the Account's pro rata portion of premiums on any fidelity bond and other insurance covering the Company, the Account and their officers and Directors. The Account shall reimburse the Subadviser for any such expenses or other expenses of the Account, as may be reasonably incurred by such Subadviser on the Account's behalf. The Subadviser shall keep and supply to the Account and the Investment Adviser adequate records of all such expenses. 3. For all investment management services to be rendered hereunder, the Investment Adviser will pay the Subadviser an annual fee, payable quarterly, as described in Schedule A hereto. For any period less than a full fiscal quarter during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full fiscal quarter. The Account shall have no responsibility for any fee payable to the Subadviser. In the event that the advisory fee payable by the Account to the Investment Adviser shall be reduced as required by the securities laws or regulations of any jurisdiction in which the Account's shares are offered for sale, the amount payable by the Investment Adviser to the Subadviser shall be likewise reduced by a proportionate amount. 4. In connection with purchases or sales of securities for the Account, neither the Subadviser nor any of its partners, directors, officers or employees will act as a principal or agent or receive directly or indirectly any compensation in connection with the purchase or sale of investment securities by the Sub-Account, other than as provided in this Agreement. The Subadviser, or its agent, shall arrange for the placing of all orders for the purchase and sale of securities for the Sub-Account with brokers or dealers selected by the Subadviser, provided that the Subadviser shall not be responsible for payment of brokerage commissions. In the selection of such brokers or dealers and the placing of such orders, the Subadviser is directed at all times to seek for the Account the best execution available. Neither the Subadviser nor any affiliate of the Subadviser will act as principal or receive directly or indirectly any compensation in connection with the purchase or sale of investment securities by the Account, other than compensation provided for in this Agreement or in the Investment Advisory Agreement of the Account and such brokerage commissions as are permitted by the 1940 Act. If and to the extent authorized to act as broker in the relevant jurisdiction, the Subadviser or any of its affiliates may act as broker for the Account in the purchase and sale of securities. The Subadviser agrees that all transactions effected through the Subadviser or brokers affiliated with the Subadviser shall be effected in compliance with Section 17(e) of the 1940 Act and written procedures established from time to time by the Board of Directors of the Company pursuant to Rule 17e-1 under the 1940 Act, as amended, copies of which shall be provided to the Subadviser by the Investment Adviser. 5. It is also understood that it is desirable for the Account that the Subadviser have access to supplemental investment and market research and security and economic analyses provided by certain brokers who may execute brokerage transactions at higher commissions to the Account than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Subadviser is authorized to place orders for the purchase and sale of securities for the Account with such certain brokers, subject to review by the Company's Board of Directors from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Subadviser in connection with its services to other clients. If any occasion should arise in which the Subadviser gives any advice to its clients concerning the shares of the Account, the Subadviser will act solely as investment counsel for such clients and not in any way on behalf of the Account. The Subadviser's services to the Account pursuant to this Agreement are not to be deemed to be exclusive and it is understood that the Subadviser may render investment advice, management and other services to others. Provided the investment objectives of the Account are adhered to, and such aggregation is in the best interests of the Account, the Subadviser may aggregate sales and purchase orders of securities held for the Account with similar orders being made simultaneously for other accounts managed by the Subadviser, if in the Subadviser's reasonable judgment, such aggregation is equitable and consistent with the Subadviser's fiduciary obligation to the Account and shall result in an overall economic benefit to the Account, taking into consideration the advantageous selling or purchase price, brokerage commission and other expenses. In accounting for such aggregated order price, commission and other expenses shall be averaged on a per bond or share basis daily. The Subadviser will advise the Account's custodian and the Investment Adviser on a prompt basis of each purchase and sale of a portfolio security, specifying the name of the issuer, the description and amount or number of shares of the security purchased, the market price, commission and gross or net price, trade date, settlement date and identity of the effecting broker or dealer, and such other information as may be reasonably required. From time to time as the Board of Directors of the Company or the Investment Adviser may reasonably request, the Subadviser will furnish to the Company's officers and to each of its Directors, at the Subadviser's expense, reports on portfolio transactions and reports on issues of securities held in the portfolio, all in such detail as the Account or the Investment Adviser may reasonably request. 6. In the absence of willful misfeasance, bad faith, negligence, or reckless disregard of the performance of the duties of the Subadviser to the Account, the Subadviser shall not be subject to liabilities to the Account, the Investment Adviser, the Company, or to any shareholder of the Account for any error of judgment or mistake of law or for any other action or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise. Notwithstanding the above, the Subadviser will indemnify and hold harmless the Investment Adviser from, against, for and in respect to losses, damages, costs and expenses incurred by the Investment Adviser, including attorneys' fees reasonably incurred, in the event of the Subadviser's willful misfeasance, bad faith or negligence in the performance of its duties or obligations hereunder or by reason of its reckless disregard of such duties or obligations; provided, however, that the Investment Adviser shall not be so indemnified for such losses, damages, costs and expenses, including such attorneys' fees, to the extent they result from the Investment Adviser's willful misfeasance, bad faith or negligence. The Investment Adviser shall indemnify and hold harmless the Subadviser to the same extent and subject to the same limitations as the Subadviser shall indemnify the Investment Adviser pursuant to the previous sentence. 7. This Agreement shall remain in force until December 31, 1997, and from year to year thereafter, but only so long as such continuance, and the continuance of the Investment Adviser as investment adviser of the Account, is specifically approved at least annually by the vote of a majority of the Directors of the Company who are not interested persons of the Subadviser, the Investment Adviser or the Account, cast in person at a meeting called for the purpose of voting on such approval and by a vote of the Board of Directors or of a majority of the outstanding voting securities of the Account. The aforesaid requirement that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the 1940 Act and the rules, regulations and interpretations thereunder. This Agreement may be terminated at any time without the payment of any penalty, (a) by the Company, by the Board of Directors, or by vote of a majority of the outstanding voting securities of the Account, upon 60 days' written notice to the Investment Adviser and Subadviser, (b) by the Investment Adviser, upon 60 days' written notice to the Account and the Subadviser, or (c) by the Subadviser, upon 90 days' written notice to the Account and Investment Adviser. This Agreement shall automatically terminate in the event of its assignment. In interpreting the provisions of this Agreement, the definitions contained in Section 2(a) of the 1940 Act (particularly the definitions of "interested person," "assignment" and "majority of the outstanding voting securities"), as from time to time amended, shall be applied, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. 8. No provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Account and by the Board of Directors, including a majority of the Directors who are not interested persons of the Investment Adviser, the Subadviser or the Account, cast in person at a meeting called for the purpose of voting on such approval. It shall be the responsibility of the Subadviser to furnish to the Board of Directors of the Company such information as may reasonably be necessary in order for such Directors to evaluate this Agreement or any proposed amendments thereto for the purposes of casting a vote pursuant to paragraphs 7 or 8 hereof. 9. The Subadviser will conform its conduct in accordance with and will ensure that the Sub-Account conforms with the Company's Articles of Incorporation and By-laws, each as amended from time to time, and the 1940 Act, as amended, other applicable laws, and to the investment objectives, policies and restrictions of the Account as each of the same shall be from time to time in effect as set forth in the Account's Prospectus and Statement of Additional Information, or any investment guidelines or other instructions received in writing from the Investment Adviser, and subject, further, to such policies and instructions as the Board of Directors or the Investment Adviser may from time to time establish and deliver to the Subadviser. In addition, the Subadviser, taking into account only income and gains realized with respect to the Sub-Account, will cause the Sub-Account to comply with the requirements of: (a) Section 851(b)(2) of the Internal Revenue Code (the "Code") regarding derivation of income from specified investment activities; (b) Section 851(b)(3) of the Code limiting gains from the disposition of securities and certain other investments held less than three months, in each case as if the Sub-Account were a "regulated investment company" as defined in Section 851(a) of the Code; and the regulations pertaining thereto. The Subadviser shall not without the prior express written consent of the Investment Adviser: (a) invest Sub-Account assets having a value exceeding five percent of the Account's total (gross) assets in securities of one issuer; or (b) cause the Sub-Account to acquire more than ten percent of the outstanding voting securities of any one issuer; or (c) invest Sub-Account assets in investments that are not cash, cash items (including receivables), Government securities, securities of other regulated investment companies, or other securities within the meaning of Section 851(b)(4) of the Code. For purposes of clauses (a) and (b) of the foregoing sentence the term "securities" shall exclude "Government securities" and "securities of other regulated investment companies" as each such term is used in Section 851(b)(4) of the Code. 10. The Subadviser represents that it has reviewed the Registration Statement of the Company as filed with the Securities and Exchange Commission and represents and warrants that with respect to disclosure about the Subadviser or information relating directly or indirectly to the Subadviser, such Registration Statement contains, as of the date hereof, no untrue statement of any material fact and does not omit any statement of material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. The Subadviser further represents and warrants that it is an investment adviser registered under the Advisers Act. 11. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 12. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 13. Any notice given to the Subadviser by the Investment Adviser pursuant to the terms of this Agreement shall be deemed to have been given if provided in writing (including by telecopy or similar hard copy reproduction) and delivered or mailed, postpaid, to: Pilgrim Baxter & Associates, Ltd., 1255 Drummers Lane, Suite 300, Wayne, PS 29087-1549, Attn: Mr. Brian Bereznak. Any notice given to the Investment Adviser by the Subadviser, pursuant to the terms of this Agreement shall be deemed to have been given if provided in writing (including by telecopy or similar hard copy reproduction) and delivered to OppenheimerFunds, Inc., Two World Trade Center, New York, NY 10048, attention: General Counsel. 14. It is understood and expressly stipulated that the Subadviser must look solely to the property of the Account for the enforcement of any claims against the Account and shall not look to or have recourse to the assets of the Company generally or any other series of the Company. 15. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above, and effective as of _________________, 1996. OppenheimerFunds, Inc. By: ________________________________ Its: ________________________________ PILGRIM BAXTER & ASSOCIATES, LTD. By: ________________________________ Its: ________________________________ SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENT Due to the substantial similarity of the investment subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and Pilgrim, Baxter & Associates, Ltd. ("Pilgrim") for the respective series of the Registrant, the following form of investment subadvisory agreement for CMIA LifeSpan Balanced Account and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Investment Subadvisory Agreement among OFI and Pilgrim for CMIA LifeSpan Capital Appreciation Account. EX-5.4 8 EXHIBIT 5.4 Exhibit 5.4 CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. FORM OF SUBADVISORY AGREEMENT AGREEMENT made as of the _____ day of _______________, 1996 by and among OppenheimerFunds, Inc., a Colorado corporation, (the "Investment Adviser"), and BEA Associates, a New York General Partnership (the "Subadviser"). Connecticut Mutual Investment Accounts, Inc., a Maryland corporation (the "Company"), is an open-end, management investment company, registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The CMIA LifeSpan Balanced Account (the "Account") is a series of the Company. The Investment Adviser and the Subadviser are investment advisers registered under the Investment Advisers Act of 1940 (the "Advisers Act"). Pursuant to authority granted the investment Adviser by the Company's Board of Directors and pursuant to the provisions of the Investment Advisory Agreement dated ______________, 1996, between the Investment Adviser and Company, on behalf of the Account, the Investment Adviser has selected the Subadviser to act as an investment subadviser of the Account and to provide certain other services, as more fully set forth below, and the Subadviser is willing to act as such investment subadviser and to perform such services under the terms and conditions hereinafter set forth. Accordingly, the Investment Adviser and the Company, on behalf of the Account agree with the Subadviser as follows: 1. The Subadviser will regularly provide the Account with advice concerning the investment management of the High Yield Fixed Income portion of the Account (the "Sub-Account"), designated by the Investment Adviser. Such advice shall be consistent with the investment objectives and policies of the Account as set forth in the Account's Prospectus and Statement of Additional Information, and any investment guidelines or other instructions received in writing from the Investment Adviser. The Subadviser will determine what securities shall be purchased for the Sub-Account, and what securities shall be held or sold by the Sub-Account, subject always to the provisions of Section 9 hereof. The Investment Adviser shall oversee the management of the Sub-Account by the Subadviser. The Investment Adviser shall manage directly, or by engaging other subadvisers, and the Subadviser shall not be responsible for the management of, any portion of the Account not designated as part of the Sub-Account. The Subadviser shall not be responsible for the provision of administrative, bookkeeping or accounting services to the Account, except as otherwise provided herein, as required by the Advisers Act as may be necessary for the Subadviser to supply to the Investment Adviser, the Company or the Company's Board of Directors the information required to be supplied under this Agreement. Any records required to be maintained shall be the property of the Company and shall be surrendered promptly to the Company upon request. In the performance of the Subadviser's duties hereunder, the Subadviser is and shall be an independent contractor and unless otherwise expressly provided herein or otherwise authorized in writing, shall have no authority to act for or represent the Company, Account or the Investment Adviser in any way or otherwise be deemed to be an agent of the Company, Account or the Investment Adviser. The Subadviser will make its officers and employees available to meet with the Company's officers and Board of Directors at least quarterly on due notice to review the investments and investment program of the Sub-Account in the light of current and prospective economic and market conditions. 2. The Subadviser will bear its own costs of providing services hereunder. Other than as herein specifically indicated, the Subadviser shall not be responsible for the Account's expenses, including brokerage and other expenses incurred in placing orders for the purchase and sale of securities. Specifically, the Subadviser will not be responsible for expenses of the Account including, but not limited to, the following: legal expenses; auditing and accounting expenses; expenses of maintenance of the Account's books and records relating to the Account, including computation of the Account's daily net asset value per share and dividends; interest, taxes, governmental fees and membership dues; fees of custodians, transfer agents, registrars or other agents; expenses of preparing share certificates; expenses relating to the redemption or repurchase of the Account's shares; expenses of registering and qualifying Account shares for sale under applicable federal and state law; expenses of preparing, setting in print, printing and distributing prospectuses, reports, notices and dividends to Account shareholders; cost of stationery; costs of shareholders and other meetings of the Account; traveling expenses of officers, Directors and employees of the Company or Account, if any; fees of the Company's Directors and salaries of any officers or employees of the Company or Account; and the Account's pro rata portion of premiums on any fidelity bond and other insurance covering the Company, the Account and their officers and Directors. The Account shall reimburse the Subadviser for any such expenses or other expenses of the Account, as may be reasonably incurred by such Subadviser on the Account's behalf. The Subadviser shall keep and supply to the Account and the Investment Adviser adequate records of all such expenses. 3. For all investment management services to be rendered hereunder, the Investment Adviser will pay the Subadviser an annual fee, payable quarterly, as described in SCHEDULE A hereto. For any period less than a full fiscal quarter during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full fiscal quarter. The Account shall have no responsibility for any fee payable to the Subadviser. In the event that the advisory fee payable by the Account to the Investment Adviser shall be reduced as required by the securities laws or regulations of any jurisdiction in which the Account's shares are offered for sale, the amount payable by the Adviser to the Subadviser shall be likewise reduced by a proportionate amount. 4. In connection with the purchases or sales of portfolio securities on behalf of the Account, neither the Subadviser nor any of its partners, directors, officers or employees will act as a principal or agent or receive directly or indirectly any compensation in connection with the purchase or sale of investment securities by the Account, other than as provided in this Agreement. The Subadviser, or its agent, shall arrange for the placing of all orders for the purchase and sale of securities for the Sub-Account with brokers or dealers selected by the Subadviser, provided that the Subadviser shall not be responsible for payment of brokerage commissions. In the selection of such brokers or dealers and the placing of such orders, the Subadviser is directed at all times to seek for the Account the best execution available. Neither the Subadviser nor any affiliate of the Subadviser will act as principal or receive directly or indirectly any compensation in connection with the purchase or sale of investment securities by the Sub-Account, other than compensation provided for in this Agreement or in the Investment -2- Advisory Agreement of the Account and such brokerage commissions as are permitted by the 1940 Act. If and to the extent authorized to act as broker in the relevant jurisdiction, the Subadviser or any of its affiliates may act as broker for the Sub-Account in the purchase and sale of securities. The Subadviser agrees that all transactions effected through the Subadviser or brokers affiliated with the Subadviser shall be effected in compliance with Section 17(e) of the 1940 Act and written procedures established from time to time by the Board of Directors of the Company pursuant to Rule 17e-1 under the 1940 Act, as amended, copies of which shall be provided to the Subadviser by the Investment Adviser. 5. It is also understood that it is desirable for the Account that the Subadviser have access to supplemental investment and market research and security and economic analyses provided by certain brokers who may execute brokerage transactions at higher commissions to the Account than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Subadviser is authorized to place orders for the purchase and sale of securities for the Sub-Account with such certain brokers, subject to review by the Company's Board of Directors from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Subadviser in connection with its services to other clients. If any occasion should arise in which the Subadviser gives any advice to its clients concerning the shares of the Sub-Account, the Subadviser will act solely as investment counsel for such clients and not in any way on behalf of the Account. The Subadviser's services to the Account pursuant to this Agreement are not to be deemed to be exclusive and it is understood that the Subadviser may render investment advice, management and other services to others. Provided the investment objectives of the Account are adhered to, and such aggregation is in the best interests of the Account, the Subadviser may aggregate sales and purchase orders of securities held for the Sub-Account with similar orders being made simultaneously for other funds managed by the Subadviser, if in the Subadviser's reasonable judgment, such aggregation is equitable and consistent with the Subadviser's fiduciary obligation to the Account and shall result in an overall economic benefit to the Account, taking into consideration the advantageous selling or purchase price, brokerage commission and other expenses. In accounting for such aggregated order price, commission and other expenses shall be averaged on a per bond or share basis daily. The Subadviser will advise the Account's custodian and the Investment Adviser on a prompt basis of each purchase and sale of a portfolio security, specifying the name of the issuer, the description and amount or number of shares of the security purchases, the market price, commission and gross or net price, trade date, settlement date and identity of the effecting broker or dealer, and such other information as may be reasonably required. From time to time as the Board of Directors of the Company or the Investment Adviser may reasonably request, the Subadviser will furnish the Company's officers and to each of its Directors, at the Subadviser's expense, reports on portfolio transactions and reports on issues of securities held in the Sub-Account, all in such detail as the Account or the Investment Adviser may reasonably request. Subject to any other written instructions of the Investment Adviser, the Subadviser is hereby appointed the Investment Adviser's agent and attorney-in-fact on behalf of the Sub-Account in its discretion to vote, tender or convert any securities in the Sub-Account; to execute proxies, waivers, consents, account documentation, agreements, contracts and other instruments with respect to such securities and the assets of the Sub-Account; to endorse, transfer or deliver -3- such securities and to participate in or consent to any class action, plan of reorganization, merger, combination, consolidation, liquidation or similar plan with reference to such securities; and the Sub-Adviser shall not incur any liability to the Investment Adviser or the Sub-Account by reason of any exercise of, or failure to exercise, any such discretion in the absence of wilful misfeasance, bad faith, or gross negligence. 