-----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, DxHw+yrtfSTslsWX/FAbtcxiykZR095bfSbpfU/qAP1B51cvMu2pp8tr3PPncKQM Jmmy0QwsNlCoQSaQFqO7RA== 0000752737-98-000002.txt : 19980202 0000752737-98-000002.hdr.sgml : 19980202 ACCESSION NUMBER: 0000752737-98-000002 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 19980130 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER VARIABLE ACCOUNT FUNDS CENTRAL INDEX KEY: 0000752737 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840974272 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 002-93177 FILM NUMBER: 98518174 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-04108 FILM NUMBER: 98518175 BUSINESS ADDRESS: STREET 1: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER VARIABLE LIFE FUNDS DATE OF NAME CHANGE: 19860609 485APOS 1 OPPENHEIMER VARIABLE ACCOUNT FUNDS Registration No. 2-93177 File No. 811-4108 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / PRE-EFFECTIVE AMENDMENT NO. __ / / POST-EFFECTIVE AMENDMENT NO. 31 / X / and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X / AMENDMENT NO. 27 / X / OPPENHEIMER VARIABLE ACCOUNT FUNDS (Exact Name of Registrant as Specified in Charter) 6803 South Tucson Way, Englewood, Colorado 80112 (Address of Principal Executive Offices) 303-768-3200 (Registrant's Telephone Number) ANDREW J. DONOHUE, ESQ. OppenheimerFunds, Inc. Two World Trade Center, New York, New York 10048-0203 (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box): / / Immediately upon filing pursuant to paragraph (b) / / On _______________, pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(i) / / On __________________, pursuant to paragraph (a)(i) / / 75 days after filing pursuant to paragraph (a)(2) / X / On May 1, 1998, pursuant to paragraph (a)(2) of Rule 485 FORM N-1A OPPENHEIMER VARIABLE ACCOUNT FUNDS Cross Reference Sheet Part A of Form N-1A Item No. Prospectus Heading - --------- ------------------ 1 Front Cover Page 2 Overview of the Funds 3 Financial Highlights; Performance of the Funds 4 Front Cover Page; How the Funds are Managed-- Organization and History; Investment Objectives and Policies; Investment Restrictions 5 How the Funds are Managed; Expenses; Back Cover 5A Performance of the Funds 6 How the Funds are Managed - Organization and History; The Transfer Agent; Dividends, Capital Gains and Taxes; Investment Objectives and Policies 8 How to Sell Shares 9 * Part B of Form N-1A Item No. Statement of Additional Information Heading - --------- ------------------------------------------- 10 Cover Page 11 Cover Page 12 * 13 Investment Objectives and Policies; Other Investment Techniques and Strategies; Additional Investment Restrictions 14 How the Funds are Managed--Trustees and Officers of the Funds 15 How the Funds are Managed-- Major Shareholders 16 How the Funds are Managed 17 Brokerage Policies of the Funds 18 Additional Information About the Funds 19 Your Investment Account - How to Buy Shares; How to Sell Shares 20 Dividends, Capital Gains and Taxes 21 How the Funds are Managed; Brokerage Policies of the Funds 22 Performance of the Funds 23 Financial Statements - -------------- * Not applicable or negative answer. OPPENHEIMER VARIABLE ACCOUNT FUNDS Prospectus dated May 1, 1998 OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end investment company consisting of ten separate funds (collectively, the "Funds"): OPPENHEIMER MONEY FUND ("Money Fund") seeks the maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. An investment in Money Fund is neither insured nor guaranteed by the U.S. Government. While Money Fund seeks to maintain a stable net asset value of $1.00 per share, there can be no assurance that it will be able to do so. OPPENHEIMER HIGH INCOME FUND ("High Income Fund") seeks a high level of current income from investment in high yield fixed-income securities. High Income Fund's investments include unrated securities or high risk securities in the lower rating categories, commonly known as "junk bonds," which are subject to a greater risk of loss of principal and nonpayment of interest than higher-rated securities. OPPENHEIMER BOND FUND ("Bond Fund") primarily seeks a high level of current income . Secondarily, this Fund seeks capital growth when consistent with its primary objective. Bond Fund will, under normal market conditions, invest at least 65% of its total assets in investment grade debt securities. OPPENHEIMER STRATEGIC BOND FUND ("Strategic Bond Fund") seeks a high level of current income principally derived from interest on debt securities and seeks to enhance such income by writing covered call options on debt securities. The Fund intends to invest principally in: (i) foreign government and corporate debt securities, (ii) U.S. Government securities, and (iii) lower-rated high yield domestic debt securities, commonly known as "junk bonds", which are subject to a greater risk of loss of principal and nonpayment of interest than higher-rated securities. Current income is not an objective. OPPENHEIMER AGGRESSIVE GROWTH FUND ("Aggressive Growth Fund") seeks to achieve capital appreciation by investing in "growth-type" companies. Prior to May 1, 1998, this Fund was named Oppenheimer Capital Appreciation Fund. OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital appreciation by investing in securities of well-known established companies. OPPENHEIMER SMALL CAP GROWTH FUND ("Small Cap Growth Fund") seeks capital appreciation. Current income is not an objective. In seeking its objective, the Fund emphasizes investments in securities of "growth-type" companies with market capitalization less than $1 billion, including common stocks, preferred stocks, convertible securities, rights, warrants and options, in proportions which may vary from time to time. OPPENHEIMER GLOBAL SECURITIES FUND ("Global Securities Fund") seeks long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations which are considered to have appreciation possibilities, but which may be considered to be speculative. OPPENHEIMER MULTIPLE STRATEGIES FUND ("Multiple Strategies Fund") seeks a total investment return (which includes current income and capital appreciation in the value of its shares) from investments in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. OPPENHEIMER GROWTH & INCOME FUND ("Growth & Income Fund") seeks a high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. From time to time this Fund may focus on small to medium capitalization common stocks, bonds and convertible securities. Shares of the Funds are sold to provide benefits under variable life insurance policies and variable annuity contracts and other insurance company separate accounts (collectively, the "Accounts"). The Accounts invest in shares of one or more of the Funds in accordance with allocation instructions received from Account owners. Such allocation rights are further described in the accompanying Account Prospectus. Shares are redeemed to the extent necessary to provide benefits under an Account. This Prospectus explains concisely what you should know before investing in the Trust and the Funds. Please read this Prospectus carefully and keep it for future reference. You can find more detailed information about the Funds in the May 1, 1998 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 and is incorporated into this Prospectus by reference (which means that it is legally part of this Prospectus). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Contents About the Funds Overview of the Funds Financial Highlights Investment Objectives and Policies How the Funds are Managed Performance of the Funds About Your Account How to Buy Shares How to Sell Shares Dividends, Capital Gains and Taxes Appendix A: Description of Terms Appendix B: Description of Securities Ratings -1- ABOUT THE FUNDS Overview of the Funds Some of the important facts about the Funds are summarized below, with references to the section of this Prospectus where more complete information can be found. You should carefully read the entire Prospectus before making a decision about investing. Keep the Prospectus for reference after you invest. o What Are the Funds' Investment Objectives? Money Fund's investment objective is to seek maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. High Income Fund's investment objective is to seek a high level of current income from investment in high yield fixed-income securities. Bond Fund's investment objective is to seek a high level of current income . As a secondary investment objective, Bond Fund seeks capital growth when consistent with its primary objective. Bond Fund invests mainly in investment grade debt securities. Strategic Bond Fund's investment objective is to seek a high level of current income principally derived from interest on debt securities and seeks to enhance such income by writing covered call options on debt securities. Aggressive Growth Fund's investment objective is to achieve capital appreciation by investing in "growth-type" companies. Growth Fund's investment objective is to seek to achieve capital appreciation by investing in securities of well-known established companies. Small Cap Growth Fund's investment objective is to seek capital appreciation from investments in growth-type companies with market capitalization less than $1 billion. Global Securities Fund's investment objective is to seek long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations which are considered to have appreciation possibilities. Multiple Strategies Fund's investment objective is to seek a total investment return (which includes current income and capital appreciation in the value of its shares) from investments in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. Growth & Income Fund's investment objective is to seek a total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. o What Do the Funds Invest In? To seek their respective investment objectives, the Funds invest as follows. Money Fund primarily invests in "money market" securities. High Income Fund primarily invests in high yield fixed-income securities, including unrated securities or high risk securities in the lower rating categories, commonly known as "junk bonds." Bond Fund will, under normal market conditions, invest at least 65% of its total assets in investment grade debt securities. Strategic Bond Fund primarily invests in foreign government and corporate debt securities, U.S. Government securities, lower-rated high yield domestic debt securities, commonly known as "junk bonds." These investments are more fully explained for each Fund in "Investment Objectives and Policies," starting on page ___. Aggressive Growth Fund primarily invests in "growth-type" companies. Growth Fund primarily invests in securities of well-known established companies. Small Cap Growth Fund primarily invests in securities of "growth-type" companies with market capitalization less than $1 billion. Global Securities Fund primarily invests in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations. Multiple Strategies Fund primarily invests in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. Growth & Income Fund invests primarily in equity and debt securities and focuses from time to time on small to medium capitalization companies. o Who Manages the Funds? The Funds' investment adviser is OppenheimerFunds, Inc. (the "Manager"), which (including subsidiaries) advises investment company portfolios having over $__ billion in assets as of March 31, 1998. Each Fund's portfolio manager is primarily responsible for the selection of securities of that Fund. The portfolio managers are as follows: Money Fund, Dorothy Warmack; High Income , Thomas P. Reedy; Bond Fund, Multiple Strategies Fund and Strategic Bond Fund, David Negri (joined by Richard Rubinstein for Multiple Strategies Fund and by Arthur Steinmetz for Strategic Bond Fund); Aggressive Growth Fund, Paul LaRocco; Growth Fund, Jane Putnam; Small Cap Growth Fund, Jay W. Tracey III and Alan Gilston; Global Securities Fund, William Wilby; and Growth & Income Fund, Robert J. Milnamow and Michael S. Levine. The Manager is paid an advisory fee by each Fund, based on its assets. The Trust's Board of Trustees, elected by shareholders, oversees the investment adviser and the portfolio manager. Please refer to "How The Funds Are Managed," starting on page ____ for more information about the Manager and its fees. o How Risky Are The Funds? While different types of investments have risks that differ in type and magnitude, all investments carry risk to some degree. Changes in overall market movements or interest rates, or factors affecting a particular industry or issuer, can affect the value of the Funds' investments and their price per share. Equity investments are generally subject to a number of risks including the risk that values will fluctuate as a result of changing expectations for the economy and individual issuers, and stocks which are small to medium size in capitalization may fluctuate more than large capitalization stocks. For both equity and income investments, foreign investments are subject to the risk of adverse currency fluctuation and additional risks and expenses in comparison to domestic investments. In comparing levels of risk among the funds that invest to some degree in equities, Growth Fund is most conservative, followed by Multiple Strategies Fund, Growth & Income Fund, Aggressive Growth Fund, Small Cap Growth Fund and Global Securities Fund. Fixed-income investments are generally subject to the risk that values will fluctuate with interest rates and inflation, with lower-rated fixed-income investments being subject to a greater risk that the issuer will default in its interest or principal payment obligations. In comparing levels of risk among the fixed-income funds, Bond Fund is most conservative, followed by Strategic Bond Fund and High Income Fund. Money Fund is the most conservative of all ten Funds in that Money Fund intends to maintain a stable net asset value, although there is no assurance that it will be able to do so. o How Can I Buy , Sell or Exchange Shares? Shares of each Fund are offered for purchase by Accounts as an investment medium for variable life insurance policies and variable annuity contracts and other insurance company separate accounts. Account owners should refer to the accompanying Account Prospectus on how to buy , sell or exchange shares of the Funds. o How Have the Funds Performed? Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund measure their performance by quoting their yields. All of the Funds with the exception of Money Fund may measure their performance by quoting average annual total return and cumulative total return, which measure historical performance. Those returns can be compared to the returns (over similar periods) of other funds. Of course, other funds may have different objectives, investments, and levels of risk. The performance of all the Funds except Money Fund can also be compared to broad market indices, which we have done starting on page ___. Please remember that past performance does not guarantee future results. -2- Financial Highlights The tables on the following pages present selected financial information, including per share data and expense ratios and other data about the Funds, and are based on each Fund's average net assets. This information has been audited by Deloitte & Touche LLP, the Funds' independent auditors, whose report on the Funds' financial statements for the fiscal year ended December 31, 1996 1997, is included in the Statement of Additional Information. Shares of Small Cap Growth Fund was not offered during the fiscal year ended December 31, 1997; accordingly no financial information for that Fund is set forth below. -3- Investment Objectives and Policies. Each Fund's investment objective and policies are set forth below. Since market risks are inherent in all securities to varying degrees, there can be no assurance that a Fund will meet its investment objectives. Investment Objective and Policies - Money Fund. The objective of Money Fund is to seek the maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. The Securities and Exchange Commission ("SEC") Rule 2a-7 ("Rule 2a-7") under the Investment Company Act of 1940 (the "Investment Company Act") places restrictions on a money market fund's investments. Under Rule 2a-7, Money Fund may purchase only "Eligible Securities," as defined below, that the Manager, under procedures approved by the Trust's Board of Trustees, has determined have minimal credit risk. An "Eligible Security" is (a) a security that has received a rating in one of the two highest short-term rating categories by any two "nationally-recognized statistical rating organizations" as defined in Rule 2a-7 ("Rating Organizations"), or, if only one Rating Organization has rated that security, by that Rating Organization, or (b) an unrated security that is judged by the Manager to be of comparable quality to investments that are "Eligible Securities" rated by Rating Organizations. Rule 2a-7 permits Money Fund to purchase "First Tier Securities," which are Eligible Securities rated in the highest category for short-term debt obligations by at least two Rating Organizations, or, if only one Rating Organization has rated a particular security, by that Rating Organization, or comparable unrated securities. Under Rule 2a-7, Money Fund may invest only up to 5% of its assets in "Second Tier Securities," which are Eligible Securities that are not "First Tier Securities." In addition to the overall 5% limit on Second Tier Securities, Money Fund may not invest (i) more than 5% of its total assets in the securities of any one issuer (other than the U.S. Government, its agencies or instrumentalities) or (ii) more than 1% of its total assets or $1 million (whichever is greater) in Second Tier Securities of any one issuer. Under the current provisions of Rule 2a-7, the Trust's Board must approve or ratify the purchase of Eligible Securities that are unrated or are rated by only one Rating Organization. Additionally, under Rule 2a-7, Money Fund must maintain a dollar-weighted average portfolio maturity of no more than 90 days, and the maturity of any single portfolio investment may not exceed 397 days. The Trust's Board has adopted procedures under Rule 2a-7 pursuant to which the Board has delegated to the Manager the responsibility of conforming Money Fund's investments with the requirements of Rule 2a-7 and those Procedures. Ratings at the time of purchase will determine whether securities may be acquired under the above restrictions. The rating restrictions described in this Prospectus do not apply to banks in which the Trust's cash is kept. Subsequent downgrades in ratings may require reassessment of the credit risk presented by a security and may require its sale. See "Investment Objectives and Policies -- Money Fund" in the Statement of Additional Information for further details. The Trust intends to exercise due care in the selection of portfolio securities. However, a risk may exist that the issuers of Money Fund's portfolio securities may not be able to meet their duties and obligations on interest or principal payments at the time called for by the instrument. There is also the risk that because of a redemption demand greater than anticipated by the Manager, some of Money Fund's portfolio may have to be liquidated prior to maturity at a loss. Any of these risks, if encountered, could cause a reduction in the net asset value of Money Fund's shares. The types of instruments that will form the major part of Money Fund's investments are certificates of deposit, bankers' acceptances, commercial paper, U.S. Treasury bills, securities of U.S. Government agencies or instrumentalities and other debt instruments (including bonds) issued by corporations, including variable and floating rate instruments, and variable rate master demand notes. Some of such instruments may be supported by letters of credit or may be subject to repurchase transactions (described below). Except as described below, Money Fund will purchase certificates of deposit or bankers' acceptances only if issued or guaranteed by a domestic bank subject to regulation by the U.S. Government or by a foreign bank having total assets at least equal to U.S. $1 billion. Money Fund may invest in certificates of deposit of up to $100,000 of a domestic bank if such certificates of deposit are fully insured as to principal by the Federal Deposit Insurance Corporation. For purposes of this section, the term "bank" includes commercial banks, savings banks, and savings and loan associations and the term "foreign bank" includes foreign branches of U.S. banks (issuers of "Eurodollar" instruments), U.S. branches and agencies of foreign banks (issuers of "Yankee dollar" instruments) and foreign branches of foreign banks. Money Fund also may purchase obligations issued by other entities if they are: (i) guaranteed as to principal and interest by a bank or corporation whose certificates of deposit or commercial paper may otherwise be purchased by Money Fund, or (ii) subject to repurchase agreements (explained below), if the collateral for the agreement complies with Rule 2a-7. In addition, the Fund may also invest in securities other than those described above that meet with the requirements of Rule 2a-7. For further information, see "Foreign Securities" and "Other Investment Restrictions" below. See Appendix A below and "Investment Objectives and Policies" in the Statement of Additional Information for further information on the investments which Money Fund may make. See Appendix B below for a description of the rating categories of the Rating Organizations. Investment Objectives and Policies - High Income Fund, Bond Fund and Strategic Bond Fund. High Income Fund. The objective of High Income Fund is to earn a high level of current income by investing primarily in a diversified portfolio of high yield, fixed-income securities (including long-term debt and preferred stock issues, including convertible securities) believed by the Manager not to involve undue risk. High Income Fund's investment policy is to assume certain risks (discussed below) in seeking high yield, which is ordinarily associated with high risk securities, commonly known as "junk bonds," in the lower rating categories of the established securities ratings services (i.e., securities rated "Baa" or lower by Moody's Investors Services, Inc. ("Moody's") or "BBB" or lower by Standard & Poor's Corporation ("Standard & Poor's")), and unrated securities. The investments in which High Income Fund will invest principally will be in the lower rating categories; it may invest in securities rated as low as "C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that the obligations are speculative in a high degree and may be in default. Appendix B of this Prospectus describes these rating categories. High Income Fund is not obligated to dispose of securities whose issuers subsequently are in default or if the rating is subsequently downgraded. High Income Fund may invest, without limit, in unrated securities if such securities offer, in the opinion of the Manager, yields and risks comparable to rated securities. Risks of high yield securities are discussed under "Risk Factors" below. Securities rated by a rating organization represented the following percentage of High Income Fund's total assets as of December 31, 1996 (the amounts shown are dollar-weighted average values; securities rated by any rating organization are included in the equivalent Standard & Poor's rating category): AAA, ____%; AA, ___%; A, ____%; BBB, ____%; BB, ____%; B, ____%; CCC, _____%; CC, ____%; C, ____%. Unrated fixed income securities represented ___% of the Fund's total assets. The Manager will not rely principally on the rating assigned by rating services. The Manager's analysis may include consideration of the financial strength of the issuer, including its historic and current financial condition, the trading activity in its securities, present and anticipated cash flow, estimated current value of assets in relation to historical cost, the issuer's experience and managerial expertise, responsiveness to changes in interest rates and business conditions, debt maturity schedules, current and future borrowing requirements, and any change in the financial condition of the issuer and the issuer's continuing ability to meet its future obligations. The Manager also may consider anticipated changes in business conditions, levels of interest rates of bonds as contrasted with levels of cash dividends, industry and regional prospects, the availability of new investment opportunities and the general economic, legislative and monetary outlook for specific industries, the nation and the world. Bond Fund. Bond Fund's primary objective is to earn a high level of current income by investing primarily in debt securities. As a secondary objective, Bond Fund seeks capital growth when consistent with its primary objective. As a matter of non-fundamental policy, Bond Fund will, under normal market conditions, invest at least 65% of its total assets in investment grade debt securities, U.S. Government securities and money market instruments. Investment grade debt securities are those rated in one of the four highest categories by Standard & Poor's, Moody's, Fitch's or other Rating Organizations or if unrated, determined by the Manager to be of comparable quality. The Fund is not obligated to dispose of securities when issuers are in default or if the rating of the security is reduced. A description of these rating categories is included as Appendix B to this Prospectus. The Fund may invest up to 35% of its total assets in debt securities rated less than investment grade or, if unrated, judged by the Manager to be of comparable quality to such lower-rated securities. Lower-grade securities include securities rated BB, B, CCC, CC and D by Standard & Poor's or Ba, B, Caa, Ca and C by Moody's. Lower-grade securities (commonly known as "junk bonds") are considered speculative and involve greater risk which are explained under "Risk Factors" below. Strategic Bond Fund. The investment objective of Strategic Bond Fund is to seek a high level of current income principally derived from interest on debt securities and to enhance such income by writing covered call options on debt securities. Although the premiums received by Strategic Bond Fund from writing covered calls are a form of capital gain, the Fund generally will not make investments in securities with the objective of seeking capital appreciation. The Fund intends to invest principally in: (i) lower-rated high yield domestic debt securities; (ii) U.S. Government securities, and (iii) foreign government and corporate debt securities. Under normal circumstances, the Fund's assets will be invested in each of these three sectors. However, Strategic Bond Fund may from time to time invest up to 100% of its total assets in any one sector if, in the judgment of the Manager, the Fund has the opportunity of seeking a high level of current income without undue risk to principal. Distributable income will fluctuate as the Fund assets are shifted among the three sectors. |X| High Yield Securities. Strategic Bond Fund and High Income Fund