6. The Subadviser will not be liable for any loss sustained by reason of the adoption of any investment policy or the purchase, sale, or retention of any security on the recommendation of the Subadviser whether or not such recommendation shall have been based upon its own investigation and research or upon investigation and research made by any other individual, firm or corporation, if such recommendation shall have been made and such other individual, firm, or corporation shall have been selected, with due care and in good faith; but nothing herein contained will be construed to protect the Subadviser against any liability to the Investment Adviser, the Company, the Account or its shareholders by reason of: (a) the Subadviser negligently causing the Sub-Account to be in violation of any federal or state law, rule or regulation or any investment policy or restriction set forth in the Account's prospectus or Statement of Additional Information or any written guidelines or instruction provided in writing by the Company's Board of Directors or the Investment Adviser, (b) the Subadviser negligently causing the Sub-Account to fail to satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") due to the Subadviser's failure to comply with the requirements set forth in the second paragraph of Section 9; or (c) the Subadviser's willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement; provided that, with respect to (a) and (b) above, the Subadviser shall be deemed not to have been negligent if it acts in reliance upon written reports provided by the Investment Adviser, the Company, the Account, or any of their respective authorized agents. The Subadviser will indemnify the Investment Adviser to the fullest extent permitted by law against any and all loss, damage, judgment, fines, amounts paid in settlement and attorneys fees incurred by the Investment Adviser to the extent resulting, in whole or in part, from any of the Subadviser's acts or omissions specified in (a), (b) or (c) above or otherwise from the Subadviser's willful misfeasance, bad faith, or gross negligence, provided, however, that nothing herein contained will provide indemnity to the Investment Adviser for liability resulting from its own willful misfeasance, bad faith, or gross negligence in the performance of its duties or reckless disregard of such duties. 7. This Agreement shall remain in force until ______________, 1998, and from year to year thereafter, but only so long as such continuance, and the continuance of the Investment Adviser as investment adviser of the Account, is specifically approved at least annually by the vote of a majority of the Directors of the Company who are not interested persons of the Subadviser, the Investment Adviser or the Account, cast in person at a meeting called for the purpose of voting on such approval and by a vote of the Board of Directors or of a majority of the outstanding votingsecurities of the Account. The aforesaid requirement that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the 1940 Act and the rules, regulations and interpretations thereunder. This Agreement may be terminated at any time without the payment of any penalty, (a) by the Company, by the Board of Directors, or by vote of a majority of the outstanding voting securities of the Account, upon 60 days' written notice to the Adviser and Subadviser, (b) by the Investment Adviser, upon 60 days' written notice to the Account and the Subadviser, or (c) by -4- the Subadviser, upon 90 days' written notice to the Account and Investment Adviser. This Agreement shall automatically terminate in the event of its assignment. In interpreting the provisions of this Agreement, the definitions contained in Section 2(a) of the 1940 Act (particularly the definitions of "interested person," "assignment" and "majority of the outstanding voting securities"), as from time to time amended, shall be applied, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order. 8. No provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of the Account and by the Board of Directors, including a majority of the Directors who are not interested persons of the Investment Adviser, the Subadviser or the Account cast in person at a meeting called for the purpose of voting on such approval. It shall be the responsibility of the Subadviser to furnish to the Board of Directors of the Company such information as may reasonably be necessary in order for such Directors to evaluate this Agreement or any proposed amendments thereto for the purposes of casting a vote pursuant to paragraphs 7 or 8 hereof. 9. The Subadviser will conform its conduct in accordance with and will ensure that the Sub-Account conforms with the Company's Articles of Incorporation and By-laws, each as amended from time to time, and the 1940 Act, as amended, other applicable laws, and to the investment objectives, policies and restrictions of the Account as each of the same shall be from time to time in effect as set forth in the Account's Prospectus and Statement of Additional Information, or any investment guidelines or other instructions received in writing from the Investment Adviser, and subject, further, to such policies and instructions as the Board of Directors or the Investment Adviser may from time to time establish and deliver to the Subadviser. In addition, the Subadviser, taking into account only income and gains realized with respect to the Sub-Account, will cause the Sub-Account to comply with the requirements of: (a) Section 851(b)(2) of the Code regarding derivation of income from specified investment activities; (b) Section 851(b)(3) of the Code limiting gains from the disposition of securities and certain other investments held less than three months, in each case as if the Sub-Account were a "regulated investment company" as defined in Section 851(a) of the Code and the regulations pertaining thereto. The Subadviser shall not without the prior express written consent of the Investment Adviser: (a) invest Sub-Account assets having a value exceeding five percent of the Account's total (gross) assets in securities of one issuer; or (b) cause the Sub-Account to acquire more than ten percent of the outstanding voting securities of any one issuer; or (c) invest Sub-Account assets in investments that are not cash, cash items (including receivables), Government securities, securities of other regulated investment companies, or other securities within the meaning of Section 851(b)(4) of the Code. For purposes of clauses (a) and (b) of the foregoing sentence the term "securities" shall exclude "Government securities" and "securities of other regulated investment companies" as each such term is used in Section 851(b)(4) of the Code. 10. The Subadviser represents that it has reviewed the Registration Statement of the Company as filed with the Securities and Exchange Commission and represents and warrants that with respect to disclosure about the Subadviser or information relating directly or indirectly -5- to the Subadviser, such Registration Statement contains, as of the date hereof, no untrue statement of any material fact and does not omit any statement of material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. The Subadviser further represents and warrants that it is an investment adviser registered under the Advisers Act. 11. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. 12. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 13. Any notice given to the Subadviser by the Investment Adviser pursuant to the terms of this Agreement shall be deemed to have been given if provided in writing (including by telecopy or similar hard copy reproduction) and delivered or mailed, postpaid, to: BEA Associates, One Citicorp Center, 153 East 53rd Street, 57th Floor, New York, NY 10022. Any notice given to the Investment Adviser by the Subadviser, pursuant to the terms of this Agreement shall be deemed to have been given if provided in writing (including by telecopy or similar hard copy reproduction) and delivered to OppenheimerFunds, Inc., Two World Trade Center, New York, NY 10048-0203, Attention: General Counsel. 14. It is understood and expressly stipulated that the Subadviser must look solely to the property of the Account for the enforcement of any claims against the Account and shall not look to or have recourse to the assets of the Company generally or any other series of the Company. -6- 15. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above, and effective as of ______________, 1996. OPPENHEIMERFUNDS, INC. By: __________________________ Its: Secretary BEA ASSOCIATES, A General Partnership By: __________________________ Its: _________________________ -7- SCHEDULE A TO SUBADVISORY AGREEMENT The fee payable by the Investment Adviser to the Subadviser shall be at an annual rate equal to a percentage of the average daily Net Assets Under Management (as defined below) as follows: Annual Rate ----------- .45% of the first $25 Million of such assets, .40% of the next $25 Millon of such assets, .35% of the next $50 Million of such assets, and .25% of such assets over $100 Million. For purposes of this Schedule A, Net Assets Under Management shall consist of the aggregated net assets of each Sub-Account as follows: (a) the High Yield Sub-Account of the CMIA LifeSpan Diversified Income Account; (b) the High Yield Sub-Account of the Series Fund I LifeSpan Diversified Income Portfolio; (c) the High Yield Sub-Account of the CMIA LifeSpan Balanced Account; (d) the High Yield Sub-Account of the Series Fund I LifeSpan Balanced Portfolio; (e) the High Yield Sub-Account of the CMIA LifeSpan Capital Appreciation Account; and (f) the High Yield Sub-Account of the Series Fund I LifeSpan Capital Appreciation Portfolio, in each case to the extent and for so long as the Subadviser also manages such assets. For purposes hereof, the value of net assets of the foregoing Sub-Accounts and Portfolios shall be computed in the manner specified in the applicable Prospectuses and Statements of Additional Information for the computation of the value of the net assets in connection with the determination of net asset value of their shares. On any day that the net asset value determination is suspended as specified in the Prospectuses, the net asset value for purposes of calculating the subadvisory fee with respect to each of the aforementioned shall be calculated as of the date last determined. -8- SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENTS Due to the substantial similarity of the investment subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and BEA Associates ("BEA") for the respective series of the Registrant, the following form of investment subadvisory agreement for CMIA LifeSpan Balanced Account and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b- 31 under the Investment Company Act of 1940. 1. Investment Subadvisory Agreement among OFI and BEA for CMIA LifeSpan Capital Appreciation Account. 2. Investment Subadvisory Agreement among OFI and BEA for CMIA LifeSpan Diversified Income Account. EX-5.5 9 EXHIBIT 5.5 Exhibit 5.5 FORM OF INVESTMENT SUB-ADVISORY AGREEMENT THIS INVESTMENT SUB-ADVISORY AGREEMENT is by and between Babson-Stewart Ivory International, a partnership organized under the laws of the Commonwealth of Massachusetts (the "Sub-Adviser"), and OppenheimerFunds, Inc., a Colorado corporation ("OFI"), effective ____________, 199___. WHEREAS, CMIA LifeSpan Balanced Account (the "Fund") is a series of Connecticut Mutual Investment Accounts, Inc. (the "Company"), a Maryland corporation which 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, as amended (the "1940 Act"), and the Company has appointed OFI as the investment adviser for the Fund, pursuant to the terms of an Investment Advisory Agreement (the "Advisory Agreement"); WHEREAS, the Advisory Agreement provides that OFI may, at its option, subject to approval by the Board of Directors of the Company, and, to the extent necessary, shareholders of the Fund, appoint a sub-adviser to assume certain responsibilities and obligations of OFI under the Advisory Agreement; WHEREAS, OFI and the Sub-Adviser are investment advisers registered as such with the Commission, and OFI desires to appoint the Sub-Adviser as a sub-adviser for the Fund and the Sub-Adviser is willing to act in such capacity upon the terms herein set forth; NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained, OFI and the Sub-Adviser, the parties hereto, intending to be legally bound, hereby agree as follows: 1. GENERAL PROVISION. OFI hereby employs the Sub-Adviser and the Sub-Adviser hereby undertakes to act as the investment sub-adviser of the international portion of the portfolio of the Fund designated by OFI (the "Sub-Account") and to provide investment advice and to perform for the Fund such other duties and functions as are hereinafter set forth. The Sub-Adviser shall, in all matters, give to the Fund and the Company's Board of Directors, directly or through OFI, the benefit of the Sub-Adviser's 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: (a) the provisions of the 1940 Act and any rules or regulations thereunder; (b) the provisions of Subchapter M of the Internal Revenue Code, as it may be amended from time to time; (c) any other applicable provisions of state or federal law; (d) the provisions of the Articles of Incorporation and By-Laws of the Company as amended from time to time; (e) policies and determinations of the Board of Directors of the Company and OFI; (f) the fundamental policies and investment restrictions of the Fund as reflected in the Company's registration statement under the 1940 Act or as such fundamental policies and investment restrictions may, from time to time, be amended by the Fund's shareholders; (g) the Prospectus and Statement of Additional Information of the Fund in effect from time to time; and (h) any investment guidelines or other instructions received in writing from OFI. The appropriate officers and employees of the Sub-Adviser shall be available upon reasonable notice for consultation with any of the Directors and officers of the Company and OFI with respect to any matters dealing with the business and affairs of the Fund including without limitation the valuation of portfolio securities of the Sub- Account that are either not registered for public sale or not traded on any securities market. In the performance of its duties hereunder, the Sub-Adviser is and shall be an independent contractor and unless otherwise expressly provided herein or otherwise authorized in writing, shall have no authority to act for or represent the Company, the Fund or OFI in any way or otherwise be deemed to be an agent of the Company, the Fund or OFI. 2. DUTIES OF THE SUB-ADVISER. (a) The Sub-Adviser shall, subject to the direction and control by the Company's Board of Directors or OFI, to the extent OFI's direction is not inconsistent with that of the Board of Directors, (i) regularly provide investment advice and recommendations to the Fund, directly or through OFI, with respect to the Sub-Account's investments, investment policies and the purchase and sale of securities; (ii) supervise and monitor continuously the investment program of the Fund with respect to the Sub-Account and the portfolio composition of the Sub-Account and determine what securities shall be purchased or sold for the Sub-Account of the Fund; (iii) arrange, subject to the provisions of paragraph 5 hereof, for the purchase of securities and other investments for the Sub-Account of the Fund and the sale of securities and other portfolio investments held in the Sub-Account of the Fund; and (iv) provide reports on the foregoing to the Board of Directors at each Board meeting. (b) Provided that neither OFI nor the Fund or the Company shall be required to pay any compensation other than as provided by the terms of this Agreement and subject to the provisions of paragraph 5 hereof, the Sub-Adviser 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 the Sub-Adviser 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, the Sub-Adviser shall not be liable for any loss sustained by reason of good faith errors or omissions inconnection with any matters to which this Agreement relates. (d) Nothing in this Agreement shall prevent OFI or the Sub-Adviser or any officer thereof from acting as investment adviser or sub-adviser for any other person, firm or corporation and shall not in any way limit or restrict OFI or the Sub-Adviser or any of their respective directors, officers, stockholders, partners 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 any party of its duties and obligations under this Agreement. (e) The Sub-Adviser shall cooperate with OFI by providing OFI with any information in the Sub-Adviser's possession necessary for supervising 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. Any records required to be maintained shall be the property of the Company and shall be surrendered promptly to the Company on request. The Sub-Adviser shall, at its own expense, provide such officers for the Company as its Board may request. 3. DUTIES OF OFI. OFI shall provide (or cause to be provided to) the Sub-Adviser the following information about the Sub-Account: (a) cash flow estimates on request; (b) notice of the Sub-Account's "investable funds" by 11:00 a.m. each business day; (c) as they are modified, from time to time, current versions of the documents and policies referred to in subparagraphs (d), (e), (f), (g) and (h) of paragraph 1 above. 4. COMPENSATION OF THE SUB-ADVISER. The Sub-Adviser will bear its own costs of providing services hereunder. The Sub-Adviser shall not be responsible for the Fund's expenses. OFI agrees to pay the Sub-Adviser and the Sub-Adviser 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 net asset value of the Sub-Account of the Fund as of the close of each business day and payable monthly by the tenth business day of the following month, at the following annual rates: .75% of the first $10 million of average net assets in the Sub-Account; .625% of the next $15 million of average net assets in the Sub-Account; .50% of the next $25 million of average net assets in the Sub-Account; and .375% of the average net assets in excess of $50 million in the Sub-Account. For any period less than a full month during which this Agreement is in effect, the fee shall be pro-rated according to the proportion which such period bears to a full month (a month being the calendar month of which such period is part). The Fund shall have no responsibility for any fee payable to the Sub-Adviser. 5. PORTFOLIO TRANSACTIONS AND BROKERAGE. (a) In connection with purchases or sales of portfolio securities on behalf of the Fund, neither the Sub-Adviser nor any of its partners, directors, officers or employees will act as a principal or agent or receive directly or indirectly any compensation in connection with the purchase or sale of securities by the Fund, other than as provided herein. The Sub-Adviser is authorized, in arranging the purchase and sale of the Sub-Account's portfolio securities, to employ or deal with such members of securities exchanges, brokers or dealers (hereinafter "broker-dealers"), including broker-dealers that are "affiliated" broker-dealers (as that term is defined in the 1940 Act), as may, in the Sub-Adviser's 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. All transactions effected through any affiliated brokers shall be effected in compliance with Section 17(e) of the 1940 Act and any written procedures established from time to time by the Board of Directors of the Company pursuant to Rule 17e-1 under the 1940 Act, as it may be amended from time to time, copies of which procedures shall be provided to the Sub-Adviser by OFI. (b) The Sub-Adviser may effect the purchase and sale of securities (which are otherwise publicly traded) in private transactions on such terms and conditions as are customary in such transactions, may use a broker to effect said transactions, and may enter into a contract in which the broker acts either as principal or as agent. (c) The Sub-Adviser shall select broker-dealers to effect the Sub-Account'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 the Sub-Adviser 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 Sub-Account'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. (d) The Sub-Adviser shall not be responsible for payment of brokerage commissions. (e) Provided that such aggregation is in the best interests of the Fund, the Sub-Adviser may aggregate orders for the purchase and sale of securities for the Sub-Account with similar orders being made simultaneously for other funds managed by the Sub-Adviser, if, in the Sub-Adviser's reasonable judgment, such aggregation is equitable and consistent with the Sub-Adviser's fiduciary obligation to the Fund and shall result in an overall economic benefit to the Fund, taking into consideration the advantageous sale or purchase price, brokerage commissions or other expenses. (f) The Sub-Adviser will advise OFI and the Fund's Custodian promptly of each purchase and sale of a portfolio security, specifying the name of the issuer, the description and amount or number of shares of the security purchased or sold, the market price, commissions and gross or net price, trade date, settlement date and identity of the effecting broker or dealer, and such other information as may be reasonably required. From time to time as the Board of Directors of the Company or OFI may reasonably request, the Sub-Adviser will furnish to the Company's officers and to its Directors, at the Sub-Adviser's expense, reports on portfolio transactions and reports on issuers of securities held in the Sub-Account, all in such detail as the Fund or OFI shall reasonably request. 6. DURATION. This Agreement will take effect on __________________, 1996, and unless earlier terminated pursuant to paragraph 7 shall remain in effect until December 31, 1998. Thereafter it shall continue in effect from year to year, so long as such continuance and the continuance of OFI as Adviser to the Fund shall be approved at least annually by the Company's Board of Directors, including the vote of the majority of the Directors of the Company who are not parties to this Agreement or "interested persons" (as defined in the 1940 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 1940 Act) of the outstanding voting securities of the Fund and by such a vote of the Company's Board of Directors. 7. TERMINATION. This Agreement shall terminate automatically upon its assignment or in the event of the Company's termination of the Advisory Agreement; it may also be terminated: (i) by-the Sub-Adviser at any time without penalty upon ninety days' written notice to OFI and the Company; or (ii) by the Company at any time without penalty upon sixty days' written notice to OFI and the Sub-Adviser provided that such termination by the Company shall be directed or approved by a vote of a majority of all of the Directors of the Company 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 1940 Act); or (iii) by OFI, upon 60 days' written notice to the Fund and the Sub-Adviser. 8. NOTICE. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party, with a copy to the Company, at the addresses below or such other address as such other party may designate for the receipt of such notice. If to OFI: OppenheimerFunds, Inc. Two World Trade Center, 34th Floor New York, NY 10048-0203 Attention: Andrew J. Donohue, Esq. If to the Sub-Adviser: Babson-Stewart Ivory International One Memorial Drive Cambridge, Massachusetts 02142-1300 Attention:______________________ If to either party, copy to: CMIA LifeSpan Balanced Fund Two World Trade Center, 34th Floor New York, New York 10048-0203 Attention: Chairman 9. No provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until its approval by vote of the holders of a majority of the outstanding voting securities of the Fund and by the Board of Directors of the Company, including a majority of the Directors who are not interested persons of OFI, the Sub-Adviser or the Fund, cast in person at a meeting called for the purpose of voting on such approval. 10. The Sub-Adviser represents that it has reviewed the Registration Statement of the Company, including any amendments or supplements thereto, and any Proxy Statement relating to the approval of this Agreement, as filed with the Securities and Exchange Commission and represents and warrants that with respect to disclosure about the Sub-Adviser or information relating directly or indirectly to the Sub- Adviser, such Registration Statement or Proxy Statement contains, as of the date hereof, no untrue statement of any material fact and does not omit any statement of material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. The Sub-Adviser further represents and warrants that it is an investment adviser registered under the Investment Advisers Act of 1940, as amended, and under the laws of all jurisdictions in which the conduct of its business hereunder requires such registration. 11. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 12. It is expressly understood and stipulated that the Sub-Adviser must look solely to the property of the Fund for the enforcement of any claims against the Fund and shall not look to or have recourse to the assets of the Company generally or any other series of the Company. 13. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, OFI and the Sub-Adviser have caused this Agreement to be executed on the day and year first above written. OPPENHEIMERFUNDS, INC. By:______________________________ (Name) (Title) BABSON-STEWART IVORY INTERNATIONAL, a Partnership By:______________________________ (Name) (Title) SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENT Due to the substantial similarity of the investment subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and Babson-Stewart Ivory International ("Babson") for the respective series of the Registrant, the following form of investment subadvisory agreement for CMIA LifeSpan Balanced Account and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Investment Subadvisory Agreement among OFI and Babson for CMIA LifeSpan Capital Appreciation Account. EX-6.5 10 EXHIBIT 6.5 EXHIBIT 6.5 FORM OF GENERAL DISTRIBUTOR'S AGREEMENT Between OPPENHEIMER SERIES FUND, INC. on behalf of Oppenheimer Disciplined Allocation Fund AND OppenheimerFunds Distributor, Inc. Date: March 18, 1996 OppenheimerFunds Distributor, Inc. Two World Trade Center, Suite 3400 New York, NY 10048 Dear Sirs: Oppenheimer Series Fund, Inc., a Maryland corporation (the "Company"), is registered as an investment company under the Investment Company Act of 1940 (the "1940 Act"), and an indefinite number of one or more series or classes of its shares of stock have been registered under the Securities Act of 1933 (the "1933 Act") including shares ("Shares") of its series, Oppenheimer Disciplined Allocation Fund (the "Fund") to be offered for sale to the public in a continuous public offering in accordance with the terms and conditions set forth in the Fund's Prospectus and Statement of Additional Information ("SAI") included in the Company's Registration Statement as it may be amended from time to time (the "current Prospectus and/or SAI"). In this connection, the Company desires that your firm (the "General Distributor") act in a principal capacity as General Distributor for the sale and distribution of Shares of the Fund 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 Company 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 Company hereby appoints you as the sole General Distributor of shares of the Fund, pursuant to the aforesaid continuous public offering of Shares, and the Company further agrees from and after the date of this Agreement, that neither it nor the Fund will, 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 Company or 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 Company may cause the Fund to 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 Company may cause the Fund to 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 Company may cause the Fund to 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 Company or 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 you and the Company or the Fund, you will suspend such efforts. The Company or 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 -2- 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 Company on behalf of 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, -3- 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 Company on behalf of 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 Company on behalf of 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 Company on behalf of 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 Company on behalf of 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 Shares of the Fund, to repurchase, from authorized dealers, certificated or uncertificated Shares of the Fund on the basis of orders received from each dealer with which you have a dealer agreement for the sale of Shares ("authorized dealer") 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 -4- 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 Company shall be a third party beneficiary of such indemnification on behalf of the Fund. (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 -5- 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 Company and 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 Company has delivered to you a copy of the Fund's current Prospectus and SAI. The Company agrees that it will use its best efforts to continue the effectiveness of its Registration Statement under the 1933 Act as to the Shares of the Fund. The Company 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 Company has already registered under the 1940 Act as an investment company, and it will use its best efforts to maintain such registration and to -6- comply with the requirements of the 1940 Act as to the Shares of the Fund. 8. STATE BLUE SKY QUALIFICATION. At your request, the Company will take such steps as may be necessary and feasible to qualify Shares of the Fund 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 Company shall not be required to qualify Shares of the Fund or to maintain the qualification of shares in any jurisdiction where it shall deem such qualification disadvantageous to the Company or 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 Company on behalf of 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 statement required to be filedwith 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 Company and 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 Company shall cause the Fund to pay the cost of composition and printing of sufficient copies of its Prospectus and SAI as shall be required for periodic -7- 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 or Plans under Rule 12b-1 of the 1940 Act, including the cost of printing and mailing of the Prospectus (other than those furnished to existing 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 you and the Company on behalf of the Fund. Unless earlier terminated pursuant to paragraph 12 hereof, this Agreement shall remain in effect until September 30, 1997. 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 Company's Board of Directors or by vote of a majority of the voting securities of the Fund; and (b) by the vote of a majority of the Directors, 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 Company or the Fund); (b) by the Company on behalf of 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 Company on behalf of the Fund and the General Distributor, provided that such termination on behalf of the Fund shall be directed or approved by the Board of Directors 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 on behalf of 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. LIMITATION OF LIABILITY. The General Distributor understands and agrees that the obligations of the Company under -8- this Agreement relate only to the shares and the property of the Fund as a series of the Company. 15. SECTION HEADINGS. The heading of each section is for descriptive purposes only, and such headings are not to be construed or interpreted as part of this Agreement. If the foregoing is in accordance with your understanding, so indicate by signing in the space provided below. Oppenheimer Series Fund, Inc. on behalf of Oppenheimer Disciplined Allocation Fund By: ________________________________ Accepted: OppenheimerFunds Distributor, Inc. By: _______________________________ -9- SCHEDULE OF OMITTED GENERAL DISTRIBUTOR'S AGREEMENTS Due to the substantial similarity of the General Distributor's Agreements among OppenheimerFunds Distributor, Inc. ("ODI") and the Registrant, on behalf of the respective series of the Registrant, the following form of Agreement on behalf of Oppenheimer Disciplined Allocation Fund and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. General Distributor's Agreement between ODI, on behalf of Connecticut Mutual Liquid Account. 2. General Distributor's Agreement between ODI, on behalf of Connecticut Mutual Government Securities Account. 3. General Distributor's Agreement between ODI, on behalf of Connecticut Mutual Income Account. 4. General Distributor's Agreement between ODI, on behalf of Oppenheimer Disciplined Value Fund. 5. General Distributor's Agreement between ODI, on behalf of Oppenheimer LifeSpan Growth Fund. 6. General Distributor's Agreement between ODI, on behalf of Oppenheimer LifeSpan Balanced Fund. 7. General Distributor's Agreement between ODI, on behalf of Oppenheimer LifeSpan Income Fund. EX-8.1 11 EXHIBIT 8.1 EXHIBIT 8.1 CUSTODIAN CONTRACT Between CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS Page 1. Employment of Custodian and Property to be Held By It.........................................................1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States.....3 2.1 Holding Securities..................................3 2.2 Delivery of Securities..............................3 2.3 Registration of Securities..........................8 2.4 Bank Accounts.......................................9 2.5 Availability of Federal Funds......................10 2.6 Collection of Income...............................10 2.7 Payment of Fund Moneys.............................11 2.8 Liability for Payment in Advance of Receipt of Securities Purchased....................14 2.9 Appointment of Agents..............................15 2.10 Deposit of Fund Assets in Securities System........l5 2.10A Fund Assets Held in the Custodian's Direct Paper System.......................................18 2.11 Segregated Account.................................20 2.12 Ownership Certificates for Tax Purposes............21 2.13 Proxies............................................22 2.14 Communications Relating to Portfolio Securities.........................................22 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States................23 3.1 Appointment of Foreign Sub-Custodians..............23 3.2 Assets to be Held..................................23 3.3 Foreign Securities Depositories....................24 3.4 Segregation of Securities..........................24 3.5 Agreements with Foreign Banking Institutions.......25 3.6 Access of Independent Accountants of the Fund......25 3.7 Reports by Custodian...............................26 3.8 Transactions in Foreign Custody Account............26 3.9 Liability of Foreign Sub-Custodians................27 3.10 Liability of Custodian.............................28 3.11 Reimbursement for Advances.........................29 3.12 Monitoring Responsibilities........................29 3.13 Branches of U.S. Banks.............................30 3.14 Tax Law............................................30 4. Payments for Sales or Repurchase or Redemptions of Shares of the Fund.....................................31 5. Proper Instructions.......................................32 6. Actions Permitted Without Express Authority...............33 7. Evidence of Authority.....................................34 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income....................................................34 9. Records...................................................35 10. Opinion of Fund's Independent Accountants.................35 11. Reports to Fund by Independent Public Accountants.........36 12. Compensation of Custodian.................................36 13. Responsibility of Custodian...............................37 14. Effective Period, Termination and Amendment...............39 15. Successor Custodian.......................................41 16. Interpretive and Additional Provisions....................43 17. Additional Funds..........................................43 18. Massachusetts Law to Apply................................43 19. Prior Contracts...........................................44 CUSTODIAN CONTRACT This Contract between Connecticut Mutual Investment Accounts, Inc., a corporation organized and existing under the laws of Maryland, having its principal place of business at 140 Garden Street, Hartford, Connecticut 06154 hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110, hereinafter called the "Custodian". WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund intends to initially offer shares in five series, the Government Securities Account, Growth Account, Income Account, Liquid Account and Total Return Account (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 17, being herein referred to as the "Portfolio(s)"); NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby employs the Custodian as the custodian of the assets of the Portfolios of the Fund, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Articles of Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of capital stock of the Fund representing interests in the Portfolios, ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 5), the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians, located in the United States but only in accordance with an applicable vote by the Board of Directors of the Fund on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedule A hereto but only in accordance with the provisions of Article 3. 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States including all domestic securities owned by such Portfolio, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10A. 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumental- ities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio of the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio of the Fund; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund, related to the Portfolio ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other proper corporate purpose, BUT only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make federal funds available to such Portfolio as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of such Portfolio which are deposited into the Portfolio's account. 2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled. 2.7 PAYMENT OF FUND MONEYS. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5; 2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Portfolio as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares of the Portfolio declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Portfolio is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund on behalf of such Portfolio to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by a Portfolio in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Portfolio in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Portfolio which are maintained in a Securities System shall identify by book-entry those securities belonging to the Portfolio; 3) The Custodian shall pay for securities purchased for the account of the Portfolio upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Portfolio. 4) The Custodian shall provide the Fund for the Portfolio with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System; 5) The Custodian shall have received from the Fund on behalf of the Portfolio the initial or annual certificate, as the case may be, required by Article 14 hereof; 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage. 2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may deposit and/or maintain securities owned by a Portfolio in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund on behalf of the Portfolio; 2) The Custodian may keep securities of the Portfolio in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Portfolio which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Portfolio; 4) The Custodian shall pay for securities purchased for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Portfolio; 5) The Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transaction in the Securities System for the account of the Portfolio; 6) The Custodian shall provide the Fund on behalf of the Portfolio with any report on its system of internal accounting control as the Fund may reasonably request from time to time. 2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions from the Fund on behalf of each applicable Portfolio establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities. 2.13 PROXIES. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Portfolio such proxies, all proxy soliciting materials and all notices relating to such securities. 2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Portfolio all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Portfolio desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Portfolio shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE OF THE UNITED STATES. 3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Portfolio's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 5 of this Contract, together with a certified resolution of the Fund's Board of Directors, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Portfolio's assets. 3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(l) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Portfolio's foreign securities transactions. 3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Portfolios shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 SEGREGATION OF SECURITIES. The Custodian shall identify on its books as belonging to each applicable Portfolio of the Fund, the foreign securities of such Portfolios held by each foreign sub-custodian. Each agreement pursuant to which the Custodian employs a foreign banking institution shall require that such institution establish a custody account for the Custodian on behalf of the Fund for each applicable Portfolio of the Fund and physically segregate in each account, securities and other assets of the Portfolios, and, in the event that such institution deposits the securities of one or more of the Portfolios in a foreign securities depository, that it shall identify on its books as belonging to the Custodian, as agent for each applicable Portfolio, the securities so deposited. 3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Portfolio will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to each applicable Portfolio; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Portfolios held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Portfolio(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Portfolio(s) securities and other assets and advice or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities. 3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Portfolio and delivery of securities maintained for the account of each applicable Portfolio may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund 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. 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 banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism or any loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.10, in delegating custody duties to State Street London Ltd., the Custodian shall not be relieved of any responsibility to the Fund for any loss due to such delegation, except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or other losses under circumstances where the Custodian and State Street London Ltd. have exercised reasonable care. 3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance cash or securities for any purpose for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolios assets to the extent necessary to obtain reimbursement. 3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the Fund, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any material loss of the assets of the Fund or in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission is notified by such foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles). 3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of the Portfolios assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for each Portfolio of the Fund in the United Kingdom shall be maintained in an interest bearing account established for the Fund with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd. or both. 3.14 TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States of America or any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of the Fund by the tax law of jurisdictions other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of jurisdictions for which the Fund has provided such information. 4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Portfolio such payments as are received for Shares of that Portfolio issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio. From such funds as may be available for the purpose but subject to the limitations of the Articles of Incorporation and any applicable votes of the Board of Directors of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. 5. PROPER INSTRUCTIONS. Proper Instructions as used throughout this Contract means a writing signed or initialed by one or more person or persons as the Board of Directors shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Directors of the Fund accompanied by a detailed description of procedures approved by the Board of Directors, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Directors and the Custodian are satisfied that such procedures afford adequate safeguards for the Portfolios' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three - party agreement which requires a segregated asset account in accordance with Section 2.11. 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Directors of the Fund. 7. EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME. The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of each Portfolio and/or compute the net asset value per share of the outstanding shares of each Portfolio or, if directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Fund's currently effective prospectus related to such Portfolio and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Fund's currently effective prospectus related to such Portfolio. 9. RECORDS. The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT. The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Custodian shall provide the Fund, on behalf of each of the Portfolios at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 12. COMPENSATION OF CUSTODIAN. 12.1 The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian. Specific fees and charges are contained in the Fee Schedule attached hereto. 12.2 The fees and charges stated in the Fee Schedule shall be fixed for a period of five years from the date of this Agreement. Thereafter the fees and charges shall be renegotiated each year, but will not exceed the previous year's fees and charges adjusted for increases in the Consumer Price Index of the previous year in the Greater Boston Area as published by the Federal Reserve Bank of Boston, or such other index as the parties may agree. 12.3 In no event shall State Street charge fees and charges stated herein that exceeds the fees and charges charged other mutual funds that have the same or less amount of Fund Net Assets maintained by State Street. In no event shall this provision allow the Fund to review the fees and charges of State Street's other customers or the books and records of State Street. 12.4 State Street shall dedicate a full time project manager for the process of the conversion of the Funds and shall waive all costs associated with the conversion of the Funds to State Street. 12.5 The fees and charges shall be subject to a performance standard as set out in the Performance Standard Schedule attached hereto. 13. RESPONSIBILITY OF CUSTODIAN. So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States (except as specifically provided in Article 3.10) and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody of any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism. If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement. 