may invest without limitation (and other Funds may invest to a limited extent) in securities in the lower rating categories of the established rating services, commonly known as "junk bonds." Such securities are rated lower than "Baa" by Moody's or "BBB" by Standard & Poor's. These Funds may invest in securities rated as low as "C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that the obligations are speculative in a high degree and may be in default. Risks of lower-rated, high yield, high risk securities are discussed under "Risk Factors" below. Securities rated by a rating organization represented the following percentage of Strategic Bond Fund's total assets as of December 31, 1997 (the amounts shown are dollar-weighted average values; securities rated by any rating organization are included in the equivalent Standard & Poor's rating category): AAA, ___%; AA, ____%; A, ___; BBB, ____%; BB, ____%; B, ____%; CCC, ___%; CC, ____%; C, ____%. Unrated fixed income securities represented ____% of the Fund's total assets. The Manager will not rely principally on the ratings assigned by rating services. These Funds are not obligated to dispose of securities whose issuers subsequently are in default or if the rating of such securities is reduced. Appendix B of this Prospectus describes these rating categories. These Funds may also invest in unrated securities which, in the opinion of the Manager, offer yields and risks comparable to those of securities which are rated. Other Fixed-Income Strategies and Techniques. High Income Fund, Bond Fund and Strategic Bond Fund (collectively, the "Income Funds") can also use the investment techniques and strategies described below. The Statement of Additional Information contains more information about these practices. |X| International Securities. The Income Funds may invest in foreign government and foreign corporate debt securities (which may be denominated in U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign corporations, certain supranational entities (such as the World Bank) and foreign governments (including political subdivisions having taxing authority) or their agencies or instrumentalities. These investments may include (i) U.S. dollar-denominated debt obligations known as "Brady Bonds," which are issued for the exchange of existing commercial bank loans to foreign entities for new obligations that are generally collateralized by zero coupon Treasury securities having the same maturity, (ii) debt obligations such as bonds (including sinking fund and callable bonds), (iii) debentures and notes (including variable rate and floating rate instruments), and (iv) preferred stocks and zero coupon securities. Further information about investments in foreign securities and special risks of "emerging markets" is set forth below under "Other Investment Techniques and Strategies - Foreign Securities," and "Special Risks of 'Emerging Markets'." |X| U.S. Government Securities. U.S. Government securities are debt obligations issued by or guaranteed by the United States Government or one of its agencies or instrumentalities. Although U.S. Government securities are considered among the most creditworthy of fixed-income investments and their yields are generally lower than the yields available from corporate debt securities, the values of U.S. Government securities (and of fixed-income securities generally) will vary inversely to changes in prevailing interest rates. To compensate for the lower yields available on U.S. Government securities, the Income Funds may attempt to augment these yields by writing covered call options against them. See "Hedging," below. Certain of these obligations, including U.S. Treasury notes and bonds, and mortgage-backed securities guaranteed by the Government National Mortgage Association ("Ginnie Maes"), are supported by the full faith and credit of the United States. Certain other U.S. Government Securities, issued or guaranteed by Federal agencies or government-sponsored enterprises, are not supported by the full faith and credit of the United States. These latter securities may include obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Mortgage Corporation ("Freddie Macs"), and obligations supported by the credit of the instrumentality, such as Federal National Mortgage Association bonds ("Fannie Maes"). U.S. Government Securities in which the Funds may invest include zero coupon U.S. Treasury securities, mortgage-backed securities and money market instruments. Zero coupon Treasury securities are: (i) U.S. Treasury notes and bonds which have been stripped of their unmatured interest coupons and receipts; or (ii) certificates representing interests in such stripped debt obligations or coupons. Because a zero coupon security pays no interest to its holder during its life or for a substantial period of time, it usually trades at a deep discount from its face or par value and will be subject to greater fluctuations of market value in response to changing interest rates than debt obligations of comparable maturities which make current distributions of interest. Because the Fund accrues taxable income from these securities without receiving cash, the Fund may be required to sell portfolio securities in order to pay cash dividends or to meet redemptions. The Income Funds may invest up to 50% of their total assets at the time of purchase in zero coupon securities issued by either corporations or the U.S. Treasury. |X| Domestic Securities. The Income Funds' investments in domestic securities may include preferred stocks, participation interests and zero coupon securities. Domestic investments include fixed- income securities and dividend-paying common stocks issued by domestic corporations in any industry which may be denominated in U.S. dollars or non-U.S. currencies. The Income Funds' investments may include securities which represent participation interests in loans made to corporations (see "Participation Interests," below) and in pools of residential mortgage loans which may be guaranteed by agencies or instrumentalities of the U.S. Government (e.g. Ginnie Maes, Freddie Macs and Fannie Maes), including collateralized mortgage-backed obligations ("CMOs"), or which may not be guaranteed. Such securities differ from conventional debt securities which provide for periodic payment of interest in fixed amounts (usually semi-annually) with principal payments at maturity or specified call dates. Mortgage-backed securities provide monthly payments which are, in effect, a "pass-through" of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. The Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at lower rates than the original investment, thus reducing the yield of the Fund. CMOs in which the Fund may invest are securities issued by a U.S. Government instrumentality or private corporation that are collateralized by a portfolio of mortgages or mortgage-backed securities which may or may not be guaranteed by the U.S. Government. The issuer's obligation to make interest and principal payments is secured by the underlying portfolio of mortgages or mortgage-backed securities. Mortgage-backed securities may be less effective than debt obligations of similar maturity at maintaining yields during periods of declining interest rates. The Income Funds 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 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. Stripped securities are generally purchased and sold by institutional investors through investment banking firms. At present, established trading markets have not yet developed for these securities. Therefore, some stripped securities may be deemed "illiquid." If any Fund holds illiquid stripped securities, the amount it can hold will be subject to its investment policy limiting investments in illiquid securities to 15% of that Fund's assets. The Income Funds may also enter into "forward roll" transactions with banks or other buyers that provide for future delivery of the mortgage-backed securities in which the Funds may invest. The Funds' obligation under the forward roll must be covered by segregated liquid assets. The main risk of this investment strategy is risk of default by the counterparty. The Income Funds may also invest in asset-backed securities, which are securities that represent fractional undivided interests in pools of consumer loans and trade receivables, similar in structure to the mortgage-backed securities in which the Fund may invest, described above. Payments of principal and interest are passed through to holders of asset-backed securities and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or having a priority to certain of the borrower's other securities. The degree of credit enhancement varies, and generally applies to only a fraction of the asset-backed security's par value until exhausted. Risk Factors. The high yield, lower rated securities in which High Income Fund , Strategic Bond Fund principally invest and in which Bond Fund may invest up to 35% of its total assets are considered speculative and involve greater risk than lower yielding, higher rated fixed-income securities, while providing higher yields than such securities. Lower rated securities may be less liquid, and significant losses could be experienced if a substantial number of other holders of such securities decide to sell at the same time. Other risks may involve the default of the issuer or price changes in the issuer's securities due to changes in the issuer's financial strength or economic conditions. Issuers of lower rated or unrated securities are generally not as financially secure or creditworthy as issuers of higher-rated securities. During an economic downturn, lower rated securities might decline in value more than investment grade securities. These Funds are not obligated to dispose of securities when issuers are in default or if the rating of the security is reduced. These risks are discussed in more detail in the Statement of Additional Information. Investment Objectives and Policies - Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund, Global Securities Fund, Multiple Strategies Fund and Growth & Income Fund . Aggressive Growth Fund. In seeking its objective of capital appreciation, Aggressive Growth Fund will emphasize investments in securities of "growth-type" companies. Such companies are believed to have relatively favorable long-term prospects for increasing demand for their goods or services, or to be developing new products, services or markets, and normally retain a relatively larger portion of their earnings for research, development and investment in capital assets. "Growth-type" companies may also include companies developing applications for recent scientific advances. Aggressive Growth Fund may also invest in cyclical industries and in "special situations" that the Manager believes present opportunities for capital growth. "Special situations" are anticipated acquisitions, mergers or other unusual developments which, in the opinion of the Manager, will increase the value of an issuer's securities, regardless of general business conditions or market movements. There is a risk that the price of the security may be expected to decline if the anticipated development fails to occur. Growth Fund. In seeking its objective of capital appreciation, Growth Fund will emphasize investments in securities of well-known and established companies. Such securities generally have a history of earnings and dividends and are issued by seasoned companies (having an operating history of at least five years, including predecessors). Current income is a secondary consideration in the selection of Growth Fund's portfolio securities. Small Cap Growth Fund. Small Cap Growth Fund seeks capital appreciation as its investment objective. Current income is not an objective. In seeking its objective, Small Cap Growth Fund will emphasize investment in securities considered by the Manager to have appreciation possibilities. Such securities may either be listed on securities exchanges or traded in the over-the-counter markets in both the United States and foreign countries. Small Cap Growth Fund expects a substantial portion of its assets to be invested in over-the-counter securities. Small Cap Growth Fund emphasizes investment in securities of growth-type issuers, including emerging growth companies, described below, with market capitalization less than $1 billion. Small Cap Growth Fund may continue to hold investments in issuers whose market capitalization grows in excess of $1 billion, and may from time to time invest in companies with market capitalization in excess of $1 billion. Small Cap Growth Fund invests primarily in common stocks or securities having investment characteristics of common stocks (for example, securities convertible into common stocks). Global Securities Fund. The objective of Global Securities Fund is to seek long-term capital appreciation. Current income is not an objective. In seeking its objective, the Fund will invest a substantial portion of its assets in securities of foreign issuers, "growth-type" companies (those which, in the opinion of the Manager, have relatively favorable long-term prospects for increasing demand or which develop new products and retain a significant part of earnings for research and development), cyclical industries (e.g. base metals, paper and chemicals) and special investment situations which are considered to have appreciation possibilities (e.g., private placements of start-up companies). The Fund may invest without limit in "foreign securities" (as defined below in "Other Investment Techniques and Strategies - Foreign Securities") and thus the relative amount of such investments will change from time to time. It is currently anticipated that Global Securities Fund may invest as much as 80% or more of its total assets in foreign securities. See "Other Investment Techniques and Strategies - Foreign Securities," below, for further discussion as to the possible rewards and risks of investing in foreign securities and as to additional diversification requirements for the Fund's foreign investments. Multiple Strategies Fund. The objective of Multiple Strategies Fund is to seek a high total investment return, which includes current income as well as capital appreciation in the value of its shares. In seeking that objective, Multiple Strategies Fund may invest in equity securities (including common stocks, preferred stocks, convertible securities and warrants), debt securities (including bonds, high yield securities, participation interests, asset-backed securities, private-label mortgage-backed securities and CMOs, zero coupon securities and U.S. Government obligations, described above under "Investment Objectives and Policies - High Income Fund, Bond Fund and Strategic Bond Fund" and under "Participation Interests" below) and cash and cash equivalents (described above as the types of instruments in which the Money Fund may invest). The composition of Multiple Strategies Fund's portfolio among the different types of permitted investments will vary from time to time based upon the Manager's evaluation of economic and market trends and perceived relative total anticipated return from such types of securities. Accordingly, there is neither a minimum nor a maximum percentage of Multiple Strategies Fund's assets that may, at any given time, be invested in any of the types of investments identified above. In the event future economic or financial conditions adversely affect securities, it is expected that Multiple Strategies Fund would assume a defensive position by investing in debt securities (with an emphasis on securities maturing in one year or less from the date of purchase), or cash and cash equivalents. Growth & Income Fund. The objective of Growth & Income Fund is to seek a high total return, which includes growth in the value of its shares as well as current income from equity and debt securities. In seeking that objective, Growth & Income Fund may invest in equity and debt securities. Its equity investments will include common stocks, preferred stocks, convertible securities and warrants. Its debt securities will include bonds, participation interests, asset-backed securities, private-label mortgage-backed securities and CMOs, zero coupon securities and U.S. government obligations (described above under "Investment Objectives and Policies - High Income Fund, Bond Fund and Strategic Bond Fund" and under "Participation Interests" below) and cash and cash equivalents (described above as the types of instruments in which the Money Fund may invest). From time to time Growth & Income Fund may focus on small to medium capitalization issuers, the securities of which may be subject to greater price volatility than those of larger capitalized issuers. The composition of Growth & Income Fund's portfolio among equity and fixed-income investments will vary from time to time based upon the Manager's evaluation of economic and market trends and perceived relative total anticipated return from such types of investments. Accordingly, there is neither a minimum nor a maximum percentage of Growth & Income Fund's assets that may, at any given time, be invested in either type of investment. In the event future economic or financial conditions adversely affect equity securities, it is expected that Growth & Income Fund would assume a defensive position by investing in debt securities (with an emphasis on securities maturing in one year or less from the date of purchase), or cash and cash equivalents. o Can the Funds' Investment Objectives and Policies Change? The Funds have investment objectives, described above, as well as investment policies each follows to try to achieve its objectives. Additionally, the Funds use certain investment techniques and strategies in carrying out those investment policies. The Funds' investment policies and techniques are not "fundamental" unless this Prospectus or the Statement of Additional Information says that a particular policy is "fundamental." Each Fund's investment objectives are fundamental policies. The Trust's Board of Trustees may change non-fundamental policies without shareholder approval, although significant changes will be described in amendments to this Prospectus. Fundamental policies are those that cannot be changed without the approval of a "majority" of the Fund's outstanding voting shares. The term "majority" is defined in the Investment Company Act to be a particular percentage of outstanding voting shares (and this term is explained in the Statement of Additional Information). Other Investment Techniques and Strategies. Some of the Funds can also use the investment techniques and strategies described below. These techniques involve certain risks. The Statement of Additional Information contains more information about these practices, including limitations on their use that are designed to reduce some of the risks. o Borrowing for Leverage. From time to time, the Funds (other than Money Fund) may borrow money from banks to buy securities. The Funds will borrow only if they can do so without putting up assets as security for a loan. This is a speculative investment method known as "leverage." This investing technique may subject a Fund to greater risks and costs than funds that do not borrow. These risks may include the possibility that a Fund's net asset value per share will fluctuate more than funds that don't borrow, since a Fund pays interest on borrowings and interest expense affects a Fund's share price and yield. Borrowing for Leverage is subject to regulatory limits described in more detail in "Borrowing" in the Statement of Additional Information. The Funds may also borrow in order to facilitate redemptions. As a matter of fundamental policy, the Funds can borrow only if they maintain a 300% ratio of assets to borrowings at all times in the manner set forth in the Investment Company Act. o Investments In Small, Unseasoned Companies. Money Fund, Aggressive Growth Fund, Multiple Strategies Fund, Growth & Income Fund, Growth Fund, Global Securities Fund, Small Cap Growth Fund and Strategic Bond Fund may each invest in securities of small, unseasoned companies. These are companies that have been in operation for less than three years, counting the operations of any predecessors. Securities of these companies may have limited liquidity (which means that the Fund may have difficulty selling them at an acceptable price when it wants to) and the prices of these securities may be volatile. It is not currently intended that investments in securities of companies (including predecessors) that have operated less than three years will exceed 5% of the net assets of either Growth Fund or Multiple Strategies Fund. Small Cap Growth Fund intends to invest no more than 20% of its total assets in securities of small, unseasoned issuers. Money Fund, Aggressive Growth Fund, Growth & Income Fund, Global Securities Fund and Strategic Bond Fund are not subject to this restriction. o Participation Interests. Strategic Bond Fund, Global Securities Fund, High Income Fund and Multiple Strategies Fund and Growth & Income Fund may acquire participation interests in U.S. dollar-denominated loans that are made to U.S. or foreign companies (the "borrower"). They may be interests in, or assignments of, the loan, and are acquired from the banks or brokers that have made the loan or are members of the lending syndicate. No more than 5% of a Fund's net assets can be invested in participation interests of the same borrower. The Manager has set certain creditworthiness standards for issuers of loan participations, and monitors their creditworthiness. The value of loan participation interests primarily depends upon the creditworthiness of the borrower, and its ability to pay interest and principal. Borrowers may have difficulty making payments. If a borrower fails to make scheduled interest or principal payments, the Fund could experience a decline in the net asset value of its shares. Some borrowers may have senior securities rated as low as "C" by Moody's "D" by Standard & Poor's or "D" by Fitch, but may be deemed acceptable credit risks. Participation interests are subject to each Fund's limitations on investments in illiquid securities. See "Illiquid and Restricted Securities" below. o Foreign Securities. Each Fund may purchase "foreign securities" that is, securities of companies organized under the laws of countries other than the United States that are traded on foreign securities exchanges or in the foreign over-the-counter markets, and each Fund other than Money Fund may purchase securities issued by U.S. corporations denominated in non-U.S. currencies. Money Fund may invest in certain dollar-denominated foreign securities which are "Eligible Securities" as described above. Securities of foreign issuers that are represented by American Depository Receipts ("ADRs"), or that are listed on a U.S. securities exchange or are traded in the United States over-the-counter markets are not considered "foreign securities" for this purpose because they are not subject to many of the special considerations and risks (discussed below and in the Statement of Additional Information) that apply to foreign securities traded and held abroad. Each Fund may also invest in debt obligations issued or guaranteed by foreign corporations, certain supranational entities (such as the World Bank) and foreign governments (including political subdivisions having taxing authority) or their agencies or instrumentalities, subject to the investment policies described above. Foreign securities which the Funds may purchase may be denominated in U.S. dollars or in non-U.S. currencies. The Funds may convert U.S. dollars into foreign currency, but only to effect securities transactions and not to hold such currency as an investment, other than in hedging transactions (see "Hedging" below). It is currently intended that each Fund (other than Global Securities Fund, Multiple Strategies Fund, Growth & Income Fund or Strategic Bond Fund) will invest no more than 25% of its total assets in foreign securities or in government securities of any foreign country or in obligations of foreign banks. Multiple Strategies Fund will invest no more than 35% of its total assets in foreign securities or in government securities of any foreign country or in obligations of foreign banks. Global Securities Fund, Growth & Income Fund and Strategic Bond Fund have no restrictions on the amount of their assets that may be invested in foreign securities. Investments in securities of issuers in non- industrialized countries generally involve more risk and may be considered highly speculative. The Funds intend to comply with the foreign country diversification guidelines of Section 10506 of the California Insurance Code, as follows: Whenever a Fund's investment in foreign securities exceeds 25% of its net assets, it will invest its assets in securities of issuers located in a minimum of two different foreign countries; this minimum is increased to three foreign countries if foreign investments comprise 40% or more of a Fund's net assets, to four if 60% or more and to five if 80% or more. In addition, no such Fund will have more than 20% of its net assets invested in securities of issuers located in any one foreign country; that limit is increased to 35% for Australia, Canada, France, Japan, the United Kingdom or Germany. The percentage of each Fund's assets that will be allocated to foreign securities will vary depending on the relative yields of foreign and U.S. securities, the economies of foreign countries, the condition of their financial markets, the interest rate climate of such countries, and the relationship of such countries' currencies to the U.S. dollar. These factors are judged on the basis of fundamental economic criteria (e.g., relative inflation levels and trends, growth rate forecasts, balance of payments status, and economic policies) as well as technical and political data. Subsequent foreign currency losses may result in a Fund having previously distributed more income in a particular period than was available from investment income, which could result in a return of capital to shareholders. Each such Fund's portfolio of foreign securities may include those of a number of foreign countries or, depending upon market conditions and subject to the above diversification requirements, those of a single country. In summary, foreign securities markets may be less liquid and more volatile than the markets in the U.S. Risks of foreign securities investing may include foreign withholding taxation, changes in currency rates or currency blockage, currency exchange costs, difficulty in obtaining and enforcing judgments against foreign issuers, relatively greater brokerage and custodial costs, risk of expropriation or nationalization of assets, less publicly available information, and differences between domestic and foreign legal, auditing, brokerage and economic standards. See "Investment Objectives and Policies - Foreign Securities" in the Statement of Additional Information for further details. o Special Risks of "Emerging Markets". Investments in securities traded in "emerging markets" (which are trading markets that are relatively new in countries with developing economies) involve more risks than foreign securities of more developed countries. Emerging markets may have extended settlement periods for securities transactions so that a Fund might not receive the repayment of principal or income on its investments on a timely basis, which could affect its net asset value. There may be a lack of liquidity for emerging market securities. Interest rates and foreign currency exchange rates may be more volatile. Government limitations on foreign investments may be more likely to be imposed than in more developed countries. Emerging markets may respond in a more volatile manner to economic changes than those of more developed countries. o Warrants and Rights. Warrants basically are options to purchase stock at set prices that are valid for a limited period of time. Rights are options to purchase securities, normally granted to current holders by the issuer. Each of the Funds (except Money Fund) may invest up to 5% of its total assets in warrants and rights. That 5% does not apply to warrants and rights that have been acquired as part of units with other securities or that were attached to other securities. For further details about these investments, see "Warrants and Rights" in the Statement of Additional Information. o Repurchase Agreements. Each Fund may acquire securities that are subject to repurchase agreements to generate income while providing liquidity. 