14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than one hundred twenty (120) days after the date of such delivery or mailing by the Custodian and sixty (60) days after the date of such delivery or mailing by the Fund; PROVIDED, however that the Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System by such Portfolio and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by such Portfolio of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Portfolio act under Section 2.10A hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System by such Portfolio and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by such Portfolio of the Direct Paper System; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund on behalf of one or more of the Portfolios may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 15. SUCCESSOR CUSTODIAN. If a successor custodian for the Fund, of one or more of the Portfolios shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 16. INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 17. ADDITIONAL FUNDS. In the event that the Fund establishes one or more series of Shares in addition to the Government Securities Account, Growth Account, Income Account, Liquid Account and Total Return Account with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder. 18. MASSACHUSETTS LAW TO APPLY. This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 19. PRIOR CONTRACTS. This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 28th day of January, 1993. ATTEST CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. _________________________ By___________________________ ATTEST STATE STREET BANK AND TRUST COMPANY _________________________ By____________________________ Assistant Secretary Executive Vice President SCHEDULE A The following foreign banking institutions and foreign securities depositories have been approved by the Board of Directors of Connecticut Mutual Investment Accounts, Inc. for use as sub-custodians for the Fund's securities and other assets: COUNTRY BANK Australia Australia and New Zealand Banking Group Limited Austria Girozentrale und Bank de oesterreichischen Sparkhassen AG Belgium Banque Bruxelles Lambert Canada Canada Trust Company Denmark Den Danske Bank Finland Kansallis-Osake-Pankki France Credit Commercial De France Germany Berliner Handels-und Frankfurter Bank Hong Kong Standard Chartered Bank Italy Credito Italiano Japan Sumitomo Trust & Banking Co., Ltd. Netherlands Bank Mees S( Hope N.V. New Zealand Westpac Banking Corporation Norway Christiania Bank OG Kreditkasse Singapore The Development Bank of Singapore Ltd. Spain Banco Hispano Americano Sweden Skandinaviska Enskilda Banken Switzerland Union Bank of Switzerland United Kingdom State Street London Limited Certified: _____________________________ Fund's Authorized Officer Date:________________________ Exhibit 1 SUBCUSTODIAN AGREEMENT AGREEMENT made this__________________________; between State Street Bank and Trust Company, A Massachusetts Trust Company (hereinafter referred to as the "Custodian"), having its principal place of business at 225 Franklin Street, Boston, MA, and ______________________________(hereinafter referred to as the "Subcustodian"), a bank organized under the laws of ________________________________ and having its registered office at ______________________________________ ____________________________________________________________. WHEREAS, Custodian has been appointed to act as Trustee, Custodian or Subcustodian of securities and monies on behalf of certain of its customers including, without limitation, collective investment undertakings, investment companies subject to the U.S. Investment Company Act of 1940, as amended, and employee benefit plans subject to the U.S. Employee Retirement Income Security Act of 1974, as amended; WHEREAS, Custodian wishes to establish Accounts (the "Accounts") with the Subcustodian to hold and maintain certain property for which Custodian is responsible as custodian; and WHEREAS, Subcustodian agrees to establish the Accounts and to hold and maintain all Property in the Accounts in accordance with the terms and conditions herein set forth. NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the Custodian and the Subcustodian agree as follows: I. THE ACCOUNT A. ESTABLISHMENT OF THE ACCOUNT Custodian hereby requests that Subcustodian establish for each client of the Custodian an Account which shall be composed of: 1. A Custody Account for any and all Securities (as hereinafter defined) from time to time received by Subcustodian therefor, and 2. A Deposit Account for any and all Cash (as hereinafter defined) from time to time received by Subcustodian therefor. B. USE OF THE ACCOUNT The Account shall be used exclusively to hold, acquire, transfer or otherwise care for, on behalf of Custodian as custodian and the customers of Custodian and not for Custodian's own interest, Securities, and such Cash or cash equivalents as are transferred to Subcustodian or as are received in payment of any transfer of, or as payment on, or interest on, or dividend from, any such Securities (herein collectively called "Cash"). C. TRANSFER OF PROPERTY IN THE ACCOUNT Beneficial ownership of the Securities and Cash in the Account shall be freely transferable without payment of money or value other than for safe custody and administration. D. OWNERSHIP AND SEGREGATION OF PROPERTY IN ACCOUNT The ownership of the property in the Account, whether Securities, Cash or both, and whether any such property is held by Subcustodian in an Eligible Depository, shall be clearly recorded on Subcustodian's books as belonging to Custodian on behalf of Custodian's customers, and not for Custodian's own interest and, to the extent that Securities are physically held in the Account, such Securities shall also be physically segregated from the general assets of Subcustodian, the assets of Custodian in its individual capacity and the assets of Subcustodian other customers. In addition, Subcustodian shall maintain such other records as may be necessary to identify the property hereunder as belonging to each Account. E. REGISTRATION OF SECURITIES IN THE ACCOUNT Securities which are eligible for deposit in a depository as provided for in Paragraph III may be maintained with the depository in an account for Subcustodian's customers. Securities which are not held in a depository and that are ordinarily held in registered form will be registered in the name of the Sub-custodian or in the name of Sub-custodian's nominee, unless alternate Instructions are furnished by Custodian. II. SERVICES TO BE PROVIDED BY THE SUBCUSTODIAN The Services Subcustodian will provide to Custodian and the manner in which such services will be performed will be as set forth below in this Agreement. A. SERVICES PERFORMED PURSUANT TO INSTRUCTIONS All transactions involving the Securities and Cash in the Account shall be executed solely in accordance with Custodian's Instructions as that term is defined in Paragraph IV hereof, except those described in Paragraph B below. B. SERVICES TO BE PERFORMED WITHOUT INSTRUCTIONS Subcustodian will, unless it receives Instructions from Custodian to the contrary: 1. COLLECT CASH Promptly collect and receive all dividends, income, principal, proceeds from transfer and other payments with respect to property held in the Account, and present for payment all Securities held in the Account which are called, redeemed or retired or otherwise become payable and all coupons and other income items which call for payment upon presentation, and credit Cash receipts therefrom to the Deposit Account. 2. EXCHANGE SECURITIES Promptly exchange Securities where the exchange is purely ministerial including, without limitation, the exchange of temporary Securities for those in definitive form and the exchange of warrants, or other documents of entitlement to Securities, for the Securities themselves. 3. SALE OF RIGHTS AND FRACTIONAL INTERESTS Whenever notification of a rights entitlement or a fractional interest resulting from a rights issue, stock dividend or stock split is received for the Account and such rights entitlement or fractional interest bears an expiration date, Subcustodian will promptly endeavor to obtain Custodian's Instructions, but should these not be received in time for Subcustodian to take timely action, Subcustodian is authorized to sell such rights entitlement or fractional interest and to credit the Account. 4. EXECUTE CERTIFICATES Execute in Custodian's name for the Account, whenever Subcustodian deems it appropriate, such ownership and other certificates as may be required to obtain the payment of income from the Securities held in the Account. 5. PAY TAXES AND RECEIVE REFUNDS To pay or cause to be paid from the Account any and all taxes and levies in the nature of taxes imposed on the property in the Account by any governmental authority, and to take all steps necessary to obtain all tax exemptions, privileges or other benefits, including reclaiming and recovering any withholding tax, relating to the Account and to execute any declarations, affidavits, or certificates of ownership which may be necessary in connection therewith. 6. PREVENT LOSSES Take such steps as may be reasonably necessary to secure, or otherwise prevent the loss of, entitlements attached to or otherwise relating to property held in the Account. C. ADDITIONAL SERVICES 1. TRANSMISSION OF NOTICES OF CORPORATE ACTION By such means as will permit Custodian to take timely action with respect thereto, Subcustodian will promptly notify Custodian upon receiving notices or reports, or otherwise becoming aware, of corporate actions affecting Securities held in the Account (including, but not limited to, calls for redemption, mergers, consolidations, reorganizations, recapitalizations, tender offers, rights offerings, exchanges, subscriptions and other offerings) and dividend, interest and other income payments relating to such Securities. 2. COMMUNICATIONS REGARDING THE EXERCISE OF ENTITLEMENTS Upon request by Custodian, Subcustodian will promptly deliver, or cause any Eligible Depository authorized and acting hereunder to deliver, to Custodian all notices, proxies, proxy soliciting materials and other communications that call for voting or the exercise of rights or other specific action (including material relative to legal proceedings intended to be transmitted to security holders) relating to Securities held in the Account to the extent received by Subcustodian or said Eligible Depository, such proxies or any voting instruments to be executed by the registered holder of the Securities, but without indicating the manner in which such Securities are to be voted. 3. MONITOR FINANCIAL SERVICE In furtherance of its obligations under this Agreement, Subcustodian will monitor a leading financial service with respect to announcements and other information respecting property held in the Account, including announcements and other information with respect to corporate actions and dividend, interest and other income payments. III. USE OF SECURITIES DEPOSITORY Subcustodian may, with the prior written approval of custodian, maintain all or any part of the Securities in the Account with a securities depository or clearing agency which is incorporated or organized under the laws of a country other than the United States of America and is supervised or regulated by a government agency or regulatory authority in the foreign jurisdiction having authority over such depositories or agencies, and which operates (a) the central system for handling of designated securities or equivalent book entries in_______________________________ or (b) a transnational system for the central handling securities or equivalent book entries (herein called "Eligible Depository"), provided however, that, while so maintained, such Securities shall be subject only to the directions of Subcustodian, and that Subcustodian duties, obligations and responsibilities with regard to such Securities shall be the same as if such Securities were held by Subcustodian on its premises. IV. CLAIMS AGAINST PROPERTY IN THE ACCOUNT The property in the account shall not be subject to any right, charge, security interest, lien or claim of any kind (collectively "Charges") in favor of Subcustodian or any Eligible Depository or any creditor of Subcustodian or of any Eligible Depository except a claim for payment by Subcustodian for such property's safe custody or administration in accordance with the terms of this Agreement. Subcustodian will immediately notify Custodian of any attempt by any party to assert any Charge against the property held in the Account and shall take all lawful actions to protect such property from such Charges until Custodian has had reasonable time to respond to such notice. V. SUBCUSTODIAN'S WARRANTY SUBCUSTODIAN REPRESENTS AND WARRANTS THAT: (A) It is a branch of a "qualified U.S. bank" or it is an "eligible foreign custodian" as those terms are defined in Rule 17f-5 of the Investment Company Act of 1940, a copy of which is attached hereto as Attachment A (the "Rule"), and Subcustodian shall immediately notify Custodian, in writing or by other authorized means, in the event that there appears to be a substantial likelihood that Subcustodian will cease to qualify under the Rule as currently in effect or as hereafter amended, or (B) It is the subject of an exemptive order issued by the United States Securities and Exchange Commission which order permits Custodian to employ Subcustodian notwithstanding the fact that Subcustodian fails to qualify under the terms of the Rule, and Subcustodian shall immediately notify Custodian, in writing or by other authorized means, if for any reason it is no longer covered by such exemptive order. Upon receipt of any such notification required under (A) or (B) of this section, Custodian may terminate this Agreement immediately without prior notice to Subcustodian. VI. DEFINITIONS A. INSTRUCTIONS The term "instructions" means 1. instructions in writing signed by authorized individuals designated as such by Custodian; 2. telex or tested telex instructions of Custodian; 3. other forms of instructions in computer readable form as shall customarily be used for the transmission of like information, and 4. such other forms of communication as from time to time may be agreed upon by Custodian and Subcustodian, which Subcustodian believes in good faith to have been given by Custodian or which are transmitted with proper testing or authentication pursuant to terms and conditions which custodian may specify. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Subcustodian shall act in accordance with Instructions and shall not be liable for any act or omission in respect of any Instruction except in the case of willful default negligence, fraud, bad faith, willful misconduct, or reckless disregard of duties on the part of Subcustodian. Subcustodian in executing all Instructions will take relevant action in accordance with accepted industry practice and local settlement practices. B. ACCOUNT The term "Account" means collectively the Custody Account, and the Deposit Account. C. SECURITIES The term "Securities" includes, without limitation, stocks, shares, bonds, debentures, debt securities (convertible or non-convertible), notes, or other obligations or securities and any certificates, receipts, futures contracts, foreign exchange contracts, options, warrants, scrip or other instruments representing rights to receive, purchase or subscribe for the same, or evidencing or representing any other rights or interests therein, or in any property or assets. VII. MISCELLANEOUS PROVISIONS A. STATEMENTS REGARDING THE ACCOUNT Subcustodian will supply Custodian with such statements regarding the Account as Custodian may request, including the identity and location of any Eligible Depository authorized and acting hereunder. In addition, Subcustodian will supply custodian an advice or notification of any transfers of Securities to or from the Account indicating, as to Securities acquired for the Account, if applicable, the Eligible Depository having physical possession of such securities. B. EXAMINATION OF BOOKS AND RECORDS Subcustodian agrees that its books and records relating to the Account and Sub-custodian's actions under this agreement shall be open to the physical, on-premises inspection and audit at reasonable times by officers of, auditors employed by, or other representatives of Custodian including (to the extent permitted under the laws of ___________________) the independent public accountants for any customer of Custodian whose property is being held hereunder) and such books and records shall be retained for such period as shall be agreed upon by Custodian and Subcustodian. As Custodian may reasonably request from time to time, Subcustodian will furnish its auditor's reports on its system of internal controls, and Subcustodian will use its best efforts to obtain and furnish similar reports of any Eligible Depository authorized and acting hereunder. C. STANDARD OF CARE In holding, maintaining, servicing and disposing of Property under this Agreement, and in fulfilling any other obligations hereunder, Subcustodian shall exercise the same standard of care that it exercises over its own assets, provided that Subcustodian shall exercise at least the degree of care and maintain adequate insurance as expected of a prudent professional Subcustodian for hire and shall assume the burden of proving that it has exercised such care in its maintenance of Property held by Subcustodian in its Accounts. The maintenance of the Property in an Eligible Depository shall not affect Subcustodian's standard of care, and Subcustodian will remain as fully responsible for any loss or damage to such securities as if it had itself retained physical possession of them. Subcustodian shall indemnify and hold harmless Custodian and each of Custodian's customers from and against any loss, damage, cost, expense, liability or claim (including reasonable attorney's fees) arising out of or in connection with the improper or negligent performance or the nonperformance of the duties of Subcustodian. Subcustodian shall be responsible for complying with all provisions of the laws of _________________________, or any other law, applicable to Subcustodian in connection with its duties hereunder, including (but not limited to) the payment of all transfer taxes or other taxes and compliance with any currency restrictions and securities laws in connection with its duties as Subcustodian. D. LOSS OF CASH OR SECURITIES Subcustodian agrees that, in the event of any loss of Securities or Cash in the Account, Subcustodian will use its best efforts to ascertain the circumstances relating to such loss and will promptly report the same to Custodian and shall use every legal means available to it to effect the quickest possible recovery. E. COMPENSATION OF SUBCUSTODIAN Custodian agrees to pay to Subcustodian from time to time such compensation for its services and such out-of- pocket or incidental expenses of Subcustodian pursuant to this Agreement as may be mutually agreed upon in writing from time to time. F. OPERATING REQUIREMENTS The Subcustodian agrees to follow such Operating Requirements as the Custodian may establish from time to time. A copy of the current Custodian Operating Reguirements is attached as Attachment B to this Agreement. G. TERMINATION This Agreement may be terminated by Subcustodian or Custodian on 60 days' written notice to the other party, sent by registered mail, provided that any such notice, whether given by Subcustodian or Custodian, shall be followed within 60 days by Instructions specifying the names of the persons to whom Subcustodian shall deliver the Securities in the Account and to whom the Cash in the Account shall be paid. If within 60 days following the giving of such notice of termination, Subcustodian does not receive such Instructions, Subcustodian shall continue to hold such Securities and Cash subject to this Agreement until such Instructions are given. The obligations of the parties under this Agreement shall survive the termination of this Agreement. H. NOTICES Unless otherwise specified in this Agreement, all notices and communications with respect to matters contemplated by this Agreement shall be in writing, and delivered by mail, postage prepaid, telex, SWIFT, or other mutually agreed telecommunication methods to the following addresses (or to such other address as either party hereto may from time to time designate by notice duly given in accordance with this paragraph): To Subcustodian: To Custodian: State Street Bank and Trust Company Securities Operations Network Administration P.O. Box 1631 Boston, Massachusetts 02105 I. CONFIDENTIALITY Subcustodian and Custodian shall each use its best efforts to maintain the confidentiality of the property in the Account and the beneficial owners thereof, subject, however, to the provisions of any laws requiring disclosure. In addition, Subcustodian shall safeguard any test keys, identification codes or other security devices which Custodian shall make available to it. The Subcustodian further agrees it will not disclose the existence of this Agreement or any current business relationship unless compelled by applicable law or regulation or unless it has secured the Custodians written consent. J. ASSIGNMENT This Agreement shall not be assignable by either party but shall bind any successor in interest of Custodian and Subcustodian respectively. K. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of _______________________________ _________________. To the extent inconsistent with this Agreement or Custodian's Operating Requirements as attached hereto, Subcustodian's rules and conditions regarding accounts generally or custody accounts specifically shall not apply. CUSTODIAN: STATE STREET BANK AND TRUST COMPANY By:_______________________ Date______________________ AGREED TO BY SUBCUSTODIAN: By :_________________________ __________________________ Date:________________________ STATE STREET BANK AND TRUST COMPANY Consolidated Custodian Fee Schedule CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. I. ADMINISTRATION The following schedule represents the consolidated fee schedule for all assets in: Connecticut Mutual Investment Accounts, Inc. Connecticut Mutual Financial Services Series Fund I, Inc. Separate Accounts A. CUSTODY INCLUDES: Maintaining custody of fund assets. Settling portfolio purchases and sales. Reporting buy and sell fails. Determining and collecting portfolio incomes. Making cash disbursements and reporting cash transactions. Monitoring corporate actions. Withholding foreign taxes. Filing foreign tax reclaims. FUND NET ASSETS ANNUAL FEE First $l Billion .005 of 1% Excess of $1 Billion .0025 of 1% B. PORTFOLIO AND FUND ACCOUNTING Includes: Maintaining investment ledgers, providing selected portfolio transactions, position and income reports. Maintaining general ledger and capital stock accounts. Preparing daily trial balance. Calculating net asset value daily, calculating fund 7 day yield. Providing selected general ledger reports. Securities yield or market value quotations will be provided to State Street by the fund or via State Street's pricing services. THERE WILL BE AN ANNUAL CHARGE OF $15,000 PER DOMESTIC PORTFOLIO. II. GLOBAL CUSTODY Includes: Maintaining custody of fund assets. Settling portfolio purchases and sales. Reporting buy and sell fails. Determining and collecting portfolio income. Making cash disbursements and reporting cash transactions. Monitoring corporate actions. Withholding foreign taxes. Filing foreign tax reclaims. *GROUP I *GROUP II *GROUP III *GROUP IV *GROUP V Euroclear Australia Austria Finland Argentina Germany Canada Belgium Philippines Brazil Japan Denmark Italy Korea Chile France Norway Mexico Taiwan Ireland HongKong Portugal Venezuela Netherlands Indonesia Singapore NewZealand Spain Sweden Thailand Switzerland Turkey U.K. Malaysia A. HOLDING FEES (BASIS POINTS PER PORTFOLIO PER ANNUM): GROUP I GROUP II GROUP III GROUP IV GROUP V First $ 50 Million 5.0 11.0 15.0 22.0 35.0 Next $ 50 Million 4.0 10.0 14.0 20.0 30.0 Over $100 Million 3.0 8.0 3.0 18.0 25.0 B. TRADING FEES (PER TRADE): GROUP I GROUP II GROUP III GROUP IV GROUP V Trades $25 $40 $55 $60 $100 *Exclude Agent, depository and local auditing fees, stamp duties and registration fees. III. PORTFOLIO TRADES FOR EACH LINE ITEM PROCESSED: State Street Bank Repos $ 7.00 Boston Commercial Paper $16.00 DTC or Fed Book Entry $12.00 Physical Settlements/Foreign Trade/PT $25.00 Maturity Collections $ 8.00 IV. OPTIONS Option charge for each option written or closing contract, per issue, per broker $25.00 Option expiration charge, per issue, per broker $15.00 Option exercised charge, per issue, per broker $15.00 V. LENDING OF SECURITIES Deliver loaned securities versus cash collateral $20.00 Deliver loaned securities versus securities collateral $30.00 Receive/deliver additional cash collateral $ 6.00 Substitutions of securities collateral $30.00 Deliver cash collateral versus receipt of loaned securities $15.00 Deliver securities collateral versus receipt of loaned securities $25.00 Loan administration market to market per day, per loan $ 3.00 VI. INTEREST RATE FUTURES Transactions no security movement $ 8.00 VII. DIVIDEND CHARGES (For items held at the Request of Traders over record date in street form) $50.00 VIII. SEC YIELD CALCULATION Yield calculation per fund, per month $250.00 IX. SPECIAL SERVICES Fees for activities of a nonrecurring nature such as fund consolidations or reorganizations, extraordinary security shipments and the preparation of special reports will be subject to negotiation. X. OUT-OF-POCKET EXPENSES This charge will be levied on foreign account assets only. A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include, but are not limited to the following: Telephone Wire Charges ($5.25 per wire in and $5.00 out) Postage and Insurance Courier Service Duplicating Legal Fees Supplies Related to Fund Records Rush Transfer $8.00 Each Transfer Fees Subcustodian Charges Price Waterhouse Audit Letter Federal Reserve Fee for Return Check items over $2,500 $4.25 GNMA Transfer $15 each CONNECTICUT MUTUAL INVESTMENT ACCOUNTS STATE STREET BANK AND TRUST CO. By:_____________________________ By:____________________________ TITLE:__________________________ TITLE:__________________________ DATE:___________________________ DATE:___________________________ PERFORMANCE STANDARDS CONNECTICUT MUTUAL - CMIA PERFORMANCE OBJECTIVE STANDARD Accurate computation of the NAV per share and Submission to 99.5% Transfer Agent. Accurate reporting of the NAV per share to NASDAQ 99% The collection and crediting of interest and dividends 99.95% FED Credited same day as receipt PTC Credited same day as receipt DTC Credited same day as receipt Physical Credited same day as receipt Defaulted Security Payments Upon receipt Timely settlement of trades 99.5% Timely and accurate receipt of reports by agreed upon delivery date 95% Accurate computation of SEC Yield calculations 99% Delivery of Cash Availability by 10:00 AM 99.5% This assumes capital stock activity is received by 9:30 AM PERFORMANCE FEE ADJUSTMENT If standards are not met then a 1% fee reduction will be applied to the fund complex. The standards will be measured on an annual basis and the adjustment will occur as a reduction in following year's fees. EX-8.2 12 EXHIBIT 8.2 EXHIBIT 8.2 February 8, 1995 State Street Bank and Trust Company 1776 Heritage Drive North Quincy, MA 02171 Gentlemen: This letter is to advise you that Connecticut Mutual Investment Accounts, Inc. (the "Fund") intends to register, qualify, and offer additional shares in the following new Portfolios to the general public: CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced Account, and CMIA LifeSpan Diversified Income Account (collectively, the "New Accounts"). In accordance with the Additional Funds provision in Section 17 of the Custodial Contract dated January 28, 1993, and Article 10 of the Transfer Agency and Service Agreement dated April 19, 1994 between the Fund and State Street Bank and Trust Company, the Fund hereby requests that you act as Custodian and Transfer Agent for the New Accounts under the terms of the respective contracts. Please indicate your acceptance of the foregoing by executing two copies of this Letter Agreement, returning one to the Fund and retaining one copy for your records. By: /s/ Ann F. Lomeli --------------------------------- Ann F. Lomeli, Secretary Agreed to this 8th day of February, 1995. STATE STREET BANK AND TRUST COMPANY By: /s/ Vice President --------------------------------- Vice President EX-9.13 13 EXHIBIT 9.13 Exhibit 9.13 FORM OF SERVICE CONTRACT THIS AGREEMENT is made effective the _th day of ________, 1996, between OPPENHEIMER SERIES FUND, INC. (hereinafter referred to as the "Company"), a Maryland corporation, having its principal place of business at Two World Trade Center, New York, New York 10048, on behalf of each series of the Company designated by the Company to OFS on Exhibit 1 to this Agreement (each series is hereinafter referred to as a "Fund") as such Exhibit may be amended from time to time to add additional series of the Company, and OPPENHEIMERFUNDS SERVICES, a division of OPPENHEIMERFUNDS, INC. -- a Colorado corporation ("hereinafter referred to as "OFS") having its principal place of business at 3410 South Galena Street, Denver, Colorado 80231. WITNESSETH: WHEREAS, the Company desires that OFS perform certain registrar and transfer agency services for the Fund, as more specifically set forth in Schedule A to this Agreement. THEREFORE, the parties hereto agree as follows: 1. SERVICES TO BE PERFORMED BY OFS. The services to be performed for the Funds by OFS are set forth in Schedule A to this Agreement, which Schedule is incorporated as part of this Agreement. OFS shall perform such services as registrar, transfer agent, dividend and distribution disbursing agent, redemption agent, clearing agent and exchange agent or as service agent for the Funds. OFS hereby represents to the Company that it is, and during the term of this Agreement and any renewals hereof will continue to be, an owner or authorized licensee for the computer data processing systems used by OFS in the rendition of services hereunder. 2. ADDITIONAL SERVICES. OFS also agrees to perform such additional services within its data processing and shareholder services capacities as may be requested from time to time by a Fund, provided that such services are the subject of an amendment to Schedule A hereof executed by the parties hereto in the manner provided herein for amendments to this Agreement. 3. FEES. A. METHOD OF CALCULATING FEES PAID BY THE FUND. OFS will render the services it agrees hereunder to provide to each Fund on a cost basis, to be determined as hereinafter provided. Each Fund will pay OFS an amount (the "Fund's Share") of OFS's "Reimbursable Expenses," as defined in subparagraph B of this section, as frequently as requested by OFS, such amounts to be paid by the Fund when billed by OFS for expenses incurred, or to be prepaid based on estimates by OFS if such prepayment arrangement is approved by the Board of Directors of the Company. Any such estimates upon which prepayments are made shall be verified and adjusted monthly thereafter in accordance with OFS's allocated costs, as described in subparagraph E below. All servicing and transaction fees or charges, required by a Fund's then-current prospectus to be paid by an investor in the Fund's shares, will be collected by OFS and credited against the Fund's Share of Reimbursable Expenses except that any amounts representing fees payable by an investor directly to any bank as custodian and director fees with regard to and pursuant to the terms of any Individual Retirement Accounts, Self-Employed Retirement Plans, Profit Sharing and Pension Plans, or similar plans invested in the Fund and for which such bank acts as custodian or director may be paid directly to such bank or, if said bank has agreed to permit OFS to retain all or a portion of said fees, such amount shall be credited against the Fund's share of Reimbursable Expenses. Any credit for fees payable for an investor's purchase of, or exchange for, the shares of any other investment company for which OFS, or any subsidiary or affiliate of OFS acts as a general distributor, will be shared equally between the applicable Fund and such other investment company. -2- B. DESCRIPTION OF "REIMBURSABLE EXPENSES." For the purposes of this Agreement, the "Reimbursable Expenses" of OFS shall include, in addition to the expenses described in subparagraphs (1), (2) and (3) of this subparagraph B, any operating and overhead expenses as may be paid or incurred by OFS to provide such personnel, equipment, telephone lines, consulting services, account collection services, supplies, space and facilities, including without limitation computer tape transmission facilities and services and computer time, as shall in the good faith judgment of OFS be necessary or desirable for the effective performance of shareholder account servicing, redemption, receipt and processing of the purchase of a Fund's shares, dividend or distribution disbursing and transfer agency services for (a) all investment companies (including each Fund) with which OFS or a subsidiary has entered into a Service Contract and for which OFS, or asubsidiary or affiliate of OFS, acts in the capacity of investment adviser, (b) the related unit investment trusts, if any, of the foregoing investment companies, other than unit investment trusts which operate as a separate account of an insurance company, and (c) the principal underwriters of any such investment companies or unit investment trust (hereinafter the entities described in (a), (b), and (c) are jointly and severally referred to as "Participants") as well as for the performance of such data processing and administrative functions or services as may be required by OFS or any subsidiary to perform the services required hereunder. Reimbursable Expenses of OFS shall also include without limitation: (1) The cost, including without limitation the personnel costs, of any computer modifications, amendments, testing or monitoring of the computer data processing system used by OFS for the performance of services for the Participants which may be deemed by OFS to be necessary or desirable for the maintenance or improvement of such data processing system; (2) Such general executive, internal audit and administrative expenses of OFS as are properly apportioned, on a basis capable of reasonable substantiation, to the -3- functions set forth above in this subparagraph B to be performed by OFS. Such costs are costs of OFS which are allocated in accordance with subparagraph C below; and (3) Amounts paid by OFS to sub-transfer agents, third party administrators and other similar clearing firms pursuant to written agreements which permit OFS to maintain an omnibus account in the name of the shareholder of record with the individual beneficial owners of the account being serviced by, and the account records for the beneficial owners maintained by, such sub-transfer agent, third party administrator or other similar clearing firm. C. DETERMINATION OF FUND'S SHARE OF REIMBURSABLE EXPENSES. Each Fund's Share of the Reimbursable Expenses of OFS for all participants will be determined by the use of allocation formulae set forth in subparagraph D below, which allocation formulae shall be: (1) No more or less advantageous to a Fund than to any of the other of such Participants; (2) Consistent with and governed by the provisions of the Distributor's Agreement in effect, from time to time, between a Fund and its general distributor relating to the allocation of costs between that Fund and its general distributor; (3) With the full cooperation of OFS, reviewed at least annually by the auditors of the Company to determine the appropriateness of the Reimbursable Expenses of OFS and the allocation formulae used to determine each Fund's Share of such Reimbursable Expenses; and (4) In no event shall a Fund's Share include any expense for services in connection with the distribution of that Fund's shares which are or may hereafter be provided by broker-dealers or financial institutions with respect to accounts for their customers owning shares of any investment company. D. COST ALLOCATION. Subject to the foregoing, each Fund's Share of the Reimbursable Expenses of OFS shall be computed in accordance with the allocation formulae and -4- procedures set forth in OFS's "Cost Accounting Manual and Job Procedures," compiled and maintained by OFS, as such document may be amended from time to time by OFS, provided that OFS shall notify that Fund of any material changes which shall change the method of allocation of that Fund's Share of Reimbursable Expenses, and such changes shall be approved by the Board of the Company. Such Manual shall be reviewed periodically by the Company's auditors in connection with the annual review described in subparagraph 2(C)(3) above. E. EXPENSE REPORTS. OFS shall submit to each Fund a monthly report setting forth in reasonable detail the Reimbursable Expenses that OFS has paid or incurred during such month (and on a year-to date basis) together with a statement of the Fund's Share of such Reimbursable Expenses. 4. REIMBURSEMENT OF OTHER EXPENSES. In addition to paying its Share of Reimbursable Expenses, each Fund also will promptly reimburse OFS or prepay OFS based on estimates by OFS if such prepayment arrangement is approved by the Company's Board (such estimates to be verified and adjusted monthly thereafter in accordance with actual allocated costs), for the following: (a) Out-of-pocket expenses, including without limitation expenses for postage, the procurement and/or printing of share certificates; shareholder statements; envelopes; labels; dividend, distribution or redemption checks; notices; reports; tax forms; letters; and all other forms or printed material which may be required for the performance by OFS of the functions and services for each Fund pursuant to the provisions of this Agreement; (b) All direct telephone, telegraph, telecopier or other communications expenses necessarily incurred by OFS in connection with OFS's communications with each Fund's custodian, investment adviser, shareholders or others which may be required for the performance by OFS of the functions and services for that Fund pursuant to the provisions of this Agreement; -5- (c) Delivery and bonding charges incurred by OFS in the transmission of materials to and from a Fund and in delivering certificates to shareholders; (d) Premiums for insurance coverage as may be required by Section 11 of this Agreement and for other coverage as may be required to be maintained by OFS or OppenheimerFunds, Inc. for the benefit of itself and each Fund with respect to services performed, or the equipment or facilities utilized by OFS in fulfilling its obligations under this Agreement; and (e) The fees and costs of retaining auditors and legal counsel for OFS in connection with its performance of transfer agency functions. 5. EFFECTIVE DATE AND TERM. This Agreement shall become effective on the date set forth in the heading paragraph of this Agreement, shall supersede any prior agreements among the parties hereto relating to the subject matter hereof, and shall continue in full force and effect until terminated by any party upon six months' prior written notice of termination addressed to all other parties. 6. STANDARD OF CARE. OFS will make every reasonable effort and take all reasonably available measures to assure the adequacy of its personnel and facilities as well as the accurate performance of all services to be performed by it hereunder within, at a minimum, the time requirements of any statute, rule or regulation pertaining to investment companies and any time requirements set forth in the then-current prospectus of each Fund. OFS shall promptly correct any error or omission made by it in the performance of its duties hereunder provided that it shall have received notice in writing of such error or omission and any necessary substantiating data. In effecting any such corrections, OFS shall take all reasonable steps necessary to trace and to correct any related errors or omissions, including, without limitation, those which might cause an over-issue of a Fund's shares and/or the excess payment of dividends or distributions. The allocable costs of corrections -6- shall be charged to the applicable Fund and the liability of OFS under this Section shall be subject to the limitations provided in Section 12 hereof. 7. RECORDS RETENTION AND CONFIDENTIALITY. OFS shall keep and maintain on behalf of each Fund all records which that Fund or its transfer agent is, or may be required, to keep and maintain pursuant to any applicable statutes, rules and regulations relating to the maintenance of records in connection with the services to be performed hereunder. OFS also shall maintain, for a period of at least 6 years, all records and documents which may be needed or required to support or document the actions taken by OFS in its performance of services hereunder. OFS recognizes and agrees that all such records and documents (but not the computer data processing programs and any related documentation used or prepared by, or on behalf of, OFS for the performance of its services hereunder) are the property of the applicable Fund; shall be open to audit or inspection by the Fund or its agents during OFS's normal business hours; shall be maintained in such fashion as to preserve the confidentiality thereof and to comply with applicable federal and/or state laws and regulations; and shall, in whole or any specified part, be surrendered and turned over to the Fund or its duly authorized agents at any time upon OFS's receipt of an appropriate written request. 8. CLEARING ACCOUNTS. Each Fund shall open and/or maintain such bank account or accounts as shall reasonably be required by OFS for controlling payments, the disbursement of dividends, capital gains distributions and share redemption payments pursuant to the provisions hereof, and any other accounts deemed necessary by OFS or a Fund to carry out the provisions of this Agreement, with a bank or banks selected by OFS with the prior approval of the Company's Board. Such account may be an omnibus account used for all funds for which OFS or one of its subsidiaries acts as transfer agent. The Company shall authorize officers or employees of the Company to act as authorized signatories to disburse funds held in such accounts. OFS shall be accountable to the -7- Company and the applicable Fund for the management of such accounts by OFS (and the funds at any time on deposit therein). 9. REPORTS. OFS will furnish to each Fund, at the Fund's cost, and to such other persons or parties as are designated herein or shall be designated in writing by an authorized officer of the Fund, such reports at such times as are required for the performance of the services referred to in Schedule A. 10. INDEMNIFICATION. The Company shall indemnify OFS and OppenheimerFunds, Inc. and hold OFS and OppenheimerFunds, their officers, directors, employees and agents harmless from and against any and all claims, demands, actions and suits, whether groundless or otherwise, and from and against all judgments, liabilities, losses, damages, costs, charges, counsel fees and other expenses arising from or relating to any action taken or omitted to be taken by OFS or by any sub-transfer agents, third-party administrators or other similar clearing firms which maintain account records for individual beneficial owners pursuant to agreement with OFS, in good faith or as a result of ordinary negligence in reliance upon: (A) The authenticity of any letter or any other instrument or communication reasonably believed by it to be genuine and to have been properly made or signed by an authorized officer or agent of a Fund or the Company or by a shareholder or the authorized agent of a shareholder, as the case may be and which complies with the terms of this Agreement which pertain thereto; (B) The accuracy of any records or information provided to it by a Fund or the Company except to the extent the same may contain patently obvious errors or omissions; (C) Any certificate by an authorized officer of a Fund or the Company or any other person authorized by the Company's Board as conclusive proof of any fact or matter required to be ascertained by OFS hereunder; -8- (D) Instructions at any time given by an authorized officer of a Fund or the Company with respect to OFS's duties and responsibilities hereunder, including, as to legal matters pertaining to the performance of its duties hereunder, such advice or instructions as may be given to OFS by a Fund's or the Company's general counsel or any legal counsel appointed by such counsel or by any authorized officer of the Fund or the Company; (E) Instructions regarding redemptions, exchanges or other treatment of the shares of a Fund, together with all dividends and capital gain distributions thereon and any reinvestment thereof, held or shown to the credit of any shareholder account, if such instructions satisfy the requirements of the Fund as contained in its then current prospectus, or the Fund's policies or as communicated in writing to OFS by the Fund; or (F) The advice or opinion of legal counsel furnished to OFS pursuant to Section 13 hereof. 11. INSURANCE. Unless otherwise obtained by the Fund, OFS or OppenheimerFunds, Inc. shall use its best efforts to obtain and keep in effect pursuant to binders with underwriters authorized to do business in the State of Colorado or New York, or approved by the Company's Board, certificates or policies naming itself and the Company and each Fund as assureds and providing for cancellation or termination only upon 30 days' prior written notice to the Fund, as follows: (i) A broad form of fidelity bond coverage in the minimum amount of $1,000,000 covering theft, embezzlement, forgery and other specified acts of malfeasance and misfeasance by OFS, its agents and employees, with aggregate coverage for counterfeit or stolen securities and forged signatures in the minimum amount of $1 million and at least $300,000 for each loss; (ii) A lost instrument bond permitting the replacement of a share certificate which has been lost, stolen or destroyed, for a stated percentage of the then-current net asset value thereof to be paid by the shareholder or party seeking replacement thereof; -9- (iii) Coverage of up to $5 million against loss of securities transmitted by first class, certified or registered mail and express or air express throughout the United States and of up to $1 million against loss of securities transmitted by registered mail or registered air mail, and express or air express mail anywhere in the world; and (iv) Data Processors' Professional Liability Insurance against errors and omissions having aggregate coverage of at least $1 million and a limitation of liability for each claim of not less than $500,000. The Board of the Company, from time to time may change the amounts of any of the foregoing coverage or prescribe additional coverage. In the event that OFS shall be unable to obtain or keep in effect any of the insurance coverage herein referred to, it shall promptly notify the Company in writing of such inability and shall use its best efforts to obtain and keep in effect such other insurance coverage as the Company shall reasonably require in lieu of the coverage described above. 12. LIMITATIONS OF LIABILITY. In addition to the limitations on OFS's and OppenheimerFunds, Inc.'s liability stated in Sections 10 and 13 hereof, OFS and OppenheimerFunds, Inc. assumes no liability hereunder and shall not be liable hereunder for any damage, loss of data, delay or other loss caused by circumstances or events beyond its control which it could not reasonably have anticipated. OFS and OppenheimerFunds, Inc. shall not have any liability beyond the insurance coverage referred to in Section 11 hereof for loss or damage arising from its own errors or omissions or the errors or omissions of sub-transfer agents, third-party administrators or other similar clearing firms which maintain account records for individual beneficial owners pursuant to an agreement with OFS ("Recordkeepers") except to the extent such errors or omissions are attributable to gross negligence or purposeful fault on the part of OFS or the Recordkeepers, their officers, directors, agents and/or employees; and in no event will OFS and OppenheimerFunds, Inc. be liable to the -10- Company or a Fund for punitive damages. The Company and each Fund shall indemnify and hold OFS and OppenheimerFunds, Inc. harmless from and against any liabilities and defense expenses arising by reason of claims of third parties, based on errors or omissions of OFS, which are greater in amount than the limitations of liability described above, except to the extent such errors or omissions are attributable to gross negligence or purposeful fault on the part of OFS, or the Recordkeepers, or their respective officers, directors, agents and/or employees. 13. LEGAL ADVICE AND INSTRUCTIONS. OFS at any time may request instructions from any authorized officer of the Company or a Fund with respect to the performance of its duties and responsibilities hereunder and may consult with counsel for the Company or a Fund relative to any such matter and shall not be liable hereunder for any action taken or omitted by it in good faith in accordance with such instructions or with an opinion of such counsel or of counsel appointed by an authorized officer of the Company or a Fund to deal with inquiries or requests for instructions by OFS. 14. DOCUMENTS AND INFORMATION. As soon as feasible prior to the effective date of the Agreement, and if not heretofore provided, the Company will supply to OFS a statement, certified by the treasurer of the Company, stating the number of shares of each Fund authorized, issued, held in treasury, outstanding and reserved as of such date, together with copies of specimen signatures of the Company's or the Fund'sofficers and such other documents and information, including without limitation the then-current prospectus of the Fund, which OFS may determine in its reasonable discretion to be necessary or appropriate to enable it to perform the services to be performed hereunder, and the Company or the Fund thereafter will supply all amendments or supplemental documents with respect thereto as soon as the same shall be effective or available for distribution. The Company and each Fund assumes full responsibility for the preparation, accuracy, content and clearance of its prospectus under federal and/or state securities laws and any rules or regulations thereunder. If a Fund shall make any change in its prospectus affecting the services and functions to be -11- performed by OFS hereunder, such additional services and functions shall be deemed to be incorporated in Schedule A. 15. TERMINATION. This Agreement may be terminated by any party only upon written notice as provided in Section 5 hereof, except that the Company may terminate this Agreement without prior notice to preserve the integrity of its shareholder records from material and continuing errors and omissions on the part of OFS. In the event of any termination, OFS will provide full cooperation, assistance and documentation within its capabilities as shall be necessary or desirable, in the reasonable judgment of the Company, to ensure that any transfer of the duties and responsibilities of OFS is accomplished with maximum efficiency and with minimum cost and disruption to the Company's activities. Such cooperation will include the delivery of all files, documents and records used, kept or maintained by OFS in the performance of its services hereunder (except records or documents destroyed when consistent with the provisions hereof or with the approval of a Fund or the Company or which relate solely to the documentation of the computer data processing programs of OFS) together with, in machine-readable form, such of a Fund's records as may be maintained by OFS in a form other than written form, as well as such summary and/or control data relating thereto used by or available to OFS as may be requested by the Fund. The cost of all such termination services on the part of OFS shall be paid by the applicable Fund without prejudice, however, to the rights of the Fund to recover any amounts so paid in the event that OFS shall be liable to the Fund under Section 12 hereof. In the course of its performance of the services set forth in Schedule A hereto, as such services may from time to time be modified or amended, OFS will enter into leases for equipment. If this Agreement is terminated by the Company, and if, as a result of such termination, such equipment specifically leased by OFS to perform such services can no longer be utilized economically by OFS in its performance of services for any other entities with which OFS has continuing transfer agency or other service contracts, OFS may in its discretion cancel such leases. However, the Company shall not have any responsibility for -12- termination penalties, if any, which may be payable under the terms of such equipment leases, unless otherwise agreed by the Company prior to the time such lease is entered into. 16. AVAILABILITY OF CONTINUED USE OF DATA PROCESSING SYSTEM. In the event that the Company ceases to employ OFS hereunder or after termination of this Agreement, the Company shall have the right to use the computer data processing systems, operating systems, computer programs, software and supporting documentation then used by OFS for providing the services to the Company contemplated hereby. 