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 incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. No Fund will enter into a repurchase agreement that causes more than 15% of its net assets (10% of net assets for Money Fund) to be subject to repurchase agreements having a maturity beyond seven days. There is no limit on the amount of a Fund's net assets that may be subject to repurchase agreements of seven days or less. o Illiquid and Restricted Securities. Under the policies and procedures established by the Board of Trustees, the Manager determines the liquidity of certain of a Fund's investments. Investments may be illiquid because of the absence of a 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 resale or cannot be sold publicly until it is registered under the Securities Act of 1933. No Fund will invest more than 15% of its net assets in illiquid or restricted securities (for Money Fund, the limit is 10%); no Fund presently intends to invest more than 10% of its net assets in illiquid or restricted securities. This policy applies to participation interests, bank time deposits, master demand notes and repurchase transactions maturing in more than seven days, over-the-counter ("OTC") options held by any Fund and that portion of assets used to cover such OTC options; it does not apply to certain restricted securities that are eligible for resale to qualified institutional purchasers. The Manager monitors holding of illiquid and securities on an ongoing basis to determine whether to sell any holdings to maintain adequate liquidity. Illiquid securities include repurchase agreements maturing in more than seven days, or certain participation interests other than those with puts exercisable within seven days. o Loans of Portfolio Securities. To attempt to increase its income, each Fund may lend its portfolio securities to brokers, dealers and other financial institutions. Each Fund must receive collateral for such loans. These loans are limited to 25% of a Fund's net assets and are subject to other conditions described in the Statement of Additional Information. The value of securities loaned, if any, is not expected to exceed 5% of the value of a Fund's total assets. o "When-Issued" or Delayed Delivery Transactions. Each Fund (except Small Cap Growth 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 changes prior to the settlement date. o Hedging. As described below, the Funds (other than Money Fund) may purchase and sell certain kinds of futures contracts, put and call options, forward contracts, and options on futures and broadly-based stock or bond indices, or enter into interest rate swap agreements. These are all referred to as "hedging instruments." The Funds do not use hedging instruments for speculative purposes, and have limits on the use of them, described below. The hedging instruments the Funds may use are described below and in greater detail in "Other Investment Techniques and Strategies" in the Statement of Additional Information. None of the discussion in this section concerning Hedging Instruments applies to Money Fund, which may not use Hedging Instruments. The Funds may buy and sell options, futures and forward contracts for a number of purposes. They may do so to try to manage their exposure to the possibility that the prices of their portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. High Income Fund, Bond Fund, Multiple Strategies Fund, Growth & Income Fund, Small Cap Growth Fund and Strategic Bond Fund may do so to try to manage their exposure to changing interest rates. Some of these strategies, such as selling futures, buying puts and writing covered calls, hedge the Funds' portfolios against price fluctuations. Other hedging strategies, such as buying futures and call options, tend to increase the Funds' exposure to the securities market. Forward contracts are used to try to manage foreign currency risks on Funds' foreign investments. Foreign currency options are used to try to protect against declines in the dollar value of foreign securities the Funds own, or to protect against an increase in the dollar cost of buying foreign securities. Writing covered call options may also provide income to the Funds for liquidity purposes or to raise cash to distribute to shareholders. o Futures. Global Securities Fund, Small Cap Growth Fund, Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund , Strategic Bond Fund, Bond Fund and High Income Fund may buy and sell futures contracts that relate to broadly-based securities indices (these are referred to as Stock Index Futures and Bond Index Futures) or to interest rates (these are referred to as Interest Rate Futures). In addition, the Income Funds may buy and sell futures contracts that relate to commodities (these are referred to as Commodity Futures). o Put and Call Options. The Funds may buy and sell exchange-traded and over-the-counter put and call options, including index options, securities options, currency options, commodities options, and options on the other types of futures described in "Futures," above. A call or put may be purchased only if, after the purchase, the value of all call and put options held by a Fund will not exceed 5% of the Fund's total assets. If a Fund sells (that is, writes) a call option, it must be "covered." That means that the Fund must own the security subject to the call while the call is outstanding, or, for other types of written calls, the Funds must segregate liquid assets to enable it to satisfy its obligations if the call is exercised Fund.. Up to 100% of a Fund's total assets may be subject to calls. The Funds may buy puts whether or not it holds the underlying investment in the portfolio. If the Fund writes a put, the put must be covered by segregated liquid assets. The Funds will not write puts if more than 50% of the Fund's net assets would have to be segregated to cover put options. o 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 Funds (other than Money Fund) use them to "lock-in" the U.S. dollar price of a security denominated in a foreign currency that a Fund has bought or sold, or to protect against losses from changes in the relative values of the U.S. dollar and a foreign currency. Such Funds may also use "cross hedging," where a Fund hedges against changes in currencies other than the currency in which a security it holds is denominated. o Interest Rate Swaps. Strategic Bond Fund, High Income Fund, Bond Fund and Growth & Income Fund can also enter into interest rate swap transactions. 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 payments for fixed rate payments. A Fund enters into swaps only on securities it owns. Each of these Funds may not enter into swaps with respect to more than 25% of its total assets. Also, each Fund will segregate liquid assets of any type, including equity and debt securities of any grade 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 that 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 has special tax effects on the Funds. There are also special risks in particular hedging strategies. If a covered call written by a Fund is exercised on a security that has increased in value, that Fund will be required to sell the security at the call price and will not be able to realize any profit if the security has increased in value above the call price. The use of forward contracts may reduce the gain that would otherwise result from a change in the relationship between the U.S. dollar and a foreign currency. To limit its exposure in foreign currency exchange contracts, each Fund limits its exposure to the amount of its assets denominated in the foreign currency. Interest rate swaps are subject to credit risks (if the other party fails to meet its obligations) and also to interest rate risks. The Funds could be obligated to pay more under their swap agreements than they receive under them, as a result of interest rate changes. These risks are described in greater detail in the Statement of Additional Information. |X| Derivative Investments. Each Fund (other than Money Fund) can invest in a number of different kinds of "derivative investments." The Funds (other than Money Fund) may use some types of derivatives for hedging purposes, and may invest in others because they offer the potential for increased income and principal value. In general, a "derivative investment" is a specially-designed investment whose performance is linked to the performance of another investment or security, such as an option, future, index or currency. In the broadest sense, derivative investments include exchange-traded options and futures contracts (please refer to "Hedging"). One risk of investing in derivative investments is that the company issuing the instrument might not pay the amount due on the maturity of the instrument. There is also the risk that the underlying investment or security on which the derivative is based, and the derivative itself may not perform the way the Manager expected it to perform. The performance of derivative investments may also be influenced by interest rate changes in the U.S. and abroad. All of these risks can mean that a Fund will realize less income than expected from its investments, or that it can lose part of the value of its investments, which will affect that Fund's share price. Certain derivative investments held by the Funds may trade in the over-the-counter markets and may be illiquid. If that is the case, the Funds' investment in them will be limited, as discussed in "Illiquid and Restricted Securities." The Funds (other than Money 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. Another derivative investment such Funds may invest in are currency-indexed securities. These are typically short-term or intermediate-term debt securities. Their value at maturity or the interest rates at which they pay income are determined by the change in value of the U.S. dollar against one or more foreign currencies or an index. In some cases, these securities may pay an amount at maturity based on a multiple of the amount of the relative currency movements. This variety of index security offers the potential for greater income but at a greater risk of loss. Other derivative investments the Funds (other than Money Fund) may invest in include "debt exchangeable for common stock" of an issuer or "equity-linked debt securities" of an issuer. At maturity, the debt security is exchanged for common stock of the issuer or is payable in an amount based on the price of the issuer's common stock at the time of maturity. In either case there is a risk that the amount payable at maturity will be less than the principal amount of the debt (because the price of the issuer's common stock is not as high as was expected). o Portfolio Turnover. A change in the securities held by the Fund is known as "portfolio turnover." The Funds may engage frequently in short-term trading to try to achieve their objectives. High turnover and short-term trading involve correspondingly greater commission expenses and transaction costs for Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities Fund and to a lesser extent, higher transaction costs for Money Fund, Bond Fund, Strategic Bond Fund and High Income Fund. The "Financial Highlights," above show the portfolio turnover for the past fiscal years for each Fund other than Small Cap Growth Fund, which is not expected to have portfolio turnover in excess of 100% each year. Other Investment Restrictions Each of the Funds has certain investment restrictions which, together with its investment objective, are fundamental policies. Under some of those restrictions, the Funds cannot: o with respect to 75% of its total assets, invest in securities (except those of the U.S. Government or its agencies or instrumentalities) of any issuer if immediately thereafter, either (a) more than 5% of that Fund's total assets would be invested in securities of that issuer, or (b) that Fund would then own more than 10% of that issuer's voting securities or 10% in principal amount of the outstanding debt securities of that issuer (the latter limitation on debt securities does not apply to Strategic Bond Fund); o lend money except in connection with the acquisition of debt securities which a Fund's investment policies and restrictions permit it to purchase; the Funds may also make loans of portfolio securities (see "Loans of Portfolio Securities"); o concentrate investments in any particular industry, other than securities of the U.S. Government or its agencies or instrumentalities [Money Fund, Bond Fund and High Income Fund, only]; therefore these Funds will not purchase the securities of issuers primarily engaged in the same industry if more than 25% of the total value of that Fund's assets would (in the absence of special circumstances) consist of securities of companies in a single industry; however, there is no limitation as to concentration of investments by Money Fund in obligations issued by domestic banks, foreign branches of domestic banks (if guaranteed by the domestic parent), savings and loan associations or in obligations issued by the federal government and its agencies and instrumentalities. None of the percentage limitations and restrictions described above and in the Statement of Additional Information is a fundamental policy unless accompanied by an express statement that the limitation or restriction is a fundamental policy. Unless the prospectus states that a percentage restriction applies on an ongoing basis, it applies only at the time a Fund makes an investment, and a Fund need not sell securities to meet the percentage limits if the value of the investment increases in proportion to the size of the Fund. Money Fund has separately undertaken to exclude savings and loan associations from the exception to the concentration limitation set forth under the fourth investment restriction listed above. Other investment restrictions are listed in "Investment Restrictions" in the Statement of Additional Information. The Trustees of the Trust are required to monitor events to identify any irreconcilable conflicts which may arise between the variable life insurance policies and variable annuity contracts that invest in the Funds. Should any conflict arise which ultimately requires that any substantial amount of assets be withdrawn from any Fund, its operating expenses could increase. How the Funds are Managed Organization and History. The Trust was organized in 1984 as a Massachusetts business trust. The Trust is an open-end, diversified management investment company, with an unlimited number of authorized shares of beneficial interest. It consists of ten separate Funds - Money Fund, Bond Fund and Growth Fund, all organized in 1984, High Income Fund, Aggressive Growth Fund and Multiple Strategies Fund, all organized in 1986, Global Securities Fund, organized in 1990, Strategic Bond Fund, organized in 1993 , Growth & Income Fund, organized in 1995, and Small Cap Growth Fund, organized in 1998. The Trust is governed by a Board of Trustees, which is responsible for protecting the interests of shareholders under Massachusetts law. The Trustees meet periodically throughout the year to oversee the Funds' activities, review performance, and review the actions of the Manager. "Trustees and Officers of the Trust" in the Statement of Additional Information names the Trustees and provides more information about them and the officers of the Trust. Although the Trust will normally not hold annual meetings of its shareholders, it may hold shareholder meetings from time to time on important matters, and shareholders have the right to call a meeting to remove a Trustee or to take other action described in the Trust's Declaration of Trust. The Board of Trustees has the power, without shareholder approval, to divide unissued shares of any or all of the Funds into two or more classes. The Board has done so, and the Fund currently has two classes of shares, one without designation and Class 2. Each class of a Fund invests in the same investment portfolio. Each class of a Fund has its own dividends and distributions and pays certain expenses which may be different for each class. Each class of a Fund may have a different net asset value. Each share has one vote at shareholder meetings, with fractional shares voting proportionally. Only shares of a particular class of a Fund vote as a class on matters that affect that class alone. Shares are freely transferrable. Further information on how shares are voted is set forth in the Statement of Additional Information under "How the Fund is Managed." The Manager and Its Affiliates. All Funds are managed by the Manager, OppenheimerFunds, Inc., which is responsible for selecting the Funds' investments and handles its day-to-day business. The Manager carries out its duties, subject to the policies established by the Board of Trustees, under Investment Advisory Agreements for each Fund which state the responsibilities of the Manager. The Investment Advisory Agreements set forth the fees paid by each Fund to the Manager, and describes the expenses that each Fund is responsible to pay to conduct its business. The Manager has operated as an investment adviser since 1959. The Manager (including subsidiaries) currently manages investment companies, including other Oppenheimer funds, with assets of more than $___ billion as of March 31, 1998, held in more than 3.5 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 management services provided to the Funds by the Manager and ORAMI, and the services provided by the Transfer Agent to shareholders, depend on the smooth functioning of their computer systems. Many computer software systems in use today cannot distinguish the year 2000 from the year 1900 because of the way dates are encoded and calculated. That failure could have a negative impact on handling securities trades, pricing and account services. The Manager and Transfer Agent have been actively working on necessary changes to their computer systems to deal with the year 2000 and expect that their systems will be adapted in time for that event. o Portfolio Managers The Portfolio Manager of the Money Fund is Dorothy G. Warmack. On May 1, 1996, she became the person principally responsible for the day-to-day management of that Fund's portfolio. During the past five years, she has served as an officer of other Oppenheimer funds. The Portfolio Manager of High Income Fund is Thomas P. Reedy. He is the person principally responsible for the day-to-day management of the High Income Fund since January 1, 1998. During the past five years Mr. Reedy has served as a portfolio manager and officer of other Oppenheimer funds and formerly served as a Securities Analyst for the Manager. The Portfolio Manager of Bond Fund, Multiple Strategies Fund and Strategic Bond Fund is David P. Negri, joined by Richard H. Rubinstein for Multiple Strategies Fund and by Arthur P. Steinmetz for Strategic Bond Fund. They are the persons principally responsible for the day-to-day management of those Funds since July 1989, January 1990, July 1989 (April 1991 for Mr. Rubinstein) and May 1993, respectively. During the past five years, Messrs. Steinmetz, Rubinstein and Negri have also served as officers of other Oppenheimer funds. The Portfolio Manager of Aggressive Growth Fund is Paul LaRocco. He has been the person principally responsible for the day-to-day management of that Fund's portfolio since January 1994. During the past five years, he has also served as an Associate Portfolio Manager for other Oppenheimer funds and formerly served as a securities analyst with Columbus Circle Investors, prior to which he was an investment analyst for Chicago Title & Trust Co. The Portfolio Manager of Growth Fund is Jane Putnam. She has been the person principally responsible for the day-to-day management of that Fund's portfolio since May 1994. During the past five years, Ms. Putnam has also served as an Associate Portfolio Manager for other Oppenheimer funds and formerly served as a portfolio manager and equity research analyst for Chemical Bank. The Portfolio Managers of Small Cap Growth Fund are Jay W. Tracey III and Alan Gilston. They are the persons principally responsible for the day-to-day management of the that Fund's portfolio since May 1, 1998, and have served as portfolio managers and officers of another Oppenheimer fund. During the past five years Mr. Tracey formerly served as a Managing Director of Buckingham Capital Management, prior to which he was a portfolio manager and Vice President of other Oppenheimer funds and a Vice President of the Manager. During the past five years Mr. Gilston has served as a Vice President and portfolio manager for Schroeder Capital Management International, Inc. The Portfolio Manager of Global Securities Fund is William Wilby. He has been the person principally responsible for the day-to-day management of that Fund's portfolio since December, 1995. During the past five years, Mr. Wilby has also served as an officer and portfolio manager for other Oppenheimer funds, prior to which he was an international investment strategist at Brown Brothers Harriman & Co., and a Managing Director and Portfolio Manager at AIG Global Investors. The Portfolio Manager of Growth & Income Fund is Robert J. Milnamow and the Associate Portfolio Manager of that Fund is Michael S. Levine. Mr. Milnamow has been the person principally responsible for the day-to-day management of that Fund since November, 1995. He is an officer of other Oppenheimer funds. During the past five years, Mr. Milnamow was a portfolio manager with Phoenix Securities Group, and Mr. Levine was a portfolio manager and research associate for Amos Securities, Inc., before which he was an analyst for Shearson Lehman Hutton, Inc. Messrs. LaRocco, Negri , Milnamow, Reedy, Tracey, Gilston and Ms. Putnam and Ms. Warmack are Vice Presidents of the Manager, Mr. Levine is an Assistant Vice President of the Manager, and Messrs. Rubinstein, Steinmetz and Wilby are Senior Vice Presidents of the Manager. Each of the Portfolio Managers named above is also a Vice President of the Trust. o Fees and Expenses. The monthly management fee payable to the Manager is computed separately on the net assets of each Fund as of the close of business each day. The management fee rates are as follows: (i) for Money Fund: 0.450% of the first $500 million of average annual net assets, 0.425% of the next $500 million, 0.400% of the next $500 million, and 0.375% of average annual net assets over $1.5 billion; (ii) for Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities Fund: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, and 0.60% of average annual net assets over $800 million; and (iii) for High Income Fund, Bond Fund and Strategic Bond Fund: 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million, and 0.50% of average annual net assets over $1 billion. During the fiscal year ended December 31, 1997, the management fee (computed on an annualized basis as a percentage of the net assets of all the Funds as of the close of business each day) and the total operating expenses as a percentage of average net assets of each Fund then in existence were as follows: Total Management Operating Fees Expenses(1) - ------------------------------------------------------------------------------ Money Fund 0.44% 0.48% - ------------------------------------------------------------------------------- High Income Fund 0.75% 0.82% - -------------------------------------------------------------------------- Bond Fund 0.73% 0.78% Strategic Bond Fund 0.75% 0.83% - ------------------------------------------------------------------------------- Aggressive Growth Fund 0.71% 0.73% - ------------------------------------------------------------------------------- Growth Fund 0.73% 0.75% - ------------------------------------------------------------------------------- Global Securities Fund 0.70% 0.76% - ------------------------------------------------------------------------------- Multiple Strategies Fund 0.72% 0.75% - ------------------------------------------------------------------------------- Growth & Income Fund 0.75% 0.83% - -------------------- (1) This table does not reflect expenses that apply at the separate account level or to related insurance products, or the fees or expenses of Small Cap Growth Fund, which had not yet commenced operations. The Funds pay expenses related to their daily operations, such as custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those expenses are paid out of the Funds' 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 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. o The Distributor. Each Fund's Class 2 shares are sold to insurance company separate account sponsors and their affiliates that have a participation agreement with OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as the Distributor. The Distributor also distributes shares of the other Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of the Manager. o Shareholder Inquiries. Inquiries by policyowners for Account information are to be directed to the insurance company issuing the Account at the address or telephone number shown in the accompanying Account Prospectus. Performance of the Funds Explanation of Performance Terminology. Money Fund uses the term "yield" to illustrate its performance. High Income Fund, Bond Fund and Strategic Bond Fund use the terms "yield," "total return," and "average annual total return" to illustrate performance. All the Funds, except Money Fund, use the terms "average annual total return" and "total return" to illustrate their performance. This performance information may be useful to help you see how well your investment has done and to compare it to other funds or market indices, as we have done below. It is important to understand