17. NOTICES. Any notice hereunder shall be sufficiently given when sent by registered or certified mail, return receipt requested, to any party hereto at the address of such party set forth above or at such other address as such party may from time to time specify in writing to the other parties. 18. CONSTRUCTION; GOVERNING LAW. The headings used in this Agreement are for convenience only and shall not be deemed to constitute a part hereof. This Agreement, and the rights and obligations of the parties hereunder, shall be governed by and construed and interpreted under and in accordance with the laws of the State of Colorado applicable to contracts made and to be performed in that state. 19. ASSIGNMENT; DELEGATION. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their successors and assigns, including without limitation, any successor to any party resulting by reason of corporate merger or consolidation; provided however that this Agreement and the rights and duties hereunder shall not be assigned by any of the parties hereto except upon the specific prior written consent of all parties hereto. With the prior written consent of the Company, OFS may delegate to others all or any portion of the services to be rendered under this Agreement. OFS may enter into written agreements with sub-transfer agents, third-party administrators and other similar clearing firms which permit OFS to maintain an omnibus account -13- in the name of the shareholder of record with the individual beneficial owners of the account being serviced by, and the account records for the beneficial owners maintained by, such sub-transfer agent, third party administrator or other similar clearing firm. Such agreements shall comply with the criteria and parameters approved and adopted from time to time by OFS and by the Board of the Company. In connection with such arrangements, the Company hereby appoints such sub-transfer agents, third-party administrators or other similar clearing firms as agent for the Company for the limited purpose of accepting purchase, exchange and redemption orders from the individual beneficial owners. 20. INTERPRETIVE PROVISIONS. OFS and a Fund or the Company may agree from time to time in writing on provisions interpretative of, or supplemental to, the provisions of this Agreement. 21. OTHER AGREEMENTS. This Agreement shall not preclude the Fund from entering into transfer agency agreements or sub-transfer agency agreements with others. 22. SEVERABILITY. If any clause or provision of this Agreement is determined to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, then such clause or provision shall be considered severed herefrom, and the remainder of this Agreement shall continue in full force and effect. 23. ENTIRE AGREEMENT. Except as otherwise provided herein, this Agreement, including Schedule A annexed hereto, constitutes the entire and complete Agreement between the parties hereto relating to the subject matter hereof; supersedes and merges all prior contracts and discussions between the parties hereto; and may not be modified or amended except by written document signed by all parties hereto against whom such modification or amendment is to be enforced. -14- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above. OPPENHEIMERFUNDS SERVICES, a division of OppenheimerFunds, Inc. ATTEST: _________________________________ By: _____________________________________ Barbara Hennigar, President OPPENHEIMER SERIES FUND, INC. on behalf of its designated Series ATTEST: _________________________________ By: _____________________________________ Name: ____________________________ Title: ____________________________ -15- EXHIBIT 1 LIST OF FUNDS FOR WHICH OFS IS DESIGNATED TO ACT AS TRANSFER AGENT Oppenheimer Disciplined Allocation Fund Oppenheimer Life Span Income Fund Oppenheimer Disciplined Value Fund Connecticut Mutual Liquid Account Oppenheimer Life Span Growth Fund Connecticut Mutual Government Oppenheimer Life Span Balanced Fund Securities Account Oppenheimer Life Span Balanced Fund Connecticut Mutual Income Account -16- SCHEDULE A SERVICE CONTRACT SCHEDULE OF SERVICES To the extent that a Fund's then-current Prospectus requires the following services, and to the extent that such services are not, or may not hereafter be, provided by broker-dealers or other financial institutions with respect to accounts for which such broker-dealer or financial institution provides services in connection with the distribution of that Fund's shares, OppenheimerFunds Services, ("OFS") shall do the following: I. Registrar of Fund Shares 1. Register and control the issuance of full and/or fractional shares of each Class of Shares of the Fund either for payment of applicable net asset value or upon surrender of an equivalent number of shares for transfer, or for reinvestment of dividends or capital gains distributions and, in connection therewith, maintain appropriate records (which may include the shareholder accounts referred to below) recording the issuance, transfer and redemption of all outstanding shares of each Class of Shares of the Fund, showing all shares of each Class of Shares of the Fund issued and represented by outstanding certificates, and showing issuance of all uncertificated shares of the Fund; prepare entries to transfer redeemed or repurchased shares to the Fund's treasury share account or, if applicable, cancel such shares for retirement; retain records of issuance of new certificates for lost or stolen certificates or for cancellation of lost or stolen certificates, and the indemnity bonds furnished by shareholders in connection therewith. 2. Maintain daily balance controls for the issuance and redemption of shares as well as all cash receipts and disbursements handled on behalf of the Fund. 3. Furnish to the Fund such information as it may request for preparation of filings with federal and state authorities. II. Shareholder Accounts 1. Open new accounts upon receipt of properly executed instructions from a dealer or the Fund's Distributor, a properly completed and signed account application, exchange application or request for transfer of an existing account, or properly authorized telephone exchange or redemption instructions, and maintain current records for all new and existing categories of shareholder accounts described in the then-current Prospectus of the Fund, showing as to each registered owner (to the extent such information is available or obtainable): a. Name(s) and address(es), with zip code; b. Category of account and taxpayer identification number; c. Dealer and/or any representative affiliated with the account; d. Number of shares currently registered; A-1 e. Account transaction history, including records of initial and additional purchases, transfers and redemptions, surrender of certificates, dividends and other distributions, and related tax information; f. Identification of any certificate(s) issued and the number of shares evidenced by each such certificate; g. Shares held in escrow against performance of any obligation; and h. Identification of account using the broker's identification. 2. Maintain files containing account applications, requests or other correspondence from or on behalf of shareholders, as well as copies of all responses thereto. 3. Process all changes or corrections to a shareholder's registration and address records authorized orally or in writing by or on behalf of the shareholder. 4. Process such reinvestments of the proceeds of a redemption of Fund shares as may properly have been elected by a shareholder pursuant to a privilege described in the then-current Prospectus of the Fund. 5. Process investments in shares of the Fund at its then-current net asset value as may properly be requested by a shareholder of any of the other investment companies having such privilege as described in the then-current Prospectus of the Fund or information supplied to OFS by the Fund. 6. Prepare and transmit by mail to the affected shareholder a statement/confirmation of all transactions affecting the account of such shareholder including initial and additional purchases, reinvestments of dividends and distributions, adjustments, exchanges, transfers to and from the account and redemptions of all kinds. 7. Maintain records when made available to OFS according to properly executed and authorized instructions relating to rights of accumulation, letters of intent and other special pricing provisions including, without limitation, group purchase plans and minimum account sizes. 8. Record and maintain the amount of pre-authorized or automatic investments, including the shareholder's bank account number and time periods for such investments; and draw the authorized investment amount from the shareholder's bank account at the specified time periods and issue shares with respect to such investments. 9. Maintain records of special account instructions such as wire/telephone redemption or exchange authorizations. 10. Retain records and amounts of payment items (including interest, dividends, distributions and redemption proceeds) that are returned undelivered and undeliverable from investors' addresses and maintain such records in accordance with applicable regulations; and invest such amounts, in accordance with the terms of the Fund's then-current Prospectus, for the benefit of the shareholder(s) of record. A-2 11. Reconcile account data for account information transmitted by magnetic tape by broker-dealers maintaining shareholder accounts in nominee name and perform other services enumerated hereunder to the extent required for such accounts. 12. Process new and additional payments made by shareholders for investment at their current offering price. 13. Maintain records required under Rule 17Ad-10(e) under the Securities Exchange Act of 1934. III. Redemptions and Automatic Withdrawals 1. Receive and ascertain the adequacy of all redemption requests on the basis of the requirements set forth in the then-current Prospectus of the Fund and the Fund's policies to the extent applicable from time to time and otherwise in accordance with the generally accepted practices of transfer agents. 2. Adjust a shareholder's account to reflect the number of shares redeemed. 3. Requisition from the Fund's custodian and remit the properly-computed amount of the proceeds of each redemption to, or as directed by, individual shareholders pursuant to appropriately-executed written instructions or appropriately-submitted redemption requests by wire or telephone in the case of shareholder accounts having appropriate authorization on file (including payment to one or more of the other investment companies with which the Fund permits exchanges in the case of an exchange of investments). 4. On accounts for which periodic withdrawals are specified in a properly-executed account application: a. Redeem shares sufficient for the amounts of the specified withdrawals at the specified time period; and b. Receive and remit the proceeds of such redemption in like manner to other redemptions. IV. Payment of Interest, Dividends and Distributions 1. Upon receipt of properly-executed instructions from the Fund upon declaration of any dividend and/or distribution, compute and credit the accounts of all shareholders electing to reinvest dividends and/or distributions with the proper number of whole and fractional shares, computed as of the reinvestment date and price specified by the relevant resolution of the Fund's trustees for such dividend or distribution; and compute for all other shareholders of record, on the ex-dividend date specified by such resolution, the dollar amount payable in cash in respect of such dividend or distribution. 2. Requisition from the Fund's custodian and remit the properly-computed amounts of dividends or distributions payable in cash to shareholders electing such payment or as directed by individual shareholders pursuant to appropriately-executed written instructions; and prepare and mail share certificates for reinvested amounts to shareholders electing to receive certificates for shares. A-3 3. Adjust the amount of dividend or distribution payments for accounts having unsettled investments or repurchases as of the record date with appropriate accounting adjustments to the Fund's distributionaccounts and remittances to its custodian. 4. Reconcile dividends and distributions with the Fund. V. Issuing and Accounting for Certificates 1. Safekeep and account for blank certificate forms. 2. Prepare, issue and mail certificates for full shares on request or according to permanent account instructions as provided in the Fund's then-current Prospectus, provided that sufficient deposit shares are available in the shareholder's account and proper authorization is received. 3. Receive certificates properly endorsed for transfer which are returned for deposit to a shareholder's account and, provided there is no stop-transfer or cancellation order pending relative to the specific certificate, make appropriate adjustments to the shareholder's account. 4. Physically cancel and otherwise account for certificates returned and deposited. 5. Keep and maintain certificate transcript records reflecting the issuance and holder of all outstanding certificates as well as all stop-transfers, cancellations and deposits of certificates. 6. Handle the replacement of lost certificates upon applications meeting the requirements of the Fund's then-current insurance coverage or, in the event such insurance is not obtainable, the instructions of the officers of the Fund or its counsel. 7. Receive and deal with stop-transfer instructions in accord with the generally-accepted practices of transfer agents. VI. Recapitalization or Capital Adjustment 1. In the case of any negative share split, recapitalization or other capital adjustment requiring a change in the form of share certificates of any Class, OFS will, in the case of accounts represented by uncertificated shares, cause the account records to be adjusted, as necessary, to reflect the number of shares held for the account of each such shareholder as a result of such change, or, in the case of shares represented by certificates, will issue share certificates in the new form in exchange for, or upon transfer of, outstanding share certificates in the old form, in either case upon receiving: a. A Certificate authorizing the issuance of share certificates in the new form; b. A certified copy of any amendment to the Company's Articles of Incorporation with respect to the change; c. Specimen share certificates for each class of shares in the new form approved by the Board of the Company, with a Certificate signed by the Secretary of the Company as to such approval; and A-4 d. An opinion of counsel for the Fund or the Company with respect to the matters set forth in Section 13 of the Service Contract as to such shares. 2. The Company shall furnish OFS with a sufficient supply of blank share certificates in the new form, and from time to time will replenish such supply upon the request of OFS. Such blank share certificates shall be properly signed by Officers of the Company authorized by law or the By-Laws to sign share certificates and, if required, shall bear the Company's seal or facsimile thereof. VII. Escrowing of Shares 1. Earmark and hold escrowed shares in a shareholder's account to secure compliance with executed letters of intent or for other purposes as provided in authorization instructions. 2. Pay dividends and distributions to the registered owner, or reinvest such dividends and distributions, on shares held in escrow. 3. Release or redeem shares held in escrow in accordance with appropriate instructions. VIII. Transfers 1. Respond to or process transfer instructions received by or on behalf of the registered owners of shares in accordance with the generally-accepted practices of transfer agents and any requirements set forth in the Fund's then-current Prospectus. 2. Pass upon the adequacy of documents submitted, prepare any documents required, and effect the transfer of shares to a shareholder account for the transferee, including the establishment of the new account. IX. Exchanges 1. Receive and process exchanges in accordance with duly-executed or telephonic exchange authorizations which comply with the provisions of the Fund's then-current Prospectus. 2. Establish, if necessary, a shareholder's account and register the new shares in accordance with duly executed or telephonic exchange instructions. X. Shareholder Communications 1. Maintain appropriate logs and other controls of all shareholder communications reflecting the promptness with which they are handled and the number of unresolved questions, inquiries and complaints outstanding at any time. 2. Receive and answer promptly all correspondence, telephone calls, or other inquiries from or on behalf of shareholders concerning the administration of their accounts. In the case of individual inquiries with respect to shares held in broker "street-name" accounts for the broker's customer, refer such inquiry to the appropriate broker for response, providing such information to such broker as OFS may reasonably ascertain from its records with respect thereto. A-5 3. Refer to the Company's investment adviser or Distributor questions or matters related to their functions. 4. Prepare such reports and summaries of shareholder communications as may be requested by the Company's officers for the preparation of reports to the Company's Board and appropriate regulatory authorities. 5. Attempt to collect or engage other agents or attorneys to collect on behalf of the Fund or the Company the amount of any over-payment or erroneous payment to a shareholder or other person by the Fund. XI. Handling of Proxies 1. In accordance with instructions by an officer of the Company, prepare proxy cards for each shareholder of record as of the date specified by a resolution of the Company's Board providing for a meeting of its shareholders. 2. Mail to each shareholder of record, at the address shown in the shareholder records of the Fund kept pursuant hereto (or as directed by the respective broker as to broker transmission accounts), a completed proxy card together with such other written material, including notices of the meeting and proxy statements, as may be supplied for that purpose by the Fund. 3. Furnish to the Fund a list of shareholders eligible to vote at the meeting, showing address of record and shares held together with an affidavit or other appropriate certificate of the mailing referred to above. 4. Receive and tabulate proxies, furnishing the Fund with a properly-certified report of such tabulation. XII. Annual and Other Reports 1. Process the mailing of such prospectuses and annual, semi-annual, or quarterly reports as shall be received from the Fund for that purpose and coordinate such mailings to appropriate categories of shareholders. 2. Prepare and mail to shareholders appropriate periodic statements of their accounts as contemplated by this Agreement. 3. Insert such other material with regular shareholder mailings as may be requested and furnished by the Fund. 4. Prepare and forward to the Fund such daily, periodic or special reports concerning shareholder records and any other functions performed pursuant to this schedule of services as may be requested by an officer of the Fund. A-6 XIII. Tax Matters 1. Prepare and file with the I.R.S. such Federal information returns with respect to Fund shareholdersas may be specified by the I.R.S. from time to time and mail copies thereof to shareholders. 2. Prepare and file appropriate Federal information returns and pay Federal income taxes withheld from distributions made to non-resident aliens. 3. Prepare magnetic tapes for brokers to determine taxable accruals as to broker transmission accounts to enable brokers to prepare appropriate information returns. 4. Pay Federal income taxes withheld from dividends, distributions and redemptions made to shareholders; process and retain records of withholding exemption certificates filed by shareholders. 5. Comply with backup withholding and taxpayer identification requirements issued by the I.R.S. which are applicable to transfer agents. A-7 EX-11 14 EXHIBIT 11 ARTHUR ANDERSEN LLP LETTERHEAD CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this Registration Statement (Registration Statement File No. 2-75276) for the following series of Connecticut Mutual Investment Accounts, Inc.: Liquid Account, Government Securities Account, Income Account, Total Return Account and Growth Account. /s/ ARTHUR ANDERSEN LLP Hartford, Connecticut February 29, 1996 ARTHUR ANDERSEN LLP LETTERHEAD CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this Registration Statement (Registration Statement File No. 2-75276) for the following series of Connecticut Mutual Investment Accounts, Inc.: LifeSpan Diversified Income Account, LifeSpan Balanced Account and LifeSpan Capital Appreciation Account. /s/ ARTHUR ANDERSEN LLP Hartford, Connecticut February 29, 1996 EX-15.7 15 EXHIBIT 15.7 Exhibit 15.7 FORM OF SERVICE PLAN AND AGREEMENT BETWEEN OPPENHEIMER DISCIPLINED ALLOCATION FUND AND OPPENHEIMERFUNDS DISTRIBUTOR, INC. FOR CLASS A SHARES SERVICE PLAN AND AGREEMENT dated the 18th day of March, 1996, by and between Oppenheimer Series Fund, Inc., on behalf of its series, Oppenheimer Disciplined Allocation Fund (the "Fund"), and OppenheimerFunds Distributor, Inc. (the "Distributor"). 1. THE PLAN. This Plan is the Fund's written service plan for its Class A Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Article III, Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers, pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and the maintenance of shareholder accounts ("Accounts") that hold Class A Shares (the "Shares") of such series and class of the Fund. The Fund may be deemed to be acting as distributor of securities of which it is the issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according to the terms of this Plan. The Distributor is authorized under the Plan to pay "Recipients," as hereinafter defined, for rendering services and for the maintenance of Accounts. Such Recipients are intended to have certain rights as third-party beneficiaries under this Plan. 2. DEFINITIONS. As used in this Plan, the following terms shall have the following meanings: (a) "Recipient" shall mean any broker, dealer, bank or other financial institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Fund's Board of Directors (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Directors") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, or (ii) such brokerage or other customers, or investment advisory or other clients of such Recipient and/or accounts as to which such Recipient is a fiduciary or custodian or co-fiduciary or co-custodian (collectively, the "Customers"), 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 recordon the Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. PAYMENTS FOR DISTRIBUTION ASSISTANCE. (a) Under the Plan, the Fund will make payments to the Distributor, within forty-five (45) days of the end of each calendar quarter, in the amount of the lesser of: (i) .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, or (ii) the Distributor's actual expenses under the Plan for that quarter of the type approved by the Board. The Distributor will use such fee received from the Fund in its entirety to reimburse itself for payments to Recipients and for its other expenditures and costs of the type approved by the Board incurred in connection with the personal service and maintenance of Accounts including, but not limited to, the services described in the following paragraph. The Distributor may make Plan payments to any "affiliated person" (as defined in the 1940 Act) of the Distributor if such affiliated person qualifies as a Recipient. The services to be rendered by the Distributor and Recipients in connection with the personal service and the maintenance of Accounts may include, but shall not be limited to, the following: answering routine inquiries from the Recipient's customers concerning the Fund, providing such customers with information on their investment in shares, assisting in the establishment and maintenance of accounts or sub-accounts in the Fund, making the Fund's investment plans and dividend payment options available, and providing such other information and customer liaison services and the maintenance of Accounts as the Distributor or the Fund may reasonably request. It may be presumed that a Recipient has provided services qualifying for compensation under the Plan if it has Qualified Holdings of Shares to entitle it to payments under the Plan. In the event that either the Distributor or the Board should have reason to believe that, notwithstanding the level of Qualified Holdings, a Recipient may not be rendering appropriate services, then the Distributor, at the request of the Board, shall require the Recipient to provide a written report or other information to verify that said Recipient is providing appropriate services in this regard. If the Distributor still is not satisfied, it may take appropriate steps to terminate the Recipient's status as such under the Plan, whereupon such entity's rights as a third-party beneficiary hereunder shall terminate. Payments received by the Distributor from the Fund under the Plan will not be used to pay any interest expense, carrying charge or other financial costs, or allocation of overhead of the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Directors. A majority of the Independent Directors may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each such 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 be sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in effect, the selection or replacement of Independent Directors and the nomination of those persons to be Directors of the Fund who are not "interested persons" of the Fund shall be committed to the discretion of the Independent Directors. Nothing herein shall prevent the Independent Directors from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Directors. 