that the Funds' total returns and yields represent past performance and should not be considered to be predictions of future returns or performance. This performance data is described below, but more detailed information about how total returns and yields are calculated is contained in the Statement of Additional Information, which also contains information about other ways to measure and compare the Funds' performance. Each Fund's investment performance will vary over time, depending on market conditions, the composition of the portfolio and expenses. o Yields. Money Fund's "yield" is the income generated by an investment in that 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 Money Fund is assumed to be reinvested. The compounded effective yield will therefore be slightly higher than the yield because of the effect of the assumed reinvestment. Yield for High Income Fund, Strategic Bond Fund or Bond Fund will be computed in a standardized manner for mutual funds, by dividing that Fund's net investment income per share earned during a 30-day base period by the maximum offering price (equal to the net asset value) per share on the last day of the period. This yield calculation is compounded on a semi-annual basis, and multiplied by 2 to provide an annualized yield. The Statement of Additional Information describes a dividend yield and a distribution return that may also be quoted for these Funds. o Total Returns. There are different types of total returns used to measure each 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 Funds' actual year-by-year performance. How Have the Funds Performed? Below is a discussion by the Manager of the Funds' performance during their last fiscal year ended December 31, 1997 followed by a graphical comparison of each Fund's performance, except Money Fund, to an appropriate broad-based market index. No performance information or index comparisons are shown for Small Cap Growth Fund, which did not commence operations until 1998. Management's Discussion of Performance. During the Funds' fiscal year ended December 31, 1997, the U.S. bond markets and the equity markets experienced overall substantial growth in response to declines in interest rates and strong corporate profits in the face of slower economic growth. These positive market factors contributed to Fund performance, as did particular investment strategies of each of the Funds. Investments in foreign securities contributed far less to Fund performance, due to substantial volatility, especially in several Southeast Asian markets, largely in reaction to currency devaluations. During the fiscal year ended December 31, 1997, the Manager emphasized the following investment strategies and techniques in the individual Funds. The portfolio holdings, allocations and strategies of each of the Funds are subject to change. High Income Fund emphasized lower rated corporate bonds in telecommunications companies, cable operators and financial services industries, which were expected to benefit from deregulation. Foreign bond positions were primary in emerging markets, particularly in Latin America. The Fund invested to a lesser degree in domestic preferred stocks. Bond Fund emphasized investments in cable operators, media and commercial banking industries, due to the same expectation concerning deregulation. The Fund also took a substantial position in commercial private mortgage securities, representing pools of mortgages on hotels, shopping malls, apartment buildings and other enterprises. Aggressive Growth Fund emphasized investments in small and medium-sized companies with new products and services. Its largest sector allocation was in the technology sector, followed by consumer noncyclical companies, industrial companies and financial services. Growth Fund emphasized large cap stocks believed to be selling at below-average valuations with above-average earnings growth. It emphasized investments in high-growth sectors such as financial services and technology companies, followed by consumer products. Multiple Strategies Fund's equity and fixed-income investments were broadly diversified among sectors. Some of the Fund's largest equity holdings included banks in Switzerland, Italy, France and Germany, expected to benefit from improved efficiency. Its fixed-income investments included domestic utilities and other high-yield corporate bonds issued in the U.S. and in developed and emerging countries. Growth & Income Fund's portfolio included substantial positions in financial stocks expected to benefit from consolidation and strong fundamentals, and technology companies with promising products. Global Securities Fund sought to avoid the volatility mentioned above in certain foreign markets, by seeking capital appreciation from U.S. companies, and to a lesser extent from companies in developed European countries. Its largest sector allocations were to financial services, technology companies and consumer products companies. Strategic Bond Fund's allocation to high-yield corporate bonds performed particularly well, due to strong performance by telecommunications companies, cable operators and financial services companies. The Fund also maintained a substantial allocation to U.S. Government securities and to foreign fixed-income securities from developed and emerging markets. o Comparing each Fund's Performance to the Market. The charts below show the performance of hypothetical $10,000 investments in each Fund (except for Money Fund and Small Cap Growth Fund) held until December 31, 1997. Performance information does not reflect charges that apply to separate accounts investing in the Funds and is not restated to reflect the increased management fee rates that took effect September 1, 1994. If these charges and expenses were taken into account, performance would be lower. High Income Fund's performance is compared to the performance of the Merrill Lynch High Yield Master Index, an unmanaged index of fixed-rate, coupon-bearing bonds with an outstanding par which is greater than or equal to $100 million, a maturity range greater than or equal to one year and a credit rating which must be rated lower than BBB/Baa3 (by Standard & Poor's or Moody's, respectively) but higher than C/D (bonds in default). This index is used as a measure of the performance of the high-yield corporate bond market - the market in which High Income Fund principally invests. Bond Fund's performance is compared to the performance of the Lehman Brothers Corporate Bond Index, which is an unmanaged index of publicly-issued non-convertible investment grade corporate debt of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate corporate bond market. The performance of Aggressive Growth Fund, Growth Fund and Growth & Income Fund is compared to the performance of the S&P 500 Index, a broad-based index of equity securities widely regarded as a general measurement of the performance of the U.S. equity securities market. Multiple Strategies Fund's performance is compared to the S&P 500 Index and the Lehman Brothers Aggregate Bond Index, a broad-based, unmanaged index of U.S. corporate bond issues, U.S. Government securities and mortgage-backed securities, widely recognized as a measure of the performance of the domestic debt securities market. Global Securities Fund's performance is compared to the Morgan Stanley World Index, an unmanaged index of issuers listed on the stock exchanges of 20 foreign countries and the U.S., and is widely recognized as a measure of global stock market performance. Strategic Bond Fund's performance is compared to the Lehman Brothers Aggregate Bond Index and the Salomon Brothers World Government Bond Index. The Salomon Brothers World Government Bond Index is an unmanaged index of fixed-rate bonds having a maturity of one year or more, and is widely recognized as a benchmark of fixed income performance on a world-wide basis. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data below shows the effect of taxes. Also, a Fund's performance reflects the effect of that Fund's business and operating expenses. While index comparisons may be useful to provide a benchmark for a Fund's performance, it must be noted that the Fund's investments are not limited to the securities in the one index. Moreover, the index performance data does not reflect any assessment of the risk of the investments included in the index. Comparison of Change in Value of $10,000 Hypothetical Investments in High Income Fund Versus Merrill Lynch High Yield Master Index [Graph comparing total return of High Income Fund shares to performance of Merrill Lynch High Yield Master Index] Average Annual Total Return at 12/31/97(1) 1 year 5 year 10 year Total returns and the ending account value in the graph show change in share value and include reinvestment of all dividends and capital gains distributions. (1)The inception date of the Fund was 4/30/86. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Bond Fund Versus Lehman Brothers Corporate Bond Index [Graph comparing total return of Bond Fund shares to performance of Lehman Brothers Corporate Bond Index] Average Annual Total Returns at 12/31/97(1) 1 year 5 year 10 year Total returns and the ending account value in the graph show change in share value and include reinvestment of all dividends and capital gains distributions. (1) The inception date of the Fund was 4/3/85. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Aggressive Growth Fund Versus S&P 500 Index [Graph comparing total return of Aggressive Growth Fund shares to performance of S&P 500 Index] Average Annual Total Returns at 12/31/97(1) 1 year 5 year 10 year Total returns and the ending account value in the graph show change in share value and include reinvestment of all dividends and capital gains distributions. (1) The inception date of the Fund was 8/15/86. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Growth Fund Versus S&P 500 Index [Graph comparing total return of Growth Fund shares to performance of S&P 500 Index] Average Annual Total Returns at 12/31/97(1) 1 year 5 years 10 Years Total returns and the ending account value in the graph show change in share value and reflect reinvestment of all dividends and capital gains distributions. (1) The inception date of the Fund was 4/3/85. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Multiple Strategies Fund Versus S&P 500 Index and Lehman Brothers Aggregate Bond Index [Graph comparing total return of Multiple Strategies Fund shares to performance of S&P 500 Index and Lehman Brothers Aggregate Bond Index] Average Annual Total Returns at 12/31/97(1) 1 year 5 years 10 years Total returns and the ending account value in the graph show change in share value and reflect reinvestment of all dividends and capital gains distributions. The performance information in the graph for the S&P 500 Index begins on 1/31/87. (1) The inception date of the Fund was 2/9/87. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Global Securities Fund Versus Morgan Stanley World Index [Graph comparing total return of Global Securities Fund shares to performance of Morgan Stanley World Index] Average Annual Total Returns at 12/31/97(1) 1 year 5 years Life of Fund Total returns and the ending account value in the graph show change in share value and reflect reinvestment of all dividends and capital gains distributions. The performance information in the graph for the Morgan Stanley World Index begins on 10/31/90. (1) The inception date of the Fund was 11/12/90. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Strategic Bond Fund Versus Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government Bond Index [Graph comparing total return of Strategic Bond Fund to performance of Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government Bond Index] Average Annual Total Returns at 12/31/97(1) 1 year Life of Fund - -------------- Total returns and the ending account value in the graph show change in share value and reflect reinvestment of all dividends and capital gains distributions. The performance information in the graph for the Lehman Brothers Aggregate Bond Index and the Salomon Brothers World Government Bond Index begins on 4/30/93. (1) The inception date of the Fund was 5/3/93. Past performance is not predictive of future performance. Graphs are not drawn to same scale. Comparison of Change in Value of $10,000 Hypothetical Investments in Growth & Income Fund Versus S&P 500 Index [Graph comparing total return of Growth & Income Fund to performance of S&P 500] Cumulative Total Return at 12/31/97(1) 1 year Life of Fund - ------------------------- Total returns and the ending account value in the graph show change in share value and reflect reinvestment of all dividends and capital gains distributions. The performance information in the graph for the S&P 500 Index begins on 6/30/95. (1) The inception date of the Fund was 7/5/95. Past performance is not predictive of future performance. Graphs are not drawn to same scale. ABOUT YOUR ACCOUNT How to Buy Shares Shares of each Fund are offered for purchase by Accounts as an investment medium for variable life insurance policies and variable annuity contracts and other insurance company separate accounts, as described in the accompanying Account Prospectus. The sale of shares will be suspended during any period when the determination of net asset value is suspended and may be suspended by the Board of Trustees whenever the Board judges it in that Fund's best interest to do so. Shares of each Fund are offered at their respective offering price, which (as used in this Prospectus and the Statement of Additional Information) is net asset value (without sales charge). Classes of Shares. The Funds offer an investor two different classes of shares, one without designation and Class 2 shares. The different classes of shares represent investments in the same portfolio of securities of a Fund but may be subject to different expenses and will likely have different share prices. |X| Service Plan for Class 2 Shares. The Trust has adopted Service Plans for Class 2 shares of each Fund to reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts that hold Class 2 shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets (currently set at 0.10% of the average annual net assets) of Class 2 shares of each Fund. The Distributor uses all of those fees to reimburse insurance company separate account sponsors quarterly for providing personal service and maintenance of accounts of their customers that hold Class 2 shares and to reimburse itself (if the Trust's Board of Trustees authorizes such reimbursements, which it has not yet done) for its other expenditures under the Plan. Services to be provided include, among other things, answering customer inquiries about the Funds, assisting in establishing and maintaining accounts holding Class 2 shares and providing other services at the request of the Trust 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 2 shares held in accounts of the insurance company separate account sponsors. The payments under the Plan increase the annual expenses of Class 2 shares. For more details, please refer to "Service Plans" in the Statement of Additional Information. All purchase orders are processed at the offering price next determined after receipt by the Trust of a purchase order in proper form. The offering price (and net asset value) is determined as of the close of The New York Stock Exchange, which is normally 4:00 P.M., New York time, but may be earlier on some days. Net asset value per share of each Fund is determined by dividing the value of that Fund's net assets by the number of its shares outstanding. The Board of Trustees has established procedures for valuing each Fund's securities. In general, those valuations are based on market value. Under Rule 2a-7, the amortized cost method is used to value Money Fund's net asset value per share, which is expected to remain fixed at $1.00 per share except under extraordinary circumstances; there can be no assurance that Money Fund's net asset value will not vary. Further details are in "About Your Account-How to Buy Shares - Money Fund Net Asset Valuation" in the Statement of Additional Information. How to Sell Shares Payment for shares tendered by an Account for redemption is made ordinarily in cash and forwarded within seven days after receipt by the Trust's transfer agent, OppenheimerFunds Services (the "Transfer Agent"), of redemption instructions in proper form, except under unusual circumstances as determined by the SEC. The Trust understands that payment to the Account owner will be made in accordance with the terms of the accompanying Account Prospectus. The redemption price will be the net asset value next determined after the receipt by the Transfer Agent of a request in proper form. The market value of the securities in the portfolios of the Funds is subject to daily fluctuations and the net asset value of the Funds' shares (other than shares of the Money Fund) will fluctuate accordingly. Therefore, the redemption value may be more or less than the investor's cost. Dividends, Capital Gains And Taxes Dividends of Money Fund. The Trust intends to declare Money Fund's dividends from its net investment income on each day the New York Stock Exchange is open for business. Such dividends will be payable on shares held of record at the time of the previous determination of net asset value. Daily dividends accrued since the prior dividend payment will be paid to shareholders monthly as of a date selected by the Board of Trustees. Money Fund's net income for dividend purposes consists of all interest income accrued on portfolio assets, less all expenses of that Fund for such period. Accrued market discount is included in interest income; amortized market premium is treated as an expense. Although distributions from net realized gains on securities, if any, will be paid at least once each year, and may be made more frequently, Money Fund does not expect to realize long-term capital gains, and therefore does not contemplate payment of any capital gains distribution. Distributions from net realized gains will not be distributed unless Money Fund's capital loss carry forwards, if any, have been used or have expired. Money Fund seeks to maintain a net asset value of $1.00 per share for purchases and redemptions. To effect this policy, under certain circumstances the Money Fund may withhold dividends or make distributions from capital or capital gains (see "Money Fund Net Asset Valuation" in the Statement of Additional Information). Dividends and Distributions of High Income Fund, Bond Fund, Strategic Bond Fund, Growth & Income Fund and Multiple Strategies Fund. The Trust intends to declare High Income Fund, Bond Fund, Strategic Bond Fund, Growth & Income Fund and Multiple Strategies Fund dividends quarterly, payable in March, June, September and December. Dividends and Distributions of Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund and Global Securities Fund. The Trust intends to declare Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund and Global Securities Fund dividends on an annual basis. Capital Gains. Any Fund (other than Money Fund) may make a supplemental distribution annually in December out of any net short-term or long-term capital gains derived from the sale of securities, premiums from expired calls written by the Fund, and net profits from hedging transactions. Each such Fund may also make a supplemental distribution of capital gains and ordinary income following the end of its fiscal year. All dividends and capital gains distributions paid on shares of any of the Funds are automatically reinvested in additional shares of that Fund at net asset value determined on the distribution date. There are no fixed dividend rates and there can be no assurance as to payment of any dividends or the realization of any capital gains. Tax Treatment to the Account As Shareholder. Dividends paid by each Fund from its ordinary income and distributions of each Fund's net realized short-term or long-term capital gains are includable in gross income of the Accounts holding such shares. The tax treatment of such dividends and distributions depends on the tax status of that Account. Tax Status of the Funds. If the Funds qualify as "regulated investment companies" under the Internal Revenue Code, the Trust will not be liable for Federal income taxes on amounts paid as dividends and distributions from any of the Funds. The Funds did qualify during their last fiscal year and the Trust intends that they will qualify in current and future years. However, the Code contains a number of complex tests relating to qualification which any Fund might not meet in any particular year . If any Fund does not so qualify, it would be treated for tax purposes as an ordinary corporation and would receive no tax deduction for payments made to shareholders of that Fund. The above discussion relates solely to Federal tax laws. This discussion is not exhaustive and a qualified tax adviser should be consulted. -4- APPENDIX A - DESCRIPTION OF TERMS Some of the terms used in the Prospectus and the Statement of Additional Information are described below: Bank obligations include certificates of deposit which are negotiable certificates evidencing the indebtedness of a commercial bank to repay funds deposited with it for a definite period of time (usually 14 days to one year) at a stated interest rate. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer; these instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Bank notes are short-term direct credit obligations of the issuing bank or bank holding company. Commercial paper consists of short-term (usually 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. Variable rate master demand notes are obligations that permit the investment of fluctuating amounts at varying rates of interest pursuant to direct arrangement between the holder and the borrower. The holder has the right to increase the amount under the note at any time up to the face amount, or to decrease the amount borrowed, and the borrower may repay up to the face amount of the note without penalty. Corporate obligations are bonds and notes issued by corporations and other business organizations, including business trusts, in order to finance their long-term credit needs. Letters of credit are obligations by the issuer (a bank or other person) to honor drafts or other demands for payment upon compliance with specified conditions. Securities issued or guaranteed by the United States Government or its agencies or instrumentalities include issues of the United States Treasury, such as bills, certificates of indebtedness, notes and bonds, and issues of agencies and instrumentalities established under the authority of an act of Congress. Such agencies and instrumentalities include, but are not limited to, Bank for Cooperatives, Federal Financing Bank, Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association and Tennessee Valley Authority. Issues of the United States Treasury are direct obligations of the United States Government. Issues of agencies or instrumentalities are (i) guaranteed by the United States Treasury, or (ii) supported by the issuing agency's or instrumentality's right to borrow from the United States Treasury, or (iii) supported by the issuing agency's or instrumentality's own credit. A-1 APPENDIX B - DESCRIPTION OF SECURITIES RATINGS This is a description of (i) the two highest rating categories for Short Term Debt and Long Term Debt by the Rating Organizations referred to under "Investment Objectives and Policies -- Money Fund", and (ii) additional rating categories that apply principally to investments by High Income Fund, Strategic Bond Fund and Bond Fund. The rating descriptions are based on information supplied by the Rating Organizations to subscribers. Short Term Debt Ratings. Moody's Investors Service, Inc. ("Moody's"): The following rating designations for commercial paper (defined by Moody's as promissory obligations not having original maturity in excess of nine months), are judged by Moody's to be investment grade, and indicate the relative repayment capacity of rated issuers: Prime-1: Superior capacity for repayment. Capacity will normally be evidenced by the following characteristics: (a) leveling market positions in well-established industries; (b) high rates of return on funds employed; (c) conservative capitalization structures with moderate reliance on debt and ample asset protection; (d) broad margins in earning coverage of fixed financial charges and high internal cash generation; and (e) well established access to a range of financial markets and assured sources of alternate liquidity. Prime-2: Strong capacity for repayment. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Standard & Poor's Corporation ("S&P"): The following ratings by S&P for commercial paper (defined by S&P as debt having an original maturity of no more than 365 days) assess the likelihood of payment: A-1: Strong capacity for timely payment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2: Satisfactory capacity for timely payment. However, the relative degree of safety is not as high as for issues designated "A-1". Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following short-term ratings to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes: F-1+: Exceptionally strong credit quality; the strongest degree of assurance for timely payment. F-1: Very strong credit quality; assurance of timely payment is only slightly less in degree than issues rated "F-1+". F-2: Good credit quality; satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned "F-1+" or "F-1" ratings. Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for commercial paper (defined by Duff & Phelps as obligations with maturities, when issued, of under one year), asset-backed commercial paper, and certificates of deposit (the ratings cover all obligations of the institution with maturities, when issued, of under one year, including bankers' acceptance and letters of credit): Duff 1+: Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1: Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1-: High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2: Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings, including commercial paper (with maturities up to 12 months), are as follows: A1+: Obligations supported by the highest capacity for timely repayment. A1: Obligations supported by a very strong capacity for timely repayment. A2: Obligations supported by a strong capacity for timely repayment, although such capacity may be susceptible to adverse changes in business, economic, or financial conditions. Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply to commercial paper, certificates of deposit, unsecured notes, and other securities having a maturity of one year or less. TBW-1: The highest category; indicates the degree of safety regarding timely repayment of principal and interest is very strong. TBW-2: The second highest rating category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated "TBW-1". Long Term Debt Ratings. These rating categories apply principally to investments by High Income Fund, Strategic Bond Fund and Bond Fund. For Money Fund only, the two highest rating categories of each Rating Organization are relevant for securities purchased with a remaining maturity of 397 days or less, or for rating issuers of short-term obligations. Moody's: Bonds (including municipal bonds) are rated as follows: Aaa: Judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." 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, such changes as can be visualized are most unlikely to impair the fundamentally strong positions of such issues. Aa: 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 in "Aaa" securities or fluctuations 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 in "Aaa" securities. 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: Considered medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: 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: Of poor standing and may be in default or there may be present elements of danger with respect to principal or interest. 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. Moody's applies numerical modifiers "1", "2" and "3" in each generic rating classification from "Aa" through "B" in its corporate bond rating system. The modifier "1" indicates that the security ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that the issue ranks in the lower end of its generic rating category. Standard & Poor's: Bonds are rated as follows: AAA: The highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA: A strong capacity to pay interest and repay principal and differ from "AAA" rated issues only in small degree. 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: 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 capacity than for bonds in the "A" category. BB, B, CCC, CC: 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 equality 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. Fitch Investment Grade Bond Ratings AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+." A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. Speculative Grade Bond Ratings BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflect the obligor's limited margin of safety and the need for reasonable business and economic activity through out the life of the issue. CCC: Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery. Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA," "DDD," "DD," or "D" categories. Duff & Phelps: AAA: The highest credit quality. The risk factors are negligible, being only slightly more than the risk- free U.S. Treasury debt. AA: High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Plus (+) and minus (-) signs are used in the "AA" category to indicate the relative position of a credit within that category. IBCA: Long-term obligations (with maturities of more than 12 months) are rated as follows: AAA: The lowest expectation for investment risk. Capacity for timely repayment of principal and interest is substantial such that adverse changes in business, economic, or financial conditions are unlikely to increase investment risks significantly. AA: A very low expectation for investment risk. Capacity for timely repayment of principal and interest is substantial. Adverse changes in business, economic, or financial conditions may increase investment risk albeit not very significantly. A plus (+) or minus (-) sign may be appended to a long term rating to denote relative status within a rating category. TBW: TBW issues the following ratings for companies. These ratings assess the likelihood of receiving payment of principal and interest on a timely basis and incorporate TBW's opinion as to the vulnerability of the company to adverse developments, which may impact the market's perception of the company, thereby affecting the marketability of its securities. A: Possesses an exceptionally strong balance sheet and earnings record, translating into an excellent reputation and unquestioned access to its natural money markets. If weakness or vulnerability exists in any aspect of the company's business, it is entirely mitigated by the strengths of the organization. A/B: The company is financially very solid with a favorable track record and no readily apparent weakness. Its overall risk profile, while low, it not quite as favorable as for companies in the highest rating category. B-1 APPENDIX TO PROSPECTUS Graphic material included in Prospectus of Oppenheimer Variable Account Funds: "Comparison of Total Return of Oppenheimer Variable Account Funds with Broad-Based Indices - Changes in Value of a $10,000 Hypothetical Investment" Linear graphs will be included in the Prospectus of Oppenheimer Variable Account Funds (the "Funds") depicting the initial account value and subsequent account value of a hypothetical $10,000 investment in shares of the Funds for the life of each Fund (except Oppenheimer Money Fund) and comparing such values with the same investments over the same time periods in Broad-Based Indices. Set forth below are the relevant data points that will appear on the linear graphs. Additional information with respect to the foregoing, including a description of the Broad-Based Indices, is set forth in the Prospectus under "How Have the Funds Performed? - Management's Discussion of Performance." Merrill Lynch Fiscal High Yield Year Ended High Income Fund Master Index 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Brothers Fiscal Corporate Year Ended Bond Fund Bond Index 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Fiscal Capital Year Ended Appreciation Fund S&P 500 Index 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Fiscal Year Ended Growth Fund S&P 500 Index 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Lehman Brothers Fiscal Multiple Aggregate Year Ended Strategies Fund S&P 500 Index Bond Index - ---------- --------------- ------------- ---------- 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Fiscal Global Morgan Stanley Year Ended Securities Fund World Index 11/12/90(1) 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 Lehman Solomon Brothers Brothers World Fiscal Strategic Aggregate Government Year Ended Bond Fund Bond Index Bond Index 05/03/93(1) 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 - ----------------------- (1) Commencement of operations. Fiscal Growth & S&P Year Ended Income Fund 500 Index 07/05/95(1) 12/31/95 12/31/96 12/31/97 - ----------------------- (1) Commencement of operations. B-2 Oppenheimer Variable Account Funds 6803 South Tucson Way Englewood, Colorado 80112 1-800-525-7048 Investment Adviser OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 Transfer Agent OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 Custodian of Portfolio Securities The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche LLP 555 Seventeenth Street Denver, Colorado 80202 Legal Counsel Myer, Swanson, Adams & Wolf, P.C. 1600 Broadway Denver, Colorado 80202 No dealer, broker, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus or the Statement of Additional Information, and if given or made, such information and representations must not be relied upon as having been authorized by the Trust, OppenheimerFunds, 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. B-3 Oppenheimer Variable Account Funds 6803 South Tucson Way, Englewood, Colorado 80112 1-800-525-7048 Statement of Additional Information dated May 1, 1998. OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company consisting of ten separate Funds (the "Funds"): Oppenheimer Money Fund ("Money Fund") Oppenheimer High Income Fund ("High Income Fund") Oppenheimer Bond Fund ("Bond Fund") Oppenheimer Strategic Bond Fund ("Strategic Bond Fund") Oppenheimer Aggressive Growth Fund ("Aggressive Growth Fund") Oppenheimer Growth Fund ("Growth Fund") Oppenheimer Small Cap Growth Fund ("Small Cap Growth Fund"). Prior to May 1, 1998, this Fund was named "Oppenheimer Capital Appreciation Fund." Oppenheimer Global Securities Fund ("Global Securities Fund") Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund") Oppenheimer Growth & Income Fund ("Growth & Income Fund") Shares of the Funds are sold to provide benefits under variable life insurance policies and variable annuity contracts and other insurance company separate accounts (collectively the "Accounts"), as described in the Account Prospectus. This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated May 1, 1998. It should be read together with the Trust's Prospectus, 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, and the Account Prospectus. TABLE OF CONTENTS Page About the Funds Investment Objectives and Policies........................................... Investment Policies and Strategies...................................... Other Investment Techniques and Strategies............................. Other Investment Restrictions.......................................... How the Funds are Managed................................................... Organization and History............................................... Trustees and Officers of the Trust..................................... The Manager and Its Affiliates......................................... Brokerage Policies of the Funds............................................. Performance of the Funds...................................................... Class 2 Service Plans...................................................... About Your Account How to Buy Shares........................................................... Dividends, Capital Gains and Taxes.......................................... Additional Information About the Funds...................................... Page Financial Information About the Funds Independent Auditors' Report................................................ Financial Statements........................................................ Appendix A: Industry Classifications......................................A-1 Appendix B: Major Shareholders.............................................B-1 ABOUT THE FUNDS Investment Objectives and Policies Investment Policies and Strategies. The investment objectives and policies of each of the Funds are described in the Prospectus. Set forth below is supplemental information about those policies. Certain capitalized terms used in this Additional Statement are defined in the Prospectus. o Money Fund. The Prospectus describes "Eligible Securities" in which Money Fund may invest and indicates that if a security's rating is downgraded, the Manager and/or the Board may have to reassess the security's credit risk. If a security has ceased to be a First Tier Security, the Manager will promptly reassess whether the security continues to present "minimal credit risk." If the Manager becomes aware that any Rating Organization has downgraded its rating of a Second Tier Security or rated an unrated security below its second highest rating category, the Trust's Board of Trustees shall promptly reassess whether the security presents minimal credit risk and whether it is in Money Fund's best interests to dispose of it; but if Money Fund disposes of the security within 5 days of OppenheimerFunds, Inc. (the "Manager") learning of the downgrade, the Manager will provide the Board with subsequent notice of such downgrade. If a security is in default, or ceases to be an Eligible Security, or is determined no longer to present minimal credit risks, the Board must determine whether it would be in Money Fund's best interests to dispose of the security. The Rating Organizations currently designated as such by the Securities and Exchange Commission ("SEC") are Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investors Service, L.P., Duff & Phelps, Inc., IBCA Limited and its affiliate, INCA, Inc., and Thomson BankWatch, Inc. See Appendix B to the Prospectus for a description of the rating categories of the Rating Organizations. o Time Deposits. The Fund may invest in fixed time deposits, which are non-negotiable deposits in a bank for a specified period of time at a stated interest rate, whether or not subject to withdrawal penalties; however, such deposits which are subject to such penalties, other than deposits maturing in less than 7 days, are subject to the 10% investment limitation for illiquid securities set forth in "Other Investment Techniques and Strategies - Illiquid and Restricted Securities" in the Prospectus. o Floating Rate/Variable Rate Notes. Money Fund may invest in instruments with floating or variable interest rates. The interest rate on a floating rate obligation is based on a stated prevailing market rate, such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank certificates of deposit, or some other standard, and is adjusted automatically each time such market rate is adjusted. The interest rate on a variable rate obligation is also based on a stated prevailing market rate but is adjusted automatically at a specified interval of no less than one year. Some variable rate or floating rate obligations in which Money Fund may invest have a demand feature entitling the holder to demand payment at an amount approximately equal to amortized cost or the principal amount thereof plus accrued interest at any time, or at specified intervals not exceeding one year. These notes may or may not be backed by bank letters of credit. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Generally, the changes in the interest rate on such securities reduce the fluctuation in their market value. As interest rates decrease or increase, the potential for capital appreciation or depreciation is less than that for fixed-rate obligations of the same maturity. o Master Demand Notes. Master demand notes are corporate obligations that permit the investment of fluctuating amounts by Money Fund at varying rates of interest pursuant to direct arrangements between Money Fund, as lender, and the corporate borrower that issues the note. These notes permit daily changes in the amounts borrowed. Money 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. The borrower may repay up to the full amount of the note at any time without penalty. It is not generally contemplated that master demand notes will be traded because they are direct lending arrangements between the lender and the borrower. There is no secondary market for these notes, although they are redeemable and thus immediately repayable by the borrower at face value, plus accrued interest, at any time. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, Money Fund's right to redeem is dependent upon the ability of the borrower to pay principal and interest on demand. In evaluating the master demand arrangements, the Manager considers the earning power, cash flow, and other liquidity ratios of the issuer. If they are not rated by Rating Organizations, Money Fund may invest in them only if, at the time of an investment, they are Eligible Securities. The Manager will continuously monitor the borrower's financial ability to meet all of its obligations because Money Fund's liquidity might be impaired if the borrower were unable to pay principal and interest on demand. There is no limit on the amount of the Money Fund's assets that may be invested in floating rate and variable rate obligations. Floating rate or variable rate obligations which do not provide for recovery of principal and interest within seven days' notice will be subject to the limitations applicable to illiquid securities described in "Other Investment Techniques and Strategies -Illiquid and Restricted Securities" in the Prospectus. o Commodity Futures Contracts. High Income Fund, Strategic Bond and Bond Fund (collectively, the "Income Funds") may invest a portion of their assets in commodity futures contracts (referred to as commodity futures). Commodity futures may be based upon commodities within five main commodity groups: (1) energy, which includes crude oil, natural gas, gasoline and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture, which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious metals, which includes gold, platinum and silver. The Income Funds may purchase and sell commodity futures contracts, options on futures contracts and options and futures on commodity indices with respect to these five main commodity groups and the individual commodities within each group, as well as other types of commodities. o Characteristics of the commodity futures markets. A commodity futures contract is an agreement between two parties in which one party agrees to buy an asset from the other party at a later date at a price and quantity agreed upon when the contract is made. In the United States, commodity futures contracts are traded on futures exchanges. These futures exchanges offer a central marketplace for transactions in futures contracts, a clearing corporation to process trades, a standardization of expiration dates and contract sizes, and the availability of a secondary market. Futures markets also regulate the terms and conditions of delivery as well as the maximum permissible price movement during a trading session. Additionally, the commodity futures exchanges have position limit rules which limit the amount of futures contracts that any one party may hold in a particular commodity at any point in time. These position limit rules are designed to prevent any one participant from controlling a significant portion of the market. o Comparison to forward contracts. Futures contracts and forward contracts have the same economic effect: both are an agreement to purchase a specified amount of a specified commodity at a specified future date for a price agreed upon at the time the contract is entered into. However, there are significant differences in the two types of contracts. Forward contracts are individually negotiated transactions and are not exchange traded. Therefore, under a forward contract, the Income Funds would make a commitment to carry out the purchase or sale of the underlying commodity at expiration. o Storage Costs. As in the financial futures markets, there are hedgers and speculators in the commodity futures markets. However, unlike financial instruments, commodities entail costs of physical storage when purchased. For instance, a large manufacturer of baked goods that wishes to hedge against a rise in the price of wheat has two basic choices: (i) it can purchase the wheat today in the cash market and store the wheat at its cost until it needs the wheat to produce baked goods, or (ii) it can buy commodity futures related to wheat. The price of the commodity futures will reflect the storage costs associated with purchasing the physical commodity. To the extent that these storage costs change for an underlying commodity while the Income Funds are "long" (that is, owns) futures contracts on that commodity, the value of the futures contract may change commensurately. o Reinvestment Risk. In the commodity futures markets, if producers of the underlying commodity wish to hedge the price risk of selling the commodity, they will sell futures contracts to lock in the price of the commodity at delivery in the future. In order to induce speculators to take the corresponding purchase side of the same futures contract, the commodity producer must be willing to sell the futures contract at a price which is below the expected future spot price. Conversely, if the predominant group of hedgers in the futures market are the purchasers of the underlying commodity who purchase futures contracts to hedge against a rise in prices, then speculators will take the short side of the futures contract only if the futures price is greater than the expected future spot price of the commodity. o Strategies. The changing strategies of the hedgers and speculators in the commodity markets can determine whether futures prices are above or below the expected future spot price. This can have significant implications for the Income Funds when it is time to reinvest the proceeds from a maturing futures contract into a new futures contract. If the strategy of hedgers and speculators in futures markets has shifted such that commodity purchasers are the predominant group of hedgers in the market, the Income Funds might have to reinvest at higher futures prices or choose other related commodity investments. o Additional Economic Factors. The values of commodities which underlie commodity futures contracts are subject to additional variables which may be less significant in the case of traditional securities such as stocks and bonds. Variables such as drought, floods, weather, livestock disease, embargoes and tariffs may have a greater impact on commodity prices and commodity-linked instruments, including futures contracts, Hybrid Instruments, commodity options and commodity swaps, than on traditional securities. These additional variables may create additional investment risks which subject the Income Funds' commodity-related investments to greater volatility than investments in traditional securities. o Leverage. There is much greater leverage in futures trading than in trading stocks and bonds. As a registered investment company, the Income Funds must pay in full for all securities it purchases. In other words, the Income Funds are not allowed to purchase securities on margin. However, the Income Funds are allowed to purchase futures contracts on margin where the initial margin requirements are typically between 3 and 6 percent of the face value of the contract. That means the Income Funds are required to pay up front only between 3 to 6 percent of the face value of the futures contract. Therefore, the Income Funds have a higher degree of leverage in its futures contract purchases than in its stock purchases. As a result there may be greater volatility in the rates of return on futures contract purchases than on stock purchases. o Price volatility. Despite the daily price limits on the futures exchanges, the short-term price volatility of commodity futures contracts has been historically greater than that for traditional securities such as stocks and bonds. To the extent that the Income Funds invest in commodity futures contracts, the assets of the Income Funds, and hence the net asset value of a Fund's shares, may be subject to greater volatility. o Marking-to-market futures positions. The futures clearinghouse marks every futures contract to market at the end of each trading day, to ensure that the outstanding futures obligations are limited by the maximum daily permissible price movement. This process of marking-to-market is designed to prevent losses from accumulating in any futures account. Therefore, if the Income Funds' futures positions have declined in value, the Income Funds may be required to post additional margin to cover that decline. Alternatively, if the Income Funds' futures positions have increased in value, that increase will be credited to the Income Funds' accounts. o Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. The market value of fixed income securities in which Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund may invest generally will be affected by changes in the level of interest rates. An increase in interest rates will tend to reduce the market value of fixed income investments, and a decline in interest rates will tend to increase their value. In order to take advantage of differences in securities prices and yields or of fluctuations in interest rates, consistent with their respective investment objectives, these Funds may trade for short-term profits. o High Yield Securities. As stated in the Prospectus, the corporate debt in which High Income Fund and Strategic Bond Fund will principally invest may be in the lower rating categories. 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 these securities and the net asset value of these Funds. For example, federally-insured savings and loan associations have been required to divest their investments in high yield bonds. o Private Label Mortgages. The Funds may also invest in private label mortgages which are real asset-linked mortgages issued by entities other than United States government agencies. Private label mortgages are offered in tranches with debt layers ranging in credit quality from AAA to, potentially, B. o Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund, Strategic Bond Fund , Global Securities Fund and Small Cap Growth Fund. The investment risks and rewards of certain of the investment policies of these Funds are discussed below. o Securities of Growth-Type Companies. Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund and Global Securities Fund may emphasize securities of "growth-type" companies. Such issuers typically are those whose goods or services have relatively favorable long-term prospects for increasing demand, or ones which develop new products, services or markets and normally retain a relatively large part of their earnings for research, development and investment in capital assets. They may include companies in the natural resources fields or those developing industrial applications for new scientific knowledge having potential for technological innovation, such as nuclear energy, oceanography, business services and new customer products. o Small, Unseasoned Companies. Each of these Funds may invest in securities of small unseasoned companies. These are companies that have been in operation for less than three years, even after including the operations of any of their predecessors. Securities of these companies may have a limited liquidity (which means that a Fund may have difficulty selling them at an acceptable price when it wants to) and the price of those securities may be volatile. o Domestic Securities. Investments by Strategic Bond Fund, Growth & Income Fund and Multiple Strategies Fund in fixed-income securities issued by domestic corporations may include participation interests, asset-backed securities and other debt obligations (bonds, debentures, notes, mortgage-backed securities and CMOs) together with preferred stocks. o Over-the-counter options. Small Cap Growth Fund may trade over the counter options. Over the counter options are not traded on an exchange and are traded directly with dealers. To the extent an over the counter option is a tailored investment for a Fund, it may be less liquid than an exchange traded option. Further, similar to hybrid instruments, over the counter options contain counterparty risk. This Fund will take on the credit risk that the seller of an over the counter option will perform its obligations under the option agreement if Small Cap Growth exercises the option. To minimize this risk, either Fund intends to transact, to the extent practicable, with issuers that have an investment grade credit rating. o Investment Policies - Collateralized Securities. Each of these Funds may invest in the collateralized securities described below. High Income Fund, Bond Fund and Strategic Bond Fund are most likely to make such investments. o Asset-Backed 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, the Fund would generally have no recourse to the entity that originated the loans in the event of default by a borrower. The underlying loans are subject to prepayments, which shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as described above for prepayments of a pool of mortgage loans underlying mortgage-backed securities. o Mortgage-Backed Securities. These securities represent participation interests in pools of residential mortgage loans which may or may not be guaranteed by agencies or instrumentalities of the U.S. Government. Such securities differ from conventional debt securities which generally provide for periodic payment of interest in fixed or determinable amounts (usually semi-annually) with principal payments at maturity or specified call dates. Mortgage-backed securities may be backed by the full faith and credit of the U.S. Treasury (e.g., direct pass-through certificates of Government National Mortgage Association); some are supported by the right of the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation); and some are backed by only the credit of the issuer itself. Those guarantees do not extend to the value or yield of the mortgage-backed securities themselves or to the net asset value of the Fund's shares. Any of those government agencies may also issue collateralized mortgage-backed obligations, discussed below. The yield on mortgage-backed securities is based on the average expected life of the underlying pool of mortgage loans. The actual life of any particular pool will be shortened by any unscheduled or early payments of principal and interest. Principal prepayments generally result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to predict accurately the average life of a particular pool. Yield on such pools is usually computed by using the historical record of prepayments for that pool, or, in the case of newly-issued mortgages, the prepayment history of similar pools. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by the Fund to differ from the yield calculated on the basis of the expected average life of the pool. Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments will most likely decline. When prevailing interest rates rise, the value of a pass-through security may decrease as do the values of other debt securities, but, when prevailing interest rates decline, the value of a pass-through security is not likely to rise to the extent that the values of other debt securities rise, because of the prepayment feature of pass-through securities. The Fund's reinvestment of scheduled principal payments and unscheduled prepayments it receives may occur at times when available investments offer higher or lower rates than the original investment, thus affecting the yield of the Fund. Monthly interest payments received by the Fund have a compounding effect which may increase the yield to the Fund more than debt obligations that pay interest semi-annually. Because of those factors, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. The Fund may purchase mortgage-backed securities at 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. The Fund may purchase mortgage-backed securities at a premium or at a discount. These Funds may invest in "stripped" mortgage backed securities, in which the principal and interest portions of the security are separated and sold. Stripped mortgage-backed securities usually have at least two classes each of which receives different proportions of interest and principal distributions on the underlying pool of mortgage assets. One common variety of stripped mortgage-backed security has one class that receives some of the interest and most of the principal, while the other class receives most of the interest and remainder of the principal. In some cases, one class will receive all of the interest (the "interest-only" or "IO" class), while the other class will receive all of the principal (the "principal-only" or "PO" class). Interest only securities are extremely sensitive to interest rate changes, and prepayments of principal on the underlying mortgage assets. An increase in principal payments or prepayments will reduce the income available to the IO security. In other types of CMOs, the underlying principal payments may apply to various classes in a particular order, and therefore the value of certain classes or "tranches" of such securities may be more volatile that the value of the pool as a whole, and losses may be more severe than on other classes. o Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are fully-collateralized bonds that are the general obligations of the issuer thereof, either the U.S. Government, a U.S. Government instrumentality, or a private issuer. Such bonds generally are secured by an assignment to a trustee (under the indenture pursuant to which the bonds are issued) of collateral consisting of a pool of mortgages. Payments with respect to the underlying mortgages generally are made to the trustee under the indenture. Payments of principal and interest on the underlying mortgages are not passed through to the holders of the CMOs as such (i.e., the character of payments of principal and interest is not passed through, and therefore payments to holders of CMOs attributable to interest paid and principal repaid on the underlying mortgages do not necessarily constitute income and return of capital, respectively, to such holders), but such payments are dedicated to payment of interest on and repayment of principal of the CMOs. CMOs often are issued in two or more classes with different characteristics such as varying maturities and stated rates of interest. Because interest and principal payments on the underlying mortgages are not passed through to holders of CMOs, CMOs of varying maturities may be secured by the same pool of mortgages, the payments on which are used to pay interest on each class and to retire successive maturities (known as "tranches") in sequence. Unlike other mortgage-backed securities (discussed above), CMOs are designed to be retired as the underlying mortgages are repaid. In the event of prepayment on such mortgages, the class of CMO first to mature generally will be paid down. Therefore, although in most cases the issuer of CMOs will not supply additional collateral in the event of such prepayment, there will be sufficient collateral to secure CMOs that remain outstanding. o Participation Interests. Strategic Bond Fund, Global Securities Fund, High Income Fund, Multiple Strategies Fund and Growth & Income Fund may invest in participation interests, subject to the limitation, described in "Illiquid and Restricted Securities" in the Prospectus, on investments by the Fund in illiquid investments. Participation interests provide the Fund an undivided interest in a loan made by the issuing financial institution in the proportion that the Fund's participation interest bears to the total principal amount of the loan. It is currently intended that no more than 5% of the net assets of Multiple Strategies Fund, Growth & Income Fund or Strategic Bond Fund can be invested in participation interests of the same borrower. Participation interests are primarily dependent upon the creditworthiness of the borrowing corporation, which is obligated to make payments of principal and interest on the loan, and there is a risk that such borrowers may have difficulty making payments. In the event the borrower fails to pay scheduled interest or principal payments, the Fund could experience a reduction in its income and might experience a decline in the net asset value of its shares. In the event of a failure by the financial institution to perform its obligation in connection with the participation agreement, the Fund might incur certain costs and delays in realizing payment or may suffer a loss of principal and/or interest. o Foreign Securities. As noted in the Prospectus, each Fund, other than Money Fund, may invest in securities (which may be denominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign corporations, certain supranational entities (described below) and foreign governments or their agencies or instrumentalities, and in securities issued by U.S. corporations denominated in non-U.S. currencies. All of these are considered to be "foreign securities." Money Fund may invest in certain U.S. dollar-denominated foreign securities, as described in the Prospectus. The obligations of foreign governmental entities may or may not be supported by the full faith and credit of a foreign government. Obligations of supranational entities include those of international organizations designated or supported by governmental entities to promote economic reconstruction or development and of international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. The governmental members, or "stockholders," usually make initial capital contributions to the supranational entity and in many cases are committed to make additional capital contributions if the supranational entity is unable to repay its borrowings. Each supranational entity's lending activities are limited to a percentage of its total capital (including "callable capital" contributed by members at the entity's call), reserves and net income. There is no assurance that foreign governments will be able or willing to honor their commitments. Investing in foreign securities, and in particular in securities in emerging market countries, involves considerations and risks not typically associated with investing in securities in the U.S. The values of foreign securities will be affected by changes in currency rates or exchange control regulations or currency blockage, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the U.S. or abroad) or changed circumstances in dealings between nations. Costs will be incurred in connection with conversions between various currencies. Foreign brokerage commissions are generally higher than commissions in the U.S., and foreign securities markets may be less liquid, more volatile and less subject to governmental regulation than in the U.S. Investments in foreign countries could be affected by other factors not generally thought to be present in the U.S., including expropriation or nationalization, confiscatory taxation and potential difficulties in enforcing contractual obligations, and could be subject to extended settlement periods. Because each Fund, other than Money Fund, may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of each Fund's assets and each Fund's income available for distribution. In addition, although a portion of each Fund's investment income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars, and absorb the cost of currency fluctuations. High Income Fund, Strategic Bond Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities Fund may engage in foreign currency exchange transactions for hedging purposes to attempt to protect against changes in future exchange rates. See "Hedging - Forward Contracts," below. The values of foreign investments and the investment income derived from them may also be affected unfavorably by changes in currency exchange control regulations. Although each Fund, other than Money Fund, will invest only in securities denominated in foreign currencies that at the time of investment do not have significant government-imposed restrictions on conversion into U.S. dollars, there can be no assurance against subsequent imposition of currency controls. In addition, the values of foreign securities will fluctuate in response to changes in U.S. and foreign interest rates. Investments in foreign securities offer potential benefits not available from investments solely in securities of domestic issuers by offering the opportunity to invest in foreign issuers that appear to offer growth potential, or in foreign countries with economic policies or business cycles different from those of the U.S., or to reduce fluctuations in portfolio value by taking advantage of foreign stock markets that do not move in a manner parallel to U.S. markets. From time to time, 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 reimposed. If a Fund's portfolio securities are held abroad, the countries in which they may be held and the sub-custodians or depositories holding them must be approved by the Trust's Board of Trustees to the extent that the approval is required under applicable rules of the Securities and Exchange Commission. Under normal market conditions, Global Securities Fund will invest its assets in securities of issuers located in a minimum of five different foreign countries; this minimum may be reduced to four foreign countries when foreign country investments comprise less than 80% of Global Securities Fund's net assets; to three foreign countries when such investments comprise less than 60% of its net assets, to two foreign countries when such investments comprise less than 40% of its net assets and to one foreign country when such investments comprise less than 20% of its net assets. In addition, no more than 20% of Global Securities Fund's net assets shall be invested in securities of issuers located in any one foreign country; that limit shall be increased to 35% for securities located in Australia, Canada, France, Japan, the United Kingdom or Germany. None of the above percentage limits are fundamental policies. o Warrants and Rights. As described in the Prospectus, each Fund other than Money Fund may invest in warrants and rights. Warrants basically are options to purchase equity securities at set prices valid for a specified period of time. Their prices do not necessarily move in a manner parallel to the prices of the underlying securities. Any price paid 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. Warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. o Repurchase Agreements. Each Fund may acquire securities that are subject to repurchase agreements in order to generate income while providing liquidity as set forth in the prospectus. Money Fund's repurchase agreements must comply with the collateral requirements of Rule 2a-7 under the Investment Company Act. In a repurchase transaction, a Fund acquires a security from, and simultaneously resells it to, an approved vendor (a U.S. commercial bank or the U.S. branch of a foreign bank or broker-dealer which has been designated a primary dealer in government securities which must meet the credit requirements set by the Trust's Board of Trustees from time to time) for delivery on an agreed-upon future date. The resale price exceeds the purchase price by an amount that reflects an agreed-upon interest rate effective for the period during which the repurchase agreement is in effect. The majority of these transactions run from day to day, and delivery pursuant to resale typically will occur within one to five days of the purchase. Repurchase agreements are considered "loans" under the Investment Company Act, collateralized by the underlying security. The Funds' repurchase agreements require that at all times while the repurchase agreement is in effect, the value of the collateral must equal or exceed the repurchase price to fully collateralize the repayment obligation. Additionally, the Funds' Manager will impose creditworthiness requirements to confirm that the vendor is financially sound and will continuously monitor the collateral's value. o Loans of Portfolio Securities. Each Fund may lend its respective portfolio securities subject to the restrictions stated in the Prospectus. Under applicable regulatory requirements (which are subject to change), the loan collateral must, on each business day, at least equal the value of the loaned securities and must consist of cash, bank letters of credit, U.S. Government securities, or certain other cash equivalents. To be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Trust if the demand meets the terms of the letter. Such terms and the issuing bank must be satisfactory to the Trust. Any Fund lending its securities receives amounts equal to the dividends declared or interest paid on the loaned securities during the term of the loan as well as the interest on the collateral securities, less any finders', administrative or other fees the Fund pays in connection with the loan. A Fund may share the interest it receives on the collateral securities with the borrower as long as it realizes at least a minimum amount of interest required by the lending guidelines established by the Board of Trustees. The lending Fund will not lend its portfolio securities to any officer, trustee, employee or affiliate of the Fund or its Manager. The terms of a Fund's loans must meet certain tests under the Internal Revenue Code and permit it to reacquire loaned securities on five days' notice or in time to vote on any important matter. o Borrowing. From time to time, the Funds (other than Money Fund) may borrow from banks on an unsecured basis to invest the borrowed funds in portfolio securities. Borrowing is subject to the restrictions stated in the Prospectus. Any such borrowing will be made only from banks. The Investment Company Act and the Fund's fundamental investment policies require that any such borrowing will be made only to the extent that the value of that Fund's assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings including the proposed borrowing . If the value of such Fund's assets, when computed in that manner, should fail to meet the 300% asset coverage requirement, that Fund is required within three days to reduce its bank debt to the extent necessary to meet such requirement. To do so, the Fund may have to sell a portion of its investments at a time when it would otherwise not want to sell the securities. Borrowing for investment increases both investment opportunity and risk. Interest on money borrowed is an expense the Funds would not otherwise incur, so that they may have little or no net investment income during periods of substantial borrowings. Since substantially all of these Funds' assets fluctuate in value whereas borrowing obligations are fixed, when a Fund has outstanding borrowings, its net asset value will tend to increase and decrease more when its portfolio assets increase or decrease than would otherwise be the case. The Funds (including Money Fund) may also borrow as a temporary measure for extraordinary or emergency purposes. o When-Issued and Delayed Delivery Transactions. Each Fund may purchase securities on a "when-issued" basis, and may purchase or sell such securities on a "delayed delivery" basis. Although a Fund will enter into such transactions for the purpose of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the Fund may dispose of a commitment prior to settlement. "When-issued" or "delayed delivery" refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. When such transactions are negotiated the price (which is generally expressed in yield terms) is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. The commitment to purchase a security for which payment will be made on a future date may be deemed a separate security and involve risk of loss if the value of the security declines prior to the settlement date. During the period between commitment by a Fund and settlement (generally within two months but not to exceed 120 days), no payment is made for the securities purchased by the purchaser, and no interest accrues to the purchaser from the transaction. Such securities are subject to market fluctuation; the value at delivery may be less than the purchase price. The Fund will identify assets to its Custodian, consisting of cash, U.S. Government securities, or other high grade debt securities rated "A" or better by Moody's or Standard & Poor's at least equal to the value of purchase commitments until payment is made. The Funds will engage in when-issued transactions in order to secure what is considered to be an advantageous price and yield at the time of entering into the obligation. When a Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to consummate the transaction. Failure to do so may result in the Fund losing the opportunity to obtain a price and yield considered to be advantageous. If any of the Funds chooses to (i) dispose of the right to acquire a when-issued security prior to its acquisition or (ii) dispose of its right to deliver or receive against a forward commitment, it may incur a gain or loss. At the time the Fund makes a commitment to purchase or sell a security on a when-issued or forward commitment basis, it records the transaction and reflects the value of the security purchased, or if a sale, the proceeds to be received in determining its net asset value. To the extent any Fund engages in when-issued and delayed delivery transactions, it will do so for the purpose of acquiring or selling securities consistent with its investment objective and policies and not for the purposes of investment leverage. Each Fund enters into such transactions only with the intention of actually receiving or delivering the securities, although (as noted above), when-issued securities and forward commitments may be sold prior to settlement date. In addition, changes in interest rates in a direction other than that expected by the Manager before settlement will affect the value of such securities and may cause loss to that Fund. When-issued transactions and forward commitments allow a Fund a technique to use against anticipated changes in interest rates and prices. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities in its portfolio on a forward commitment basis to attempt to limit its exposure to anticipated falling prices. In periods of falling interest rates and rising prices, a Fund might sell portfolio securities and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher cash yields. Other Investment Techniques and Strategies Covered Calls and Hedging As described in the Prospectus, each Fund (except Money Fund) may each write covered calls and may also employ one or more types of Hedging Instruments, including the futures identified in the Prospectus ("Futures"). The Funds' strategy of hedging with Futures and options on Futures will be incidental to each such Fund's activities in the underlying cash market. When hedging to attempt to protect against declines in the market value of the Fund's portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities which have appreciated, or to facilitate selling securities for investment reasons, a given Fund would: (i) sell Futures, (ii) purchase puts on such Futures or securities, or (iii) write covered calls on securities or on Futures. When hedging to permit a Fund to establish a position in the securities markets as a temporary substitute for purchasing individual securities (which that Fund will normally purchase, and then terminate that hedging position), or to attempt to protect against the possibility that a Fund's portfolio debt securities are not fully included in a rise in the securities market, these Funds may: (i) purchase Futures, or (ii) purchase calls on such Futures or on securities. When hedging to attempt to protect against declines in the dollar value of a foreign currency- denominated security or in a payment on such security, a Fund would: (a) purchase puts on that foreign currency or on foreign currency Futures, (b) write calls on that currency or on such Futures, or (c) enter into Forward Contracts at a lower or higher rate than the spot ("cash") rate. Additional information about the Hedging Instruments these Funds may use is provided below. At present, the Funds do not intend to purchase or sell Futures or related options if, after any such purchase, the sum of initial margin deposits on Futures and premiums paid for related options exceeds 5% of the value of that Fund's total assets. Certain options on foreign currencies are considered related options for this purpose. 