5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall provide at least quarterly a written report to the Fund's Board for its review, detailing the amount of all payments made pursuant to this Plan, the identity of the Recipient of each such payment, and the purposes for which the payments were made. The report shall state whether all provisions of Section 3 of this Plan have been complied with. The Distributor shall annually certify to the Board the amount of its total expenses incurred that year with respect to the personal service and maintenance of Accounts in conjunction with the Board's annual review of the continuation of the Plan. 6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing and shall provide that: (i) such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Independent Directors or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding Shares of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such continuance. 7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been approved by a vote of the Independent Directors cast in person at a meeting called on November 17, 1995 for the purpose of voting on this Plan, and shall take effect on the date first noted above. Unless terminated as hereinafter provided, it shall continue in effect until December 31, 1997 and from year to year thereafter or as the Board may otherwise determine only so long as such continuance is specifically approved at least annually by the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such continuance. This Plan may be terminated at any time by vote of a majority of the Independent Directors or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class A Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Directors. OPPENHEIMER SERIES FUND, INC. on behalf of Oppenheimer Disciplined Allocation Fund By: ___________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: ___________________________ SCHEDULE OF SERVICE PLANS FOR CLASS A SHARES Due to the substantial similarity of the Service Plan and Agreement ("Service Plan") with OppenheimerFunds Distributor, Inc. for Class A Shares of the respective series of the Registrant, the following form of Service Plan for Class A Shares on behalf of Oppenheimer Disciplined Allocation Fund and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Service Plan for Class A Shares for Connecticut Mutual Government Securities Accout. 2. Service Plan for Class A Shares for Connecticut Mutual Income Account. 3. Service Plan for Class A Shares for Oppenheimer Disciplined Value Fund. 4. Service Plan for Class A Shares for Oppenheimer LifeSpan Growth Fund. 5. Service Plan for Class A Shares for Oppenheimer LifeSpan Balanced Fund. 6. Service Plan for Class A Shares for Oppenheimer LifeSpan Income Fund. EX-15.8 16 EXHIBIT 15.8 Exhibit 15.8 FORM OF DISTRIBUTION AND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. FOR CLASS B SHARES OF OPPENHEIMER DISCIPLINED ALLOCATION FUND DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 18th day of March, 1996, by and between Oppenheimer Series Fund, Inc. (the "Company"), on behalf of its series, Oppenheimer Disciplined Allocation Fund (the "Fund"), and OppenheimerFunds 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 its services 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 person or entity 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 Company's Board of Directors (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Directors") may remove any broker, dealer, bank or other person or entity as a Recipient, whereupon such person's or 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 brokerage or other customers, or investment advisory or other clients of such Recipient and/or accounts as to which such Recipient is a fiduciary or custodian or co-fiduciary or co-custodian (collectively, the "Customers"), 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 more than one person or entity would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the Fund's books as determined by the Distributor 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 with respect to Accounts. Such Asset-Based Sales Charge payments -2- received from the Fund will compensate the Distributor and Recipients for providing distribution assistance in connection with the sale of Shares. The administrative support services in connection with the Accounts to be rendered by Recipients may include, but shall not be limited to, the following: answering routine inquiries concerning the Fund, assisting in 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 or the Board still is not satisfied, either may take appropriate steps to terminate the Recipient's status as such under the Plan, whereupon such Recipient'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 -3- Holdings owned beneficially or of record by the Recipient or by its Customers for a period of more than the minimum period (the "Minimum Holding Period"), if any, to be set from time to time by a majority of the Independent Directors. Alternatively, the Distributor may, at its sole option, make service fee payments ("Advance Service Fee Payments") to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed (i) 0.25% of the average during the calendar quarter of the aggregate net asset value of Shares, computed as of the close of business on the day such Shares are sold, constituting Qualified Holdings sold by the Recipient during that quarter and owned beneficially or of record by the Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of Shares computed as of the close of each business day, constituting Qualified Holdings owned beneficially or of record by the Recipient or by its Customers for a period of more than one (1) year, subject to reduction or chargeback so that the Advance Service Fee Payments do not exceed the limits on payments to Recipients that are, or may be, imposed by Article III, Section 26, of the NASD Rules of Fair Practice. In the event Shares are redeemed less than one year after the date such Shares were sold, the Recipient is obligated and will repay to the Distributor on demand a pro rata portion of such Advance Service Fee Payments, based on the ratio of the time such shares were held to one (1) year. The Advance Service Fee Payments described in part (i) of this paragraph (b) may, at the Distributor's sole option, be made more often than quarterly, and sooner than the end of the calendar quarter. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Directors. A majority of the Independent Directors may at any time or from time to time decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or direct the Distributor to increase or decrease the 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 -4- 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 Service Fee and the Asset-Based Sales Charge on Shares are 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. The distribution assistance and administrative support services to be rendered by the Distributor in connection with the Shares may include, but shall not be limited to, the following: (i) paying sales commissions to any broker, dealer, bank or other person or entity 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(b) of this Agreement; (ii) paying compensation to and expenses of personnel of the Distributor who support distribution of Shares by Recipients; (iii) obtaining financing or providing such financing from its own resources, or from an affiliate, for the interest and other borrowing costs of the Distributor's unreimbursed expenses incurred in rendering distribution assistance and administrative support services to the Fund; (iv) paying other direct distribution costs, 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. Such services include distribution assistance and administrative support services rendered in connection with Shares acquired (i) by purchase, (ii) in exchange for shares of another investment company for which the Distributor serves as distributor or sub- distributor, or (ii) pursuant to a plan of reorganization to which the Fund is a party. 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) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it -5- receives from the Fund), or (ii) by the Distributor (a subsidiary of OFI), from its own resources, from Asset-Based Sales Charge payments or from its borrowings. (e) Notwithstanding any other provision of this Plan, this Plan does not obligate or in any way make the Fund liable to make any payment whatsoever to any person or entity other than directly to the Distributor. In no event shall the amounts to be paid to the Distributor exceed the rate of fees to be paid by the Fund to the Distributor set forth in paragraph (a) of this section 3. 4. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in effect, the selection and nomination of those persons to be Directors of the Fund who are not "interested persons" of the Fund ("Disinterested Directors") shall be committed to the discretion of such Disinterested Directors. Nothing herein shall prevent the Disinterested Directors from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Disinterested Directors. 5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall provide written reports to the Fund's Board for its review, detailing services rendered in connection with the distribution of the Shares, the amount of all payments made and the purpose for which the payments were made. The reports shall be provided quarterly, and shall state whether all provisions of Section 3 of this Plan have been complied with. 6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing and shall provide that: (i) such agreement may be terminated at any time, without payment of any penalty, by a vote of a majority of the Independent Directors or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its assignment (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such continuance. 7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been approved by a vote of the Board and its Independent Directors cast in person at a meeting called on November 17, 1995, -6- for the purpose of voting on this Plan, and shall take effect on the date first written above. Unless terminated as hereinafter provided, it shall continue in effect until December 31, 1997 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 Directors cast in person at a meeting called for the purpose of voting on such continuance. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class B Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Directors. This Plan may be terminated at any time by vote of a majority of the Independent Directors or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class. In the event of such termination, the Board and its Independent Directors shall determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the Service Fee and/or the Asset-Based Sales Charge in respect of Shares sold prior to the effective date of such termination. OPPENHEIMER SERIES FUND, INC., on behalf of Oppenheimer Disciplined Allocation Fund By: ________________________________ OPPENHEIMER FUNDSDISTRIBUTOR, INC. By: ________________________________ - -7- SCHEDULE OF DISTRIBUTION AND SERVICE PLANS FOR CLASS B SHARES Due to the substantial similarity of the Distribution and Service Plan and Agreement ("Distribution and Service Plan") with OppenheimerFunds Distributor, Inc. for Class B Shares of the respective series of the Registrant, the following form of Distribution and Service Plan for Class B Shares on behalf of Oppenheimer Disciplined Allocation Fund and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Distribution and Service Plan for Class B Shares for Connecticut Mutual Government Securities Account. 2. Distribution and Service Plan for Class B Shares for Connecticut Mutual Income Account. 3. Distribution and Service Plan for Class B Shares for Oppenheimer Disciplined Value Fund. 4. Distribution and Service Plan for Class B Shares for Oppenheimer LifeSpan Growth Fund. 5. Distribution and Service Plan for Class B Shares for Oppenheimer LifeSpan Balanced Fund. 6. Distribution and Service Plan for Class B Shares for Oppenheimer LifeSpan Income Fund. EX-15.9 17 EXHIBIT 15.9 EXHIBIT 15.9 FORM OF DISTRIBUTION AND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. FOR CLASS C SHARES OF OPPENHEIMER DISCIPLINED ALLOCATION FUND DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 1st day of May, 1996, by and between Oppenheimer Series Fund, Inc. (the "Company") on behalf of Oppenheimer Disciplined Allocation Fund (the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor"). 1. THE PLAN. This Plan is the Fund's written distribution plan for Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to which the Fund will compensate the Distributor for a portion of its costs incurred in connection with the distribution of Shares, and the personal service and maintenance of shareholder accounts that hold Shares ("Accounts"). The Fund may act as distributor of securities of which it is the issuer, pursuant to the Rule, according to the terms of this Plan. The Distributor is authorized under the Plan to pay "Recipients," as hereinafter defined, for rendering (1) distribution assistance in connection with the sale of Shares and/or (2) administrative support services with respect to Accounts. Such Recipients are intended to have certain rights as third-party beneficiaries under this Plan. The terms and provisions of this Plan shall be interpreted and defined in a manner consistent with the provisions and definitions contained in (i) the 1940 Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of Fair Practice of the National Association of Securities Dealers, Inc., or its successor (the "NASD Rules of Fair Practice") and (iv) any conditions pertaining either to distribution related expenses or to a plan of distribution, to which the Fund is subject under any order on which the Fund relies, issued at any time by the Securities and Exchange Commission. 2. DEFINITIONS. As used in this Plan, the following terms shall have the following meanings: (a) "Recipient" shall mean any broker, dealer, bank or other person or entity 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 Company's Board of Directors (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Directors") may remove any broker, dealer, bank orother person or entity as a Recipient, whereupon such person's or 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 brokerage or other customers, or investment advisory or other clients of such Recipient and/or accounts as to which such Recipient is a fiduciary or custodian or co-fiduciary or co-custodian (collectively, the "Customers"), 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 more than one person or entity would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the Fund's books as determined by the Distributor shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT SERVICES. (a) The Fund will make payments to the Distributor, within forty-five (45) days of the end of each calendar quarter, in the aggregate amount (i) of 0.0625% (0.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day (the "Service Fee"), plus (ii) 0.1875% (0.75% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day (the "Asset Based Sales Charge"). Such Service Fee payments received from the Fund will compensate the Distributor and Recipients for providing administrative support services with respect to Accounts. Such Asset Based Sales Charge payments received from the Fund will compensate the Distributor and Recipients for providing distribution assistance in connection with the sale of Shares. The administrative support services in connection with the Accounts to be rendered by Recipients may include, but shall not be limited to, the following: answering routine inquiries concerning the Fund, assisting in establishing and maintaining accounts or sub-accounts in the Fund and processing Share redemption transactions, making the Fund's investment plans and dividend payment options available, and providing such other information and services in connection with the rendering of personal services and/or the maintenance of Accounts, as the Distributor or the Fund may reasonably request. The distribution assistance in connection with the sale of Shares to be rendered by Recipients may include, but shall not be limited to, the following: distributing sales literature and prospectuses other than those furnished to current holders of the Fund's Shares ("Shareholders"), and providing such other information and services in connection with the distribution of Shares as the Distributor or the Fund may reasonably request. It may be presumed that a Recipient has provided distribution assistance or administrative support services qualifying for payment under the Plan if it has Qualified Holdings of Shares to entitle it to payments under the Plan. In the event that either the Distributor or the Board should have reason to believe that, notwithstanding the level of Qualified Holdings, a Recipient may not be rendering appropriate distribution assistance in connection with the sale of Shares or administrative support services for the Accounts, then the Distributor, at the request of the Board, shall require the Recipient to provide a written report or other information to verify that said Recipient is providing appropriate distribution assistance and/or services in this regard. If the Distributor or the Board still is not satisfied, either may take appropriate steps to terminate the Recipient's status as such under the Plan, whereupon such Recipient's rights as a third-party beneficiary hereunder shall terminate. (b) The Distributor shall make service fee payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of Shares, computed as of the close of each business day constituting Qualified Holdings owned beneficially or of record by the Recipient or by its Customers for a period of more than the minimum period (the "Minimum Holding Period"), if any, to be set from time to time by a majority of the Independent Directors. Alternatively, the Distributor may, at its sole option, make service fee payments ("Advance Service Fee Payments") to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed (i) 0.25% of the average during the calendar quarter of the aggregate net asset value of Shares, computed as of the close of business on the day such Shares are sold, constituting Qualified Holdings sold by the Recipient during that quarter and owned beneficially or of record by the Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of Shares computed as of the close of each business day, constituting Qualified Holdings owned beneficially or of record by the Recipient or by its Customers for a period of more than one (1) year, subject to reduction or chargeback so that the Advance Service Fee Payments do not exceed the limits on payments to Recipients that are, or may be, imposed by Article III, Section 26, of the NASD Rules of Fair Practice. In the event Shares are redeemed less than one year after the date such Shares were sold, the Recipient is obligated and will repay to the Distributor on demand a pro rata portion of such Advance Service Fee Payments, based on the ratio of the time such shares were held to one (1) year. The Advance Service Fee Payments described in part (i) of the preceding sentence may, at the Distributor's sole option, be made more often than quarterly, and sooner than the end of the calendar quarter. In addition, the Distributor shall make asset-based sales charge payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of Shares computed as of the close of each business day constituting Qualified Holdings owned beneficially or of record by the Recipient or its Customers for a period of more than one (1) year. However, no such service fee or asset-based sales charge payments (collectively, the "Recipient Payments") shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Directors. A majority of the Independent Directors may at any time or from time to time decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rates set forth above, and/or direct the Distributor to increase or decrease the Minimum Holding Period or the Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings or Minimum Holding Period, if any, and the rates of Recipient Payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. The Distributor may make Plan payments to any "affiliated person" (as defined in the 1940 Act) of the Distributor if such affiliated person qualifies as a Recipient. (c) The Service Fee and the Asset-Based Sales Charge on Shares are 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. 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 person or entity that sell Shares, and/or paying such persons Advance Service Fee Payments in advance of, and/or greater than, the amount provided for in Section 3(b) of this Agreement; (ii) paying compensation to and expenses of personnel of the Distributor who support distribution of Shares by Recipients; (iii) obtaining financing or providing such financing from its own resources, or from an affiliate, for the interest and other borrowing costs of the Distributor's unreimbursed expenses incurred in rendering distribution assistance and administrative support services to the Fund; (iv) paying 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) providing any service rendered by the Distributor that a Recipient may render pursuant to part (a) of this Section 3. Such services include distribution assistance and administrative support services rendered in connection with Shares acquired (i) by purchase, (ii) in exchange for shares of another investment company for which the Distributor serves as distributor or sub- distributor, or (iii) pursuant to a plan of reorganization to which the Fund is a party. 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) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund), or (ii) by the Distributor (a subsidiary of OFI), from its own resources, from Asset Based Sales Charge payments or from its borrowings. (e) Notwithstanding any other provision of this Plan, this Plan does not obligate or in any way make the Fund liable to make any payment whatsoever to any person or entity other than directly to the Distributor. In no event shall the amounts to be paid to the Distributor exceed the rate of fees to be paid by the Fund to the Distributor set forth in paragraph (a) of this section 3. 4. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in effect, the selection and nomination of those persons to be Directors of the Company who are not "interested persons" of the Fund ("Disinterested Directors") shall be committed to the discretion of such Disinterested Directors. Nothing herein shall prevent the Disinterested Directors from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Disinterested Directors. 5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall provide written reports to the Fund's Board for its review, detailing services rendered in connection with the distribution of Shares, the amount of all payments made and the purpose for which the payments were made. The reports shall be provided quarterly and shall state whether all provisions of Section 3 of this Plan have been complied with. 6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing and shall provide that: (i) such agreement may be terminated at any time, without payment of any penalty, by a vote of a majority of the Independent Directors or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its assignment (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such continuance. 7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been approved by a vote of the Board and its Independent Directors cast in person at a meeting called on February 26, 1996, for the purpose of voting on this Plan, and takes effect as of the date first set forth above. Unless terminated as hereinafter provided, it shall continue in effect from year to year from the date first set forth above or as theBoard may otherwise determine only so long as such continuance is specifically approved at least annually by a vote of the Board and its Independent Directors cast in person at a meeting called for the purpose of voting on such continuance. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class C Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Directors. This Plan may be terminated at any time by vote of a majority of the Independent Directors or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class. In the event of such termination, the Board and its Independent Directors shall determine whether the Distributor is entitled to payment from the Fund of all or a portion of the Service Fee and/or the Asset-Based Sales Charge in respect of Shares sold prior to the effective date of such termination. Oppenheimer Series Fund, Inc. (on behalf of Oppenheimer Disciplined Allocation Fund) By:____________________________________ OppenheimerFunds Distributor, Inc. By:____________________________________ SCHEDULE OF DISTRIBUTION AND SERVICE PLANS FOR CLASS C SHARES Due to the substantial similarity of the Distribution and Service Plan and Agreement ("Distribution and Service Plan") with OppenheimerFunds Distributor, Inc. for Class C Shares of the respective series of the Registrant, the following form of Distribution and Service Plan for Class C Shares on behalf of Oppenheimer Disciplined Allocation Fund and this schedule of omitted documents is filed in accordance with the requirements of Rule 8b-31 under the Investment Company Act of 1940. 