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 that Fund's investment objective, legally permissible and adequately disclosed. Writing Covered Call Options. When any of the Funds (except Money Fund) write a call on a security, it receives a premium and agrees to sell the underlying security to a purchaser of a corresponding call on the same security during the call period (usually not more than 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. Such Fund has retained the risk of loss should the price of the underlying security decline during the call period, which may be offset to some extent by the premium. To terminate its obligation on a call it has written, each such 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 security and the premium received. Any such profits are considered short-term capital gains for Federal income tax purposes, and when distributed by each such Fund are taxable as ordinary income. If the Fund could not effect a closing purchase transaction due to lack of a market, it would have to hold the callable securities until the call expired or was exercised. Call writing may affect a Fund's turnover rate and brokerage commissions. The exercise of calls written by a Fund may cause that Fund to sell related portfolio securities, thus increasing its turnover rate in a manner beyond its control. The Funds may also write (and purchase) calls on foreign currencies. A call written on a foreign currency by any of the Funds is "covered" if the Fund owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currency held in its portfolio. A call written by any of the Funds on a foreign currency is for cross-hedging purposes if it is not covered, but is designed to provide a hedge against a decline (due to an adverse change in the exchange rate) in the U.S. dollar value of a security which the Fund owns or has the right to acquire and which is denominated in the currency underlying the option. In such circumstances, the Fund collateralizes the option by maintaining in a segregated account with the Funds' custodian, cash or U.S. Government securities in an amount not less than the value of the underlying foreign currency in U.S. dollars marked-to-market daily. A Fund may also write calls on Futures without owning a futures contract (or, with respect to the High Income Fund, a deliverable bond) provided that at the time the call is written, the Fund covers the call by segregating in escrow an equivalent dollar amount of liquid assets. The Fund will segregate additional liquid assets if the value of the escrowed assets drops below 100% of the current value of the Future. In no circumstances would an exercise notice require a Fund to deliver a futures contract; it would simply put the Fund in a short futures position, which is permitted by each Fund's hedging policies. Hedging. Set forth below are the Hedging Instruments which the Funds (except Money Fund) may use. Writing Put Options. A put option on securities gives the purchaser the right to sell, and the writer the obligation to buy, the underlying investment at the exercise price during the option period. Writing a put covered by segregated liquid assets equal to the exercise price of the put has the same economic effect to a Fund as writing a covered call. The premium the Fund receives from writing a put option represents a profit, as long as the price of the underlying investment remains above the exercise price. However, a Fund has also assumed the obligation during the option period to buy the underlying investment from the buyer of the put at the exercise price, even though the value of the investment may fall below the exercise price. If the put expires unexercised, the Fund (as the writer of the put) realizes a gain in the amount of the premium less transaction costs. If the put is exercised, the Fund must fulfill its obligation to purchase the underlying investment at the exercise price, which will usually exceed the market value of the investment at that time. In that case, the Fund may incur a loss, equal to the sum of the sale price of the underlying investment and the premium received minus the sum of the exercise price and any transaction costs incurred. When writing put options on securities or on foreign currencies, to secure its obligation to pay for the underlying security, the Fund will earmark liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Fund therefore forgoes the opportunity of investing the segregated assets or writing calls against those assets. As long as the obligation of the Fund as the put writer continues, it may be assigned an exercise notice by the exchange or broker-dealer through whom such option was sold, requiring the Fund to take delivery of the underlying security against payment of the exercise price. The Fund may be assigned an exercise notice at any time prior to the termination of its obligation as the writer of the put. This obligation terminates upon expiration of the put, or such earlier time at which the Fund effects a closing purchase transaction by purchasing a put of the same series as that previously sold. Once the Fund has been assigned an exercise notice, it is thereafter not allowed to effect a closing purchase transaction. The Fund may effect a closing purchase transaction to realize a profit on an outstanding put option it has written or to prevent an underlying security from being put. Furthermore, effecting such a closing purchase transaction will permit the Fund to write another put option to the extent that the exercise price thereof is secured by the deposited assets, or to utilize the proceeds from the sale of such assets for other investments by that Fund. The Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from writing the option. As above for writing covered calls, any and all such profits described herein from writing puts are considered short-term gains for Federal tax purposes, and when distributed by the Fund, are taxable as ordinary income. Purchasing Calls and Puts. When a Fund purchases a call (other than in a closing purchase transaction), it pays a premium and has the right to buy the underlying investment from a seller of a corresponding call on the same investment during the call period at a fixed exercise price. The Fund benefits only if the call is sold at a profit or if, during the call period, the market price of the underlying investment is above the sum of the call price plus the transaction costs and the premium paid for the call and the call is exercised. If the call is not exercised or sold (whether or not at a profit), it will become worthless at its expiration date and the Fund will lose its premium payment and the right to purchase the underlying investment. When such Fund purchases a put, it pays a premium and has the right to sell the underlying investment to a seller of a put on a corresponding investment during the put period at a fixed exercise price. Buying a put on securities or Futures a Fund owns enables the Fund to attempt to protect itself during the put period against a decline in the value of the underlying investment below the exercise price by selling the underlying investment at the exercise price to a seller of a corresponding put. If the market price of the underlying investment is equal to or above the exercise price and, as a result, the put is not exercised or resold, the put will become worthless at its expiration date and the Fund will lose its premium payment and the right to sell the underlying investment; the put may, however, be sold prior to expiration (whether or not at a profit). Purchasing a put on either Futures or on securities it does not own permits a Fund either to resell the put or, if applicable, to buy the underlying investment and sell it at the exercise price. The resale price of the put will vary inversely with the price of the underlying investment. If the market price of the underlying investment is above the exercise price, and, as a result, the put is not exercised, the put will become worthless on its expiration date. In the event of a decline in price of the underlying investment, the Fund could exercise or sell the put at a profit to attempt to offset some or all of its loss on its portfolio securities. When the Fund purchases a put on a Future or security not held by it, the put protects the Fund to the extent that the prices of the underlying Future or securities move in a similar pattern to the prices of the securities in a Fund's portfolio. Futures. No price is paid or received upon the purchase or sale of a Future. Upon entering into a Futures transaction, a Fund will be required to deposit an initial margin payment with the futures commission merchant (the "futures broker"). The initial margin will be deposited with the Fund's Custodian in an account registered in the futures broker's name; however the futures broker can gain access to that account only under specified conditions. As the Future is marked to market to reflect changes in its market value, subsequent margin payments, called variation margin, will be paid to or by the futures broker on a daily basis. Prior to expiration of the Future, if the Fund elects to close out its position by taking an opposite position, a final determination of variation margin is made, additional cash is required to be paid by or released to the Fund, and any loss or gain is realized for tax purposes. All futures transactions are effected through a clearinghouse associated with the exchange on which the contracts are traded. Forward Contracts. A Forward Contract involves bilateral obligations of one party to purchase, and another party to sell, a specific currency at a future date (which may be any fixed number of days from the date of the contract agreed upon by the parties), at a price set at the time the contract is entered into. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. The Funds may use Forward Contracts to protect against uncertainty in the level of future exchange rates. The use of Forward Contracts does not eliminate fluctuations in the prices of the underlying securities the Fund owns or intends to acquire, but it does fix a rate of exchange in advance. In addition, although Forward Contracts limit the risk of loss due to a decline in the value of the hedged currencies, at the same time they limit any potential gain that might result should the value of the currencies increase. These Funds 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 a Fund 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. A Fund will thereby be able to protect itself against a possible loss resulting from an adverse change in the relationship between the currency exchange rates during the period between the date on which the security is purchased or sold, or on which the payment is declared, and the date on which such payments are made or received. These Funds 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 that Fund's portfolio securities denominated in such foreign currency, or when a Fund believes that the U.S. dollar may suffer a substantial decline against a foreign currency, it may enter into a forward purchase contract to buy that foreign currency for a fixed dollar amount. In this situation the Fund may, in the alternative, enter into a Forward Contract to sell a different foreign currency for a fixed U.S. dollar amount where that 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 that Fund are denominated ("cross-hedge"). These Funds will not enter into such Forward Contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate that 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 or another currency that is also the subject of the hedge. The 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 these currencies provided the excess amount is "covered" by liquid, high-grade debt securities, denominated in that foreign currency or U.S. dollars, at least equal at all times to the amount of such excess. As an alternative, the Fund may purchase a call option permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale contract at a price no higher than the forward contract price or the Fund may purchase a put option permitting the Fund to sell the amount of foreign currency subject to a forward purchase contract at a price as high or higher than the forward contract price. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The precise matching of the Forward Contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of these securities between the date the Forward Contract is entered into and the date it is sold. Accordingly, it may be necessary for 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 the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency 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 any Fund to sell a currency, the Fund may either sell a portfolio security and use the sale proceeds to make delivery of the currency or retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract pursuant to which the Fund will obtain, on the same maturity date, the same amount of the currency that it is obligated to deliver. Similarly, the Fund may close out a Forward Contract requiring it to purchase a specified currency by entering into a second contract entitling it to sell the same amount of the same currency on the maturity date of the first contract. The Fund would realize a gain or loss as a result of entering into such an offsetting Forward Contract under either circumstance to the extent the exchange rate or rates between the currencies involved moved between the execution dates of the first contract and offsetting contract. The cost to the Fund of engaging in Forward Contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because Forward Contracts are usually entered into on a principal basis, no fees or commissions are involved. Because such contracts are not traded on an exchange, a Fund must evaluate the credit and performance risk of each particular counterparty under a Forward Contract. Although each Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. The Fund may convert foreign currency from time to time, and investors should be aware of the costs of currency conversion. Foreign exchange dealers do not charge a fee for conversion, but they do seek to realize a profit based on the difference between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should that Fund desire to resell that currency to the dealer. Interest Rate Swap Transactions. The risk incurred by Bond Fund, High Income Fund and Strategic Bond Fund when entering into a swap agreement is twofold: interest rate risk and credit risk. There is a risk that, based on movements of interest rates in the future, the payments made by the Fund under a swap agreement will have been greater than those received by it. Credit risk arises from the possibility that the counterparty will default. If the counterparty to an interest rate swap defaults, the Fund's loss will consist of the net amount of contractual interest payments that the Fund has not yet received. The Manager will monitor the creditworthiness of counterparties to the Fund's interest rate swap transactions on an ongoing basis. These Funds will enter into swap transactions with appropriate counterparties pursuant to master netting agreements. A master netting agreement provides that all swaps done between the Fund and that counterparty under the master agreement shall be regarded as parts of an integral agreement. If on any date amounts are payable in the same currency in respect of one or more swap transactions, the net amount payable on that date in that currency shall be paid. In addition, the master netting agreement may provide that if one party defaults generally or on one swap, the counterparty may terminate the swaps with that party. Under such agreements, if there is a default resulting in a loss to one party, the measure of that party's damages is calculated by reference to the average cost of a replacement swap with respect to each swap (i.e., the mark-to-market value at the time of the termination of each swap). The gains and losses on all swaps are then netted, and the result is the counterparty's gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as "aggregation." Additional Information About Hedging Instruments and Their Use. Each Fund's Custodian, or a securities depository acting for the Custodian, will act as that Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the securities on which the Fund has written options or as to other acceptable escrow securities, so that no margin will be required for such transactions. OCC will release the securities on the expiration of the option or upon the Fund's entering into a closing transaction. An option position may be closed out only on a market which provides secondary trading for options of the same series, and there is no assurance that a liquid secondary market will exist for any particular option. When a Fund writes an over-the-counter ("OTC") option, it will enter into an arrangement with a securities dealer, which would establish a formula price at which that Fund would have the absolute right to repurchase that OTC option. This formula price would generally be based on a multiple of the premium received for the option, plus the amount by which the option is exercisable below for a put, above for a call, the market price of the underlying security ("in-the-money"). For any OTC option which any of these three Funds writes, it will treat as illiquid (for purposes of the 15% of net assets restriction on illiquid securities, stated in the Prospectus) the mark-to-market value of any OTC option held by it, unless subject to a buy-back agreement with the executing broker. The SEC is evaluating the general issue of whether or not OTC options should be considered as liquid securities, and the procedure described above could be affected by the outcome of that evaluation. Each Fund's option activities may affect its turnover rate and brokerage commissions. As noted above, the exercise of calls written by a Fund may cause that Fund to sell related portfolio securities, thus increasing its turnover rate in a manner beyond a Fund's control. The exercise by a Fund of puts on securities or Futures may cause the sale of related investments, also increasing portfolio turnover. Although such exercise is within the Fund's control, holding a put might cause the Fund to sell the underlying investment for reasons which would not exist in the absence of the put. Each Fund will pay a brokerage commission each time it buys or sells a call, buys a put or sells an underlying investment in connection with the exercise of a put or call. Such commissions may be higher than those which would apply to direct purchases or sales of the underlying investments. Premiums paid for options are small in relation to the market value of such investments and consequently, put and call options offer large amounts of leverage. The leverage offered by trading in options could result in a Fund's net asset value being more sensitive to changes in the value of the underlying investment. Regulatory Aspects of Hedging Instruments. These Funds must each operate within certain restrictions as to its long and short positions in Futures and options thereon under a rule (the "CFTC Rule") adopted by the Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange Act (the "CEA"), which excludes the Fund from registration with the CFTC as a "commodity pool operator" (as defined in the CEA) if it complies with the CFTC Rule. The Rule does not limit the percentage of each Fund's assets that may be used for Futures margin and related options premiums for a bona fide hedging position. However, under the Rule each Fund must limit its aggregate initial futures margin and related option premiums to no more than 5% of that Fund's net assets for hedging strategies that are not considered bona fide hedging strategies under the Rule. Under the restrictions, each Fund also must, as to its short positions, use Futures and options thereon solely for bona-fide hedging purposes within the meaning and intent of the applicable provisions under the CEA. Certain options on foreign currencies are considered related options for this purpose. Transactions in options by these 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 exchanges or brokers. Thus, the number of options which the Fund may write or hold may be affected by options written or held by other entities, including other investment companies having the same or an affiliated investment adviser. Position limits also apply to Futures. An exchange may order the liquidation of positions found to be in violation of those limits and may impose certain other sanctions. Due to requirements under the Investment Company Act, when a Fund purchases a Future, the Fund will maintain, in a segregated account or accounts with its custodian bank, 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 Hedging Instruments and Covered Calls. Each Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code of 1986. That qualification enables each Fund to "pass-through" its income and realized capital gains to shareholders without the Fund having to pay tax on them. Certain foreign currency exchange contracts ("Forward Contracts") in which the Fund may invest are treated as "section 1256 contracts." Gains or losses relating to section 1256 contracts generally are characterized under the Internal Revenue Code as 60% long-term and 40% short-term capital gains or losses. However, foreign currency gains or losses arising from certain section 1256 contracts (including Forward Contracts) generally are treated as ordinary income or loss. In addition, section 1256 contracts held by the Fund at the end of each taxable year are "marked-to-market" with the result that unrealized gains or losses are treated as though they were realized. These contracts also must be marked-to-market for purposes of the excise tax applicable to investment company distributions and for other purposes under rules prescribed pursuant to the Internal Revenue Code. An election can be made by the Fund to exempt these transactions from this marked-to-market treatment. Certain Forward Contracts entered into by the Fund may result in "straddles" for Federal income tax purposes. The straddle rules may affect the character and timing of gains (or losses) recognized by the Fund on straddle positions. Generally, a loss sustained on the disposition of a position making up a straddle is allowed only to the extent such loss exceeds any unrecognized gain in the offsetting positions making up the straddle. Disallowed loss is generally allowed at the point where there is no unrecognized gain in the offsetting positions making up the straddle, or the offsetting position is disposed of. Under the Internal Revenue Code, gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of foreign currency forward contracts, gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. Currency gains and losses are offset against market gains and losses on each trade before determining a net "Section 988" gain or loss under the Internal Revenue Code for that trade, which may increase or decrease the amount of the Fund's investment company income available for distribution to its shareholders. Possible Risk Factors in Hedging. In addition to the risks with respect to options discussed in the Prospectus and above, there is a risk in using short hedging by: (i) selling Futures or (ii) purchasing puts on broadly-based indices or Futures to attempt to protect against declines in the value of the Fund's securities that the prices of the Futures or applicable index (thus the prices of the Hedging Instruments) will correlate imperfectly with the behavior of the cash (i.e., market value prices) of the Fund's securities. The ordinary spreads between prices in the cash and futures markets are subject to distortions due to differences in the natures of those markets. First, all participants in the futures markets are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures markets depend on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures markets could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures markets are less onerous than margin requirements in the securities markets. Therefore, increased participation by speculators in the futures markets may cause temporary price distortions. The risk of imperfect correlation increases as the composition of a Fund's portfolio diverges from the securities included in the applicable index. To compensate for the imperfect correlation of movements in the price of the securities being hedged and movements in the price of the Hedging Instruments, each Fund may use Hedging Instruments in a greater dollar amount than the dollar amount of securities being hedged if the historical volatility of the prices of such securities being hedged is more than the historical volatility of the applicable index. It is also possible that where a Fund has used Hedging Instruments in a short hedge, the market may advance and the value of securities held in the Fund's portfolio may decline. If this occurred, the Fund would lose money on the Hedging Instruments and also experience a decline in value in its securities. However, while this could occur for a very brief period or to a very small degree, over time the value of a diversified portfolio of equity securities will tend to move in the same direction as the indices upon which the Hedging Instruments are based. If a Fund uses Hedging Instruments to establish a position in the securities markets as a temporary substitute for the purchase of individual securities (long hedging) by buying Futures and/or calls on such Futures, on securities, or on stock indices, it is possible that the market may decline. If either Fund then concludes not to invest in such securities at that time because of concerns as to possible further market decline or for other reasons, that Fund will realize a loss on the Hedging Instruments that is not offset by a reduction in the price of the equity securities purchased. Other Investment Restrictions The significant investment restrictions of all the Funds are set forth in the Prospectus. The following investment restrictions are also fundamental policies. Fundamental policies and the Funds' investment objectives cannot be changed without the vote of a "majority" of the outstanding shares of the Trust (or of the Fund, as to matters affecting only that Fund). Under the Investment Company Act, such a "majority" vote is defined as the vote of the holders of the lesser of: (1) 67% or more of the shares present or represented by proxy at such meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or (2) more than 50% of the outstanding shares. Under these additional restrictions, each of the Funds cannot: o invest in real estate or in interests in real estate, but may purchase securities of issuers holding real estate or interests therein; o invest in companies for the purpose of acquiring control of management thereof; o underwrite securities of other companies, except insofar as it might be deemed to be an underwriter for purposes of the Securities Act of 1933 in the resale of any securities held in its own portfolio; o invest or hold securities of any issuer if those officers and trustees or directors of the Trust or its adviser owning individually more than 1/2 of 1% of the securities of such issuer together own more than 5% of the securities of such issuer . The following operating policies of the Funds are not fundamental policies and may be changed by a vote of the majority of the Trust's Board of Trustees without shareholder approval. These additional restrictions provide that the Funds cannot: o invest in oil or gas exploration or development programs, but may purchase options, futures contracts, swaps and other investments, which are backed by, or the investment return from which are linked to oil, gas and mineral values; or o pledge, mortgage or hypothecate any assets to secure a debt; the escrow, collateral and margin arrangements involved with any of the Funds' investments are not considered to involve such a pledge, mortgage or hypothecation. For purposes of the Funds' policy not to concentrate described in the investment restrictions listed in the Prospectus, the Funds have adopted the corporate industry classifications set forth in Appendix A to the Statement of Additional Information. In addition, the Funds are restricted by the Investment Company Act from issuing senior securities (as defined in that Act). These are not fundamental policies. New York's insurance laws require that investments of each Fund be made with a degree of care of an "ordinarily prudent person." The Manager believes that compliance with this standard will not have a negative impact on the performance of any of the Funds. In addition, each Fund's investments must comply with the diversification requirements contained in Section 817(h) of the Internal Revenue Code, and each Fund will comply with the diversification requirements of Section 10506 of the California Insurance Code (see "Other Investment Techniques and Strategies -- Foreign Securities" in the Prospectus) and with the regulations adopted under those statutes. How the Funds are Managed Organization and History. As a Massachusetts business trust, the Trust is not required to hold, and does not plan to hold, regular annual meetings of shareholders. The Trust will hold meetings when required to do so by the Investment Company Act or other applicable law, or when a shareholder meeting is called by the Trustees or upon proper request of the shareholders. At all shareholder meetings, shareholders only vote on matters affecting their Fund. Shareholders have the right, upon the declaration in writing or vote of two-thirds of the outstanding shares of the Trust, to remove a Trustee. The Trustees will call a meeting of shareholders to vote on the removal of a Trustee upon the written request of the record holders of 10% of its outstanding shares. In addition, if the Trustees receive a request from at least 10 shareholders (who have been shareholders for at least six months) holding shares of the Trust valued at $25,000 or more or holding at least 1% of the Trust's outstanding shares, whichever is less, stating that they wish to communicate with other shareholders to request a meeting to remove a Trustee, the Trustees will then either make the Trust's shareholder list available to the applicants or mail their communication to all other shareholders at the applicants' expense, or the Trustees may take such other action as set forth under Section 16(c) of the Investment Company Act. At all shareholder meetings, shareholders only vote on matters affecting their Fund, and each Fund votes separately on such matters. However, matters that require a vote by all shareholders of the Trust are submitted to all the shareholders, without individual The Trust's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Trust's obligations, and provides for indemnification and reimbursement of expenses out of its property for any