1. Distribution and Service Plan for Class C Shares for Connecticut Mutual Government Securities Account. 2. Distribution and Service Plan for Class C Shares for Connecticut Mutual Income Account. 3. Distribution and Service Plan for Class C Shares for Oppenheimer Disciplined Value Fund. 4. Distribution and Service Plan for Class C Shares for Oppenheimer LifeSpan Growth Fund. 5. Distribution and Service Plan for Class C Shares for Oppenheimer LifeSpan Balanced Fund. 6. Distribution and Service Plan for Class C Shares for Oppenheimer LifeSpan Income Fund. EX-18.1 18 EXHIBIT 18.1 EXHIBIT 18.1 OPPENHEIMER FUNDS MULTIPLE CLASS PLAN MARCH 18, 1996 1. THE PLAN. This Plan is the written multiple class plan for each of the open-end management investment companies (individually the "Fund" and collectively the "Funds") named on Exhibit A hereto, which exhibit may be revised from time to time, for OppenheimerFunds Distributor, Inc. (the "Distributor"), the general distributor of shares of the Funds and for OppenheimerFunds, Inc. (the "Advisor"), the investment advisor ofthe Funds. In instances where such investment companies issueshares representing interests in different portfolios ("Series"), the term "Fund" and "Funds" shall separately refer to each Series. It is the written plan contemplated by Rule 18f-3 (the "Rule") under the Investment Company Act of 1940 (the "1940 Act"),pursuant to which the Funds may issue multiple classes of shares. The terms and provisions of this Plan shall be interpreted and defined in a manner consistent with the provisions and definitions contained in the Rule. 2. SIMILARITIES AND DIFFERENCES AMONG CLASSES. Each Fund offering shares of more than one class agrees that each class of that Fund: (1)(i) shall have a separate service plan or distribution and service plan ("12b-1 Plan"), and shall pay all of the expenses incurred pursuant to that arrangement; and (ii) may pay a different share of expenses ("Class Expenses") if such expenses are actually incurred in a different amount by that class, or if the class receives services of a different kind or to a different degree than that of other classes. Class Expenses are those expenses specifically attributable to the particular class of shares, namely (a) 12b-1 Plan fees, (b) transfer and shareholder servicing agent fees and administrative service fees, (c) shareholder meeting expenses, (d) blue sky and SEC registration fees and (e) any other incremental expenses subsequently identified that should be allocated to one class which shall be approved by a vote of that Fund's Board of Directors, Trustees or Managing General Partners(the "Directors"). Expenses identified in Items (c) through (e) may involve issues relating either to a specific class or to the entire Fund; such expenses constitute Class Expenses only when they are attributable to a specific class. Because Class Expenses may be accrued at different rates for each class of a single Fund, dividends distributable to shareholders and net asset values per share may differ for shares of different classes of the same Fund. (2) shall have exclusive voting rights on any matters that relate solely to that class's arrangements, including without limitation voting with respect to a 12b-1 Plan for that class; (3) shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class; -2- (4) may have a different arrangement for shareholder services, including different sales charges, sales charge waivers, purchase and redemption features, exchange privileges, loan privileges, the availability of certificated shares and/or conversion features; and (5) shall have in all other respects the same rights and obligations as each other class. 3. ALLOCATIONS OF INCOME, CAPITAL GAINS AND LOSSES AND EXPENSES. The methodologies and procedures for allocating expenses, as set forth in "Methodology for Net Asset Value (NAV) and Dividend and Distribution Determinations for Oppenheimer Funds with Multiple Classes of Shares" are re-approved. Income, realized and unrealized capital gains and losses, and expenses of each Fund other than Class Expenses allocated to a particular class shall be allocated to each class on the basis of the net asset value of that class in relation to the net asset value of that Fund, except as follows: For Funds operating under 1940 Act Rule 2a-7, such allocations shall be made on the basis of relative net assets (settled shares) [net assets valued in accordance with generally accepted accounting principles but excluding the value of subscriptions receivable] in relation to the net assets of that Fund. 4. EXPENSE WAIVERS AND REIMBURSEMENTS. From time to time the Advisor may voluntarily undertake to (i) waive any portion of the management fee charged to a Fund, and/or (ii) reimburse any -3- portion of the expenses of a Fund or of one or more of its classes, but is not required to do so or to continue to do so for any period of time. The quarterly report by the Advisor to the Directors of Fund expense reimbursements shall disclose any reimbursements that are not equal for all classes of the same Fund. 5. CONVERSIONS OF SHARES. Any Fund may offer a conversion feature whereby shares of one class ("Purchase Class Shares") will convert automatically to shares of another class ("Target Class Shares") of that Fund, after being held for a requisite period ("Matured Purchase Class Shares"), pursuant to the terms and conditions of that Fund's Prospectus and/or Statement of Additional Information. Upon conversion of Matured Purchase Class Shares, all Purchase Class Shares of that Fund acquired by reinvestment of dividends or distributions of such Matured Purchase Class Shares shall also be converted at that time. Purchase Class Shares will convert into Target Class Shares of that Fund on the basis of the relative net asset values of the two classes, without the imposition of any sales load, fee or other charge. The conversion feature shall be offered for so long as (i) the expenses to which Target Class Shares of a Fund are subject, including payments authorized under that Fund's Target Class 12b-1 plan, are not higher than the expenses of Purchase Class Shares of that Fund, including payments authorized under that Fund's Purchase Class 12b-1 plan; (ii) there continues to be -4- available a ruling from the Internal Revenue Service, or of an opinion of counsel or of an opinion of an auditing firm serving as tax adviser, to the effect that the conversion of Purchase Class Shares to Target Class Shares does not constitute a taxable event for the holder; and (iii) if the amount of expenses to which Target Class Shares of a Fund are subject, including payments authorized under that Fund's Target Class 12b-1 plan, is increased materially without approval ofthe shareholders of Purchase Class Shares of that Fund, that Fund will establish a new class of shares ("New Target Class Shares") and shall take such other action as is necessary to provide that existing Purchase Class Shares are exchanged or converted into New Target Class Shares, identical in all material respects to Target Class Shares as they existed prior to implementation of the proposal to increase expenses, no later than the date such shares previously were scheduled to convert into Target Class Shares. 6. DISCLOSURE. The classes of shares to be offered by each Fund, and the initial, asset-based or contingent deferred sales charges and other material distribution arrangements with respect to such classes, shall be disclosed in the prospectus and/or statement of additional information used to offer that class of shares. Such prospectus or statement of additional information shall be supplemented or amended to reflect any change(s) in classes of shares to be offered or in the material distribution arrangements with respect to such classes. -5- 7. INDEPENDENT AUDIT. The methodology and procedures for calculating the net asset value, dividends and distributions of each class shall be reviewed by an independent auditing firm (the "Expert"). At least annually, the Expert, or an appropriate substitute expert, will render a report to the Funds on policies and procedures placed in operation and tests of operating effectiveness as defined and described in SAS 70 of the AICPA. 8. OFFERS AND SALES OF SHARES. The Distributor will maintain compliance standards as to when each class of shares may appropriately be sold to particular investors, and will require all persons selling shares of the Funds to agree to conform to such standards. 9. RULE 12b-1 PAYMENTS. The Treasurer of each Fund shall provide to the Directors of that Fund, and the Directors shall review, at least quarterly, the written report required by that Fund's 12b-1 Plan, if any. The report shall include information on (i) the amounts expended pursuant tothe 12b-1 Plan, (ii) the purposes for which such expenditures were made and (iii) the amount of the Distributor's unreimbursed distribution costs (if recovery of such costs in future periods is permitted by that 12b- 1 Plan), taking into account 12b-1 Plan payments and contingent deferred sales charges paid to the Distributor. 10. CONFLICTS. On an ongoing basis, the Directors of the Funds, pursuant to their fiduciary responsibilities under the 1940 Act and otherwise, will monitor the Funds for the existence of any -6- material conflicts among the interests of the classes. The Advisor and the Distributor will be responsible for reporting any potential or existing conflicts to the Directors. In the event a conflict arises, the Directors shall take such action as they deem appropriate. 11. EFFECTIVENESS AND AMENDMENT. This Plan takes effect for each Fund as of the date of adoption shown below for that Fund, whereupon the Funds are released from the terms and conditions contained in their respective exemptive applications pursuant to which orders were issued exempting the respective Funds from the provisions of Sections 2(a)(32), 2(a)(35), 18(f), 18(g), 18(i), 22(c) and 22(d) of the 1940 Act and Rule 22c-1 thereunder, or from their respective previous multiple class plan.(1) This Plan has been approved by a majority vote of the Board of each Fund and of each Fund's Board members who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plan or any agreements _________________ (1) Oppenheimer Management Corp. ET AL., Release IC-19821, 10/28/93 (notice) and Release IC-19894, 11/23/93 (order), and Quest for Value Fund, Inc. ET AL., Release IC-19605, 7/30/93 (notice) and Release IC-19656, 8/25/93 (order); Rochester Funds Multiple Class Plan; Connecticut Mutual Funds Multiple Class Plan. -7- relating to the Plan (the "Independent Trustees") of each Fund at meetings called for (i) the Denver Oppenheimer Funds listed on Exhibit A on October 24, 1995, (ii) the New York Oppenheimer Funds listed on Exhibit A on October 5, 1995, (iii) the Quest Oppenheimer Funds listed on Exhibit A on November 28, 1995, (iv) the Rochester Oppenheimer Funds listed on Exhibit A on January 10, 1996, and (v) the Connecticut Mutual Oppenheimer Funds listed in Exhibit A on February 26, 1996, in each case for the purpose of voting on this Plan. Prior to that vote, (i) each Board was furnished by the methodology used for net asset value and dividend and distribution determinations for the Funds, and (ii) a majority of each Board and its Independent Trustees determined that the Plan as proposed to be adopted, including the expense allocation, is in the best interests of each Fund as a whole and to each class of each Fund individually. Prior to any material amendment to the Plan, each Board shall request and evaluate, and OFDI shall furnish, such information as may be reasonably necessary to evaluate such amendment, and a majority of each Board and its Independent Trustees shall find that the Plan as proposed to be amended, including the expense allocation, is in the best interest of each class, each Fund as a whole and each class of each Fund individually. 12. DISCLAIMER OF SHAREHOLDER AND TRUSTEE LIABILITY. The Distributor understands that the obligations under this Plan of each Fund that is organized as a Massachusetts business trust are -8- not binding upon any Trustee or shareholder of such Fund personally, but bind only that Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declarations of Trust of such Funds disclaiming shareholder and Trustee liability for acts or obligations of the Funds. Adopted by the Boards of the Denver Oppenheimer Funds on October 24, 1995. /s/ Andrew J. Donohue --------------------------------- Andrew J. Donohue, Vice President Denver Oppenheimer Funds Adopted by the Boards of the New York Oppenheimer Funds on October 5, 1995. /s/ Andrew J. Donohue --------------------------------- Andrew J. Donohue, Secretary New York Oppenheimer Funds Adopted by the Boards of the Quest Oppenheimer Funds on November 28, 1995. /s/ Andrew J. Donohue --------------------------------- Andrew J. Donohue, Secretary Quest Oppenheimer Funds -9- Adopted by the Boards of the Rochester Oppenheimer Funds on January 10, 1996. /s/ Andrew J. Donohue --------------------------------- Andrew J. Donohue, Secretary Rochester Oppenheimer Funds Adopted by the Board of the Connecticut Mutual Oppenheimer Funds on February 26, 1996. /s/ Andrew J. Donohue --------------------------------- Andrew J. Donohue, Secretary Connecticut Mutual Oppenheimer Funds -10- EXHIBIT A 1. DENVER OPPENHEIMER FUNDS Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Equity Income Fund Oppenheimer Limited-Term Government Fund Oppenheimer Integrity Funds (consisting of the following 2 series): Oppenheimer Bond Fund Oppenheimer Value Stock Fund Oppenheimer High Yield Fund Oppenheimer Main Street Funds, Inc. (consisting of the following 2 series): Oppenheimer Main Street Income & Growth Fund Oppenheimer Main Street California Tax-Exempt Fund Oppenheimer Strategic Funds Trust (consisting of the following series): Oppenheimer Strategic Income Fund Oppenheimer Strategic Income & Growth Fund Oppenheimer Tax-Exempt Fund (consisting of the following 2 series): Oppenheimer Insured Tax-Exempt Fund Oppenheimer Intermediate Tax-Exempt Fund Oppenheimer Total Return Fund, Inc. 2. NEW YORK OPPENHEIMER FUNDS Oppenheimer Asset Allocation Fund Oppenheimer California Tax-Exempt Fund Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Global Emerging Growth Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer Fund Oppenheimer International Equity Fund Oppenheimer Multi-State Tax-Exempt Trust (consisting of the following 3 series): Oppenheimer Florida Tax-Exempt Fund Oppenheimer New Jersey Tax-Exempt Fund Oppenheimer Pennsylvania Tax-Exempt Fund Oppenheimer New York Tax-Exempt Fund Oppenheimer Target Fund Oppenheimer Tax-Free Bond Fund Oppenheimer U.S. Government Trust A-1 3. QUEST OPPENHEIMER FUNDS Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest for Value Funds (consisting of the following 4 series:) Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Quest Value Growth & Income Fund Oppenheimer Quest Officers Value Fund Oppenheimer Quest Global Value Fund, Inc. 4. ROCHESTER OPPENHEIMER FUNDS Rochester Fund Series - The Bond Fund For Growth Rochester Fund Municipals Rochester Portfolio Series - Limited Term New York Municipal Fund 5. CONNECTICUT MUTUAL OPPENHEIMER FUNDS Oppenheimer Series Fund, Inc. (consisting of the following series:) Oppenheimer Disciplined Allocation Fund Oppenheimer Disciplined Growth Fund Oppenheimer LifeSpan Growth Fund Oppenheimer LifeSpan Balanced Fund Oppenheimer LifeSpan Income Fund Connecticut Mutual Income Account Connecticut Mutual Government Securities Account A-2 EX-27.A 19 EXHIBIT 27A FDS CMIA LIFESPAN (DIVERSIFIED)
6 11 DIVERSIFIED INCOME YEAR DEC-31-1995 DEC-31-1995 23,032,521 24,444,631 357,417 43,601 0 24,845,649 680 0 33,434 34,114 0 23,327,617 2,318,786 0 12,342 0 59,466 0 1,412,110 24,811,535 168,991 847,638 0 223,397 793,232 159,534 1,412,110 2,364,876 0 780,890 100,068 0 2,236,410 204 82,580 24,811,535 0 0 0 0 111,599 111,798 223,397 22,258,909 10.00 .37 .73 (.36) (.04) 0 10.70 1.50 0 0 shares common stock per class: class a - 2,300,898 class b - 17,888 distributions of income per class: class a - 779,588 class b - 1,302 distirbutions of gains per class: class a - 99,296 class b - 772 number of shares sold per class: class a - 2,218,682 class b - 17,728 number of shares redeemed per class: class a - 170 class b - 34 shares reinvested per class: class a - 82,386 class b - 194 Represents figure for Class A shares, Class B share figure is: 10.45 Represents figure for Class A shares, Class B share figure is: .12 Represents figure for Class A shares, Class B share figure is: .32 Represents figure for Class A shares, Class B share figure is: (.11) Represents figure for Class A shares, Class B share figure is: (.04) Represents figure for Class A shares, Class B share figure is: 10.74 Represents figure for Class A shares, Class B share figure is: 2.25
EX-27.B 20 EXHIBIT 27B FDS CMIA LIFESPAN (BALANCED)
6 12 BALANCED YEAR DEC-31-1995 DEC-31-1995 38,500,754 42,008,714 450,734 63,154 0 42,522,602 132,460 0 88,450 220,910 0 38,679,189 3,826,749 0 (24,131) 0 90,126 0 3,556,508 42,301,692 345,473 914,578 0 391,114 868,937 923,770 3,556,508 5,349,215 0 893,068 82,498,286 0 3,673,833 4,954 157,870 42,301,692 0 0 0 0 214,011 177,103 391,114 37,663,377 10.00 .24 1.29 (.25) (.23) 0 11.05 1.55 0 0 shares common stock per class: class a - 3,787,271 class b - 39,478 distributions of income per class: class a - 890,951 class b - 2,117 distributions of gains per class: class a - 824,982 class b - 8,662 number of shares sold per class: class a - 3,635,283 class b - 38,550 number of shares redeemed per class: class a - 4,943 class b - 11 shares reinvested per class: class a - 156,931 class b - 939 Represents figure for Class A shares; figure for Class B shares is: 10.00 Represents figure for Class A shares; figure for Class B shares is; .24 Represents figure for Class A shares; figure for Class B shares is: 1.29 Represents figure for Class A shares; figure for Class B shares is: (.25) Represents figure for Class A shares; figure for Class B shares is: (.23) Represents figure for Class A shares; figure for Class B shares is: 11.05 Represents figure for Class A shares; figure for Class B shares is: 1.55
EX-27.C 21 EXHIBIT 27C FDS CMIA LIFESPAN (CAPITAL APPR)
6 13 CAPITAL APPRECIATION YEAR DEC-31-1995 DEC-31-1995 31,351,719 34,893,384 234,399 7,499 0 35,135,282 162,649 0 44,108 206,757 0 31,288,972 3,067,575 0 (29,003) 0 78,195 0 3,590,361 34,928,525 345,890 408,733 0 303,969 450,654 770,151 3,590,361 4,811,166 0 479,657 691,956 0 2,993,629 30,516 104,462 34,928,525 0 0 0 0 166,212 137,757 303,969 29,251,434 10.00 .16 1.63 (.17) (.23) 0 11.39 1.55 0 0 shares common stock per class: class a - 3,018,681 class b - 48,894 distributions of income per class: class a - 478,706 class b - 951 distributions of gains per class: class a - 680,837 class b - 11,119 number of shares sold per class: class a - 2,945,839 class b - 47,790 number of shares redeemed per class: class a - 30,516 class b - 0 shares reinvested per class: class a - 103,358 class b - 1,104 Represents figure for Class A shares; figure for Class B shares is: 11.14 Represents figure for Class A shares; figure for Class B shares is: .03 Represents figure for Class A shares; figure for Class B shares is: .56 Represents figure for Class A shares; figure for Class B shares is: (.03) Represents figure for Class A shares; figure for Class B shares is: (.23) Represents figure for Class A shares; figure for Class B shares is: 11.47 Represents figure for Class A shares; figure for Class B shares is: 2.30
EX-27.D 22 EXHIBIT 27D FDS CMIA FAMILY (LIQUID ACCOUNT)
6 1 LIQUID ACCOUNT YEAR DEC-31-1995 DEC-31-1995 75,707,513 75,707,513 216,006 12,344 0 75,935,863 0 0 128,112 128,112 0 75,807,751 75,807,751 63,945,870 0 0 0 0 0 75,807,751 0 4,162,889 0 674,660 3,488,229 2 0 3,488,231 0 (3,488,229) (2) 0 184,452,934 176,015,712 3,424,659 11,861,881 0 0 0 0 349,609 325,051 674,660 69,921,800 1.00 .049 0 .049 .049 0 1.00 (.96) 0 0
EX-27.E 23 EXHIBIT 27E FDS CMIA FAMILY (GOV'T SEC)
6 2 GOVERNMENT SECURITIES YEAR DEC-31-1995 DEC-31-1995 46,839,748 48,961,256 1,064,748 107 0 50,026,111 0 0 123,228 123,228 0 51,220,513 4,651,720 6,163,339 32,873 0 (3,472,011) 0 2,121,508 49,902,883 0 4,326,765 0 534,877 3,791,888 (618,861) 6,078,046 9,251,073 0 3,790,993 0 0 311,783 2,147,472 324,143 (10,259,456) 31,978 (2,853,150) 0 0 342,325 192,552 534,877 54,824,326 9.76 .72 .97 (.72) 0 0 10.73 .98 0 0 shares common stock per class: class a - 4,644,816 class b - 6,904 distributions of income per class: class a - (3,790,617) class b - (376) number of shares hold per class: class a - 304,895 class b - 6,888 number of shares redeemed per class: class a - 2,147,453 class b - 19 shares reinvested per class: class a - 324,108 class b - 35 Represents figure for Class A shares: class b - 10.45 Represents figure for Class A shares: class b - .12 Represents figure for Class A shares: class b - .32 Represents figure for Class A shares: class b - (.12) Represents figure for Class A shares: class b - 10.77 Represents figure for Class A shares: class b - 1.98
EX-27.F 24 EXHIBIT 27F FDS CMIA FAMILY (INCOME ACCOUNT)
6 3 INCOME ACCOUNT YEAR DEC-31-1995 DEC-31-1995 32,577,590 32,548,568 658,896 13,220 0 33,220,684 0 0 34,323 34,323 0 35,612,380 3,484,188 5,094,374 19,045 0 (2,416,042) 0 (29,022) 33,186,361 0 3,327,978 0 274,169 3,053,809 (717,369) 2,639,614 4,976,054 0 (3,052,123) 0 0 770,413 2,654,709 274,100 (13,360,603) 17,359 (1,698,673) 0 0 274,057 0 274,057 43,867,447 9.14 .67 .37 (.66) 0 0 9.52 .63 0 0 shares common stock per class: class a - 3,478,038 class b - 6,150 distributions of income per class: class a - (3,051,490) class b - (633) number of shares sold per class: class a - 764,273 class b - 6,140 number of shares redeemed per class: class a - 2,654,709 class b - 0 shares reinvested per class: class a - 274,100 class b - 10 Represents figure for Class A shares, Class B figure is 9.46 Represents figure for Class A shares, Class B figure is .13 Represents figure for Class A shares, Class B figure is .10 Represents figure for Class A shares, Class B figure is (.13) Represents figure for Class A shares, Class B figure is 9.56 Represents figure for Class A shares, Class B figure is 1.63
EX-27.G 25 EXHIBIT 27G FDS CMIA FAMILY (TOTAL RETURN)
6 4 TOTAL RETURN YEAR DEC-31-1995 DEC-31-1995 192,516,346 219,198,594 1,562,380 6,632 0 220,767,606 1,640,712 0 377,614 2,018,326 0 191,347,357 14,149,588 13,232,562 68,633 0 651,042 0 26,682,248 218,749,280 1,826,407 8,376,038 0 2,198,075 8,004,370 7,754,106 26,965,439 42,723,915 0 (7,980,308) (7,635,758) 0 2,038,116 2,126,335 1,005,245 40,845,273 44,571 532,694 0 0 1,251,666 946,409 2,198,075 200,103,359 13.44 .60 2.59 (.60) (.57) 0 15.46 1.17 0 0 shares common stock per class: class a - 14,108,084 class b - 41,504 distributions of income per class: class a - (7,977,727) class b - (2,581) distributions of gains per class: class a - (7,615,071) class b - (20,682) number of shares sold per class: class a - 1,998,083 class b - 40,033 number of shares redeemed per class: class a - 2,126,335 class b - 0 shares reinvested per class: class a - 1,003,774 class b - 1,471 Represents figure for Class A shares; Class B shares figure is 15.48 Represents figure for Class A shares; Class B shares figure is .07 Represents figure for Class A shares; Class B shares figure is (.70) Represents figure for Class A shares; Class B shares figure is (.07) Represents figure for Class A shares; Class B shares figure is (.52) Represents figure for Class A shares; Class B shares figure is 15.66 Represents figure for Class A shares; Class B shares figure is 1.92
EX-27.H 26 EXHIBIT 27H FDS CMIA FAMILY (GROWTH ACCOUNT)
6 5 GROWTH ACCOUNT YEAR DEC-31-1995 DEC-31-1995 95,069,282 120,793,328 419,278 21,967 0 121,234,573 2,200,297 0 199,744 2,400,041 0 92,323,812 6,658,761 5,520,444 11,438 0 775,236 0 25,724,046 118,834,532 2,035,451 598,872 0 1,132,616 1,501,707 7,939,891 20,902,301 30,343,899 0 (1,491,662) (7,692,786) 0 1,279,842 657,261 515,736 40,444,694 1,393 528,131 0 0 613,378 519,238 1,132,616 98,113,176 14.20 .25 4.88 (.25) (1.24) 0 17.84 1.22 0 0 shares common stock per class: class a - 6,619,121 class b - 39,640 distributions of income per class: class a - (1,491,101) class b - 1,561 distributions of gains per class: class a - 7,649,952 class b - (42,834) number of shares sold per class: class a - 1,242,427 class b - 30,415 number of shares redeemed per class: class a - 657,052 class b - 209 shares reinvested per class: class a - 513,302 class b - 2,434 Represents figure for Class A shares; Class B share figure is 17.83 Represents figure for Class A shares; Class B share figure is .02 Represents figure for Class A shares; Class B share figure is 1.40 Represents figure for Class A shares; Class B share figure is .02 Represents figure for Class A shares; Class B share figure is (1.15) Represents figure for Class A shares; Class B share figure is 18.08 Represents figure for Class A shares; Class B share figure is 1.97
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