shareholder held personally liable for its obligations. The Declaration of Trust also provides that the Trust shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. Thus, while Massachusetts law permits a shareholder of a business trust (such as the Trust) to be held personally liable as a "partner" under certain circumstances, the risk of a Trust shareholder incurring financial loss on account of shareholder liability is limited to the relatively remote circumstances in which the Trust would be unable to meet its obligations described above. Any person doing business with the Trust, and any shareholder of the Trust, agrees under the Trust's Declaration of Trust to look solely to the assets of the Trust for satisfaction of any claim or demand which may arise out of any dealings with the Trust, and the Trustees shall have no personal liability to any such person, to the extent permitted by law. Trustees and Officers of the Trust. The Trust's Trustees and officers and their principal occupations and business affiliations during the past five years are set forth below. Each Trustee is also a Trustee, Director or Managing General Partner of Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial California Tax Exempt Trust, Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund, Oppenheimer Champion Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Main Street Funds, Inc., Oppenheimer International Bond Fund, Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund, Oppenheimer Real Asset Fund, Centennial America Fund, L.P., Oppenheimer Municipal Fund, Oppenheimer Limited-Term Government Fund, Panorama Series Fund, Inc. and The New York Tax-Exempt Income Fund, Inc. (collectively, the "Denver-based Oppenheimer Funds") except for Mr. Fossel who is not a Trustee of Centennial New York Tax-Exempt Trust or Managing General Partner of Centennial America Fund, L.P. Ms. Macaskill is President and Mr. Swain is Chairman and Chief Executive Officer of each of the Denver-based Oppenheimer funds. As of March 31, 1998, none of the Trustees or officers were Account owners and thus none owned any Fund shares. Robert G. Avis, Trustee*; Age: 66 One North Jefferson Ave., St. Louis, Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G. Edwards Trust Company (its affiliated investment adviser and trust company, respectively). William A. Baker, Trustee; Age: 83 197 Desert Lakes Drive, Palm Springs, California 92264 Management Consultant. Charles Conrad, Jr., Trustee; Age: 67 1501 Quail Street, Newport Beach, CA 92660 Chairman and CEO of Universal Space Lines, Inc. (a space services management company); formerly Vice President of McDonnell Douglas Space Systems Co. and associated with the National Aeronautics and Space Administration. - -------------- *A Trustee who is an "interested person" of the Trust as defined in the Investment Company Act. Jon S. Fossel, Trustee; Age: 56 P.O. Box 44, Mead Street, Waccabuc, New York 10597 Member of the Board of Governors of the Investment Company Institute (a national trade association of investment companies), Chairman of the Investment Company Institute Education Foundation; formerly Chairman and a director of the Manager, President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding company, and Shareholder Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager. Sam Freedman, Trustee; Age : 57 4975 Lakeshore Drive, Littleton, Colorado 80123 Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services, Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief Executive and Officer and director of SFSI, Vice President and director of OAC and a director of OppenheimerFunds, Inc. Raymond J. Kalinowski, Trustee; Age: 68 44 Portland Drive, St. Louis, Missouri 63131 Director of Wave Technologies International, Inc. (a computer products training company). C. Howard Kast, Trustee; Age: 76 2552 East Alameda, Denver, Colorado 80209 Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm). Robert M. Kirchner, Trustee; Age: 76 7500 E. Arapahoe Road, Englewood, Colorado 80112 President of The Kirchner Company (management consultants). Ned M. Steel, Trustee; Age: 82 3416 South Race Street, Englewood, Colorado 80110 Chartered Property and Casualty Underwriter; a director of Visiting Nurse Corporation of Colorado . James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 64 6803 South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since September 1988); formerly President and a director of Centennial Asset Management Corporation, an investment adviser subsidiary of the Manager ("Centennial"), and Chairman of the Board of SSI. Bridget A. Macaskill, President ; Age: 46 49 Two World Trade Center, New York, New York 10048-0203 President (since June 1991), Chief Executive Officer (since September 1995) and a Director (since December 1994) of the Manager; President and director (since June 1991) of HarbourView; Chairman and a director of SSI (since August 1994), and SFSI (September 1995); President (since September 1995) and a director (since October 1990) of OAC; President (since September 1995) and a director - -------------- *A Trustee who is an "interested person" of the Trust as defined in the Investment Company Act. (since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the Manager; a director of Oppenheimer Real Asset Management, Inc. (since July 1996) ; President and a director (since October 1997) of OppenheimerFunds International Ltd., an offshore fund manager subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since October 1997); President and a director of other Oppenheimer funds; a director of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food company); a Trustee and Director of other Oppenheimer funds; formerly an Executive Vice President of the Manager. Alan Gilston, Vice President; Small Cap Growth Fund Portfolio Manager; Age: 39 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since September 1997); formerly a Vice President and portfolio manager at Schroder Capital Management International, Inc. Paul Larocco, Vice President; Aggressive Growth Fund Portfolio Manager; Age : 40 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since April 1996); an officer of other Oppenheimer funds; formerly a Securities Analyst with Columbus Circle Investors (August 1990-January 1993), prior to which he was an Investment Analyst for Chicago Title & Trust Co. Michael S. Levine, Growth & Income Fund Associate Portfolio Manager; Age: 32 Two World Trade Center, New York, New York 10048-0203 Assistant Vice President of the Manager (since April 1996); formerly portfolio manager and research associate for Amas Securities, Inc., prior to which he was an analyst for Shearson Lehman Hutton Inc. Robert Milnamow, Vice President; Growth & Income Fund Portfolio Manager; Age: 47 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since November 1995); an officer of other Oppenheimer funds; previously a portfolio manager with Phoenix Securities Group (August 1989-August 1995) . David P. Negri, Vice President; Bond Fund, Strategic Bond Fund and Multiple Strategies Fund Portfolio Manager; Age: 44 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since June 1989); an officer of other Oppenheimer funds. Jane Putnam, Vice President; Growth Fund Portfolio Manager; Age: 37 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager funds.(since October 1995); previously a portfolio manager and equity research analyst for Chemical Bank. Thomas P. Reedy, Vice President; High Income Fund Portfolio Manager; Age: 36 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since June 1993); an officer of other Oppenheimer funds; formerly a Securities Analyst for the Manager. Richard H. Rubinstein, Vice President; Multiple Strategies Fund Portfolio Manager; Age: 49 Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since October 1995); an officer of other Oppenheimer funds (since June 1990). Arthur P. Steinmetz, Vice President; Strategic Bond Fund Portfolio Manager; Age: 39 Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since March 1993); an officer of other Oppenheimer funds. Jay W. Tracey III, Vice President; Small Cap Growth Fund Portfolio Manager; Age: 44 Two World Trade Center, New York, New York 10048-0203 Vice President of the Manager (since September 1994); Vice President and portfolio manager of other OppenheimerFunds; formerly a Managing Director of Buckingham Capital Management (February 1994-September 1994), prior to which he was Portfolio Manager and Vice President of other Oppenheimer funds and a Vice President of the Manager (July 1991-February 1994). Dorothy G. Warmack, Vice President; Money Fund Portfolio Manager; Age: 61 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager and Centennial (since January 1992); an officer of other Oppenheimer funds. William L. Wilby, Vice President; Global Securities Fund Portfolio Manager; Age: 53 Two World Trade Center, New York, New York 10048-0203 Senior Vice President of the Manager (since July 1994) and Vice President of HarbourView (since October 1993); an officer of other Oppenheimer funds; formerly international investment strategist at Brown Brothers Harriman & Co., prior to which he was a Managing Director and Portfolio Manager at AIG Global Investors. Andrew J. Donohue, Vice President and Secretary; Age: 47 Two World Trade Center, New York, New York 10048-0203 Executive Vice President (since January 1993), General Counsel (since October 1991) and a Director (since September 1995) of the Manager; Executive Vice President (since September 1993), and a director (since January 1992) of the Distributor; Executive Vice President, General Counsel and a director of HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since (September 1995) and MultiSource Services, Inc. (a broker-dealer) (since December 1995); President and a director of Centennial (since September 1995); President and a director of Oppenheimer Real Asset Management, Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC; Vice President of OFIL and Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. George C. Bowen, Vice President, Treasurer, and Assistant Secretary; Age: 61 6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President (since September 1987) and Treasurer (since March 1985) of the Manager; Vice President (since June 1983) and Treasurer (since March 1985) of the Distributor; Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView; Senior Vice President (since February 1992), Treasurer (since July 1991)and a director (since December 1991) of Centennial; President, Treasurer and a director of Centennial Capital Corporation (since June 1989); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI (since November 1989); Treasurer of OAC (since June 1990); Treasurer of Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc., a broker-dealer (since December 1995); a Trustee, Director and officer of other Oppenheimer funds . Robert J. Bishop, Assistant Treasurer; Age: 39 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager/Mutual Fund Accounting (since May 1996); an officer of other Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for the Manager. Scott T. Farrar, Assistant Treasurer; Age: 32 6803 South Tucson Way, Englewood, Colorado 80112 Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly an Assistant Vice President of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for the Manager. Robert G. Zack, Assistant Secretary; Age: 49 Two World Trade Center, New York, New York 10048-0203 Senior Vice President (since May 1985) and Associate General Counsel (since May 1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI (since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. o Remuneration of Trustees. The officers of the Trust and one of the Trustees of the Trust (Mr. Swain) who is affiliated with the Manager receive no salary or fee from the Trust. The remaining Trustees of the Trust received the compensation shown below. The compensation from the Trust was paid during its fiscal year ended December 31, 1997. The compensation from all of the Denver-based Oppenheimer funds includes the Trust and compensation is received as a director, trustee, managing general partner or member of a committee or Board of those funds during the calendar year 1997. Total Compensation Aggregate From All Compensation Denver-based Name Position From Trust OppenheimerFunds1 Robert G. Avis Trustee $3,391.05 $63,501 William A. Baker Audit and Review $3,410.51 $77,502 Committee Ex-Officio Member2 and Trustee Charles Conrad, Jr. Trustee(3) $3,649.51 $72,000 Jon S. Fossel Trustee $3,391.05 $63,277 Sam Freedman Audit and Review $2,579.56 $66,501 Committee Member2 and Trustee Raymond J. Kalinowski Audit and Review $3,822.45 $ 71,561 Committee Member2 and Trustee C. Howard Kast Audit and Review $4,088.19 $76,503 Committee Chairman2 and Trustee Robert M. Kirchner Trustee3 $3,649.51 $ 72,000 Ned M. Steel Trustee $3,391.05 $ 63,501 1 For the 1997 calendar year. 2Commitee positions effective July 1, 1997. 3Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the Audit and Review Committee. Deferred Compensation Plan. The Board of Trustees has adopted a Deferred Compensation plan for disinterested Trustees that enables Trustees to elect to defer receipt of all or a portion of the annual fees they are entitled to receive from the Trust. As of December 31, 1997, none have elected to do so. Under the plan, the compensation deferred by a Trustee is periodically adjusted as though an equivalent amount had been invested in shares of one or more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under the plan will be determined based upon the performance of the selected funds. Deferral of Trustees' fees under the plan will not materially affect the assets, liabilities or net income per share of any Fund. The plan will not obligate the Trust to retain the services of any Trustee or to pay any particular level of compensation to any Trustee. Pursuant to an Order issued by the SEC, the Trust may invest in the funds selected by the Trustee under the plan without shareholder approval for the limited purpose of determining the value of the Trustee's deferred fee account. o Major Shareholders. As of March 31, 1998 the holders of 5% or more of the outstanding shares of any Fund were separate accounts of (i) Monarch Life Insurance Company ("Monarch"), Springfield, MA; (ii) ReliaStar Bankers Security Life Insurance Company ("ReliaStar"), Minneapolis, MN; (iii) The Life Insurance Company of Virginia ("Life of Virginia"), Richmond, VA; (iv) Nationwide Life Insurance Company ("Nationwide"), Columbus, OH; (v) Aetna Life Insurance and Annuity Company ("Aetna"), Hartford, CT; (vi) Massachusetts Mutual Life Insurance Company, Springfield, MA ("MassMutual"), (vii) Jefferson-Pilot Life Insurance Company ("Jefferson Pilot"), Greensboro, NC, (viii) Chubb Life Insurance Company of America ("Chubb"), Concord, NH; (ix) Acacia National Life Insurance Company ("Acacia"), Washington, D.C.; (x) Protective Life Insurance Company ("Protective"), Birmingham, AL; (xi)CUNA Mutual Group ("CUNA"), Madison, WI; (xii) COVA Financial Life Insurance Company ("COVA"), Oakbrook Terrace, IL; (xiii) American Enterprise Life Insurance Company ("American Express"), Minneapolis, MN; (xiv) PFL Life Insurance Company ("PFL"), Cedar Rapids, IA and their respective affiliates. Such shares were held as shown in Appendix B. The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual Life Insurance Company. OAC is also owned in part by certain of the Manager's directors and officers, some of whom also serve as officers of the Trust, and one of whom (Mr. Swain) serves as a Trustee of the Trust. 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. o Portfolio Management. The Portfolio Managers of the Funds are as follows; Money Fund, Dorothy Warmack; High Income, Thomas P. Reedy; Bond Fund, Multiple Strategies Fund and Strategic Bond Fund, David Negri (joined by Richard Rubinstein for Multiple Strategies Fund and by Arthur Steinmetz for Strategic Bond Fund); Small Cap Growth Fund, Jay W. Tracey III and Alan Gilston; Aggressive Growth Fund, Paul LaRocco; Growth Fund, Jane Putnam; Global Securities Fund, William Wilby; and Growth & Income Fund, Robert J. Milnamow and Michael S. Levine. They are the persons principally responsible for the day-to-day management of each of the Fund's respective portfolios. Their backgrounds are described in the Prospectus under "Portfolio Managers." Other members of the Equity Portfolio Department, particularly, George Evans and Frank Jennings for Global Securities Fund, Jay W. Tracey, III for Aggressive Growth Fund, Robert Doll for Growth Fund and Michael S. Levine for Multiple Strategies Fund provide the portfolio managers with counsel and support in managing those Funds' portfolios. o The Investment Advisory Agreements. The Investment Advisory Agreements between the Manager and the Trust for each of the eleven Funds require 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 continuous public sale of shares of each Fund. Expenses not expressly assumed by the Manager under the Investment Advisory Agreements are paid by the Trust. The Investment Advisory Agreements list examples of expenses paid by the Trust, the major categories of which relate to interest, taxes, brokerage commissions, fees to certain Trustees, legal and audit expenses, custodian and transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring expenses, including litigation costs. Expenses with respect to any two or more Funds are allocable in proportion to the net assets of the respective Funds except where allocations of direct expenses can be made. The management fees paid by the Funds to the Manager for the Funds' most recent three fiscal years (except for Small Cap Growth Fund, which commenced operations in 1998) were as follows: Fiscal year ended December 31, 1995 1996 1997 Money Fund $ 338,483 $445,899 High Income Fund $ 866,154 $1,177,754 Bond Fund $1,280,422 $2,188,350 Aggressive Growth Fund $1,790,785 $3,382,840 Growth Fund $644,977 $1,139,255(2) Multiple Strategies Fund $2,540,311 $3,132,569 Global Securities Fund $2,451,556 $3,395,740 Strategic Bond Fund $ 281,335 $ 618,338 Growth & Income Fund(1) $ 6,710(1) $ 160,819 - -------------------- (1)From July 5, 1995 (commencement of operations) to December 31, 1996. (2) During the fiscal year ended December 31, 1996, the Manager reimbursed Oppenheimer Growth Fund $27,276 for certain SEC registration fees incurred in connection with the acquisition by that Fund of J.P. Aggressive Growth Fund, Inc. The Investment Advisory Agreements provide that the Manager is not liable for any loss sustained by the Trust and/or any Fund in connection with matters to which the Investment Advisory Agreements relate, except a loss resulting by reason of the Manager's willful misfeasance, bad faith or gross negligence in the performance of its duties or reckless disregard for its obligations thereunder. The Manager may act as investment adviser for any other person, firm or corporation, and the Investment Advisory Agreements permit the Manager to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment adviser or general distributor. If the Manager shall no longer act as investment adviser to the Trust, the right of the Trust or any of the Funds to use the name "Oppenheimer" as part of their names may be withdrawn. The Investment Advisory Agreements contain no expense limitation. o The Distributor. Under its General Distributor's Agreement with the trust dated May 1, 1998, the Distributor acts as the principal underwriter in the continuous public offering of the Fund's Class 2 shares only, but is not obligated to sell a specific number of shares. Expenses normally attributable to sales (other than those paid under the Class 2 Service Plans of each Fund), including advertising and the cost of printing and mailing prospectuses (other than those furnished to existing shareholders), may be borne by the Distributor or by the insurance company separate account sponsors and their affiliates that offer Class 2 shares to their contract owners. For additional information about distribution of the each Fund's shares and the expenses connected with such activities, please refer to "Class 2 Service Plans," below. o The Transfer Agent. OppenheimerFunds Services, the Trust's Transfer Agent, is responsible for maintaining the Trust's shareholder registry and shareholder accounting records. Brokerage Policies of the Funds Brokerage Provisions of the Investment Advisory Agreements Affecting Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund, Global Securities Fund, Small Cap Growth Fund and Strategic Bond Fund. One of the duties of the Manager under the Investment Advisory Agreements is to arrange the portfolio transactions for the Funds. The Investment Advisory Agreements contain provisions relating to the employment of broker-dealers ("brokers") to effect the Funds' portfolio transactions. In doing so, the Manager is authorized by the Investment Advisory Agreements to employ broker-dealers, including "affiliated" brokers, as that term is defined in the Investment Company Act, as may, in its best judgment based on all relevant factors, implement the policy of the Funds to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable price obtainable) of such transactions. The Manager need not seek competitive commission bidding but is expected to minimize the commissions paid to the extent consistent with the interests and policies of the Funds as established by the Board of Trustees. Purchases of securities from underwriters include a commission or concession paid by the issuer to the underwriter, and purchases from dealers include a spread between the bid and asked price. Under the Investment Advisory Agreements the Manager is authorized to select brokers that provide brokerage and/or research services for the Funds and/or the other accounts over which the Manager or its affiliates have investment discretion. The commissions paid to such brokers may be higher than another qualified broker would have charged if a good faith determination is made by the Manager that the commission is fair and reasonable in relation to the services provided. Description of Brokerage Practices Followed by the Manager. Subject to the provisions of the Investment Advisory Agreements, and the procedures and rules described above, allocations of brokerage are generally made by the Manager's portfolio traders based upon recommendations from the Manager's portfolio managers. In certain instances portfolio managers may directly place trades and allocate brokerage, also subject to the provisions of the advisory agreement and the procedures and rules described above. 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 are otherwise paid only if it appears likely that a better price or execution can be obtained. When 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 or its affiliates are combined. The transactions effected pursuant to such combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each account. Option commissions may be relatively higher than those which would apply to direct purchases and sales of portfolio securities. Most purchases of money market instruments and debt obligations are principal transactions at net prices. Instead of using a broker for those transactions, the Fund normally deals directly with the selling or purchasing principal or market maker unless the Manager determines that a better price or execution can be obtained by using a broker. Purchases of these securities from underwriters include a commission or concession paid by the issuer to the underwriter. Purchases from dealers include a spread between the bid and asked prices. The Funds seek to obtain prompt execution of these orders at the most favorable net price. The research services provided by a particular broker may be useful only to one or more of the advisory accounts of the Manager and its affiliates, and investment research received for the commissions of those other accounts may be useful both to the 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 Trustees permits the Manager to use concessions on fixed price offerings to obtain research in the same manner as is permitted for agency transactions. The Board also permits the Manager to use stated commissions on secondary fixed-income agency trades to obtain research where the broker has represented to the Manager that: (i) the trade is not from or for the broker's own inventory, (ii) the trade was executed by the broker on an agency basis at the stated commission, and (iii) the trade is not a riskless principal transaction. The research services provided by brokers broaden the scope and supplement the research activities of the Manager, by making available additional views for consideration and comparisons, and by enabling the Manager to obtain market information for the valuation of securities held in the Fund's portfolio or being considered for purchase. Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund. As most purchases made by Money Fund, High Income Fund, Bond Fund and Strategic Bond 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. Money 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 the net asset value of that Fund. During the Funds' fiscal year ended December 31, 1995 , 1996 and 1997 total brokerage commissions paid by the Funds (not including spreads or concessions on principal transactions on a net trade basis) were $4,083,132 , $507,501 and $ , respectively, for Aggressive Growth Fund; $104,203 $24,248 and $ , respectively, for High Income Fund; $152,870 , $215,286 and $ , respectively, for Growth Fund; $400,275 , $351,373 and $ , respectively, for Multiple Strategies Fund; $2,826,016 , $2,101,076 and $ , respectively for Global Securities Fund; $13,074 , $11,995 and $ , respectively, for Strategic Bond Fund; $2,100 , $13,852 and $ , respectively, for Bond Fund; and $42,952 , $71,023 and $ ,, respectively for Growth & Income Fund. During the fiscal year ended December 31, 1997, $ , $ , $ , $ , $ , $ , $ , $ , and $ was paid by Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Global Securities Fund, Strategic Bond Fund, Bond Fund, High Income Fund and Growth & Income Fund, respectively, to dealers as brokerage commissions in return for research services; the aggregate amount of those transactions was $ , $ , $ , $ , $ , $ , $ , $ , and $_______ for these respective Funds. ------------ ------------ Performance of the Funds o Money Fund Yield Information. Money Fund's current yield for a seven day period of time is determined in accordance with regulations adopted under the Investment Company Act 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 a 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. For the seven days ended December 31, 1997, Money Fund's "current yield" was 5.03% and its compounded "effective yield" for that period was ___%. 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 the Fund's portfolio securities which may affect dividends, the dividends declared during a period may not be the same on an annualized basis as the yield for that period. o High Income Fund, Bond Fund and Strategic Bond Fund Yield Information. The "yield" or "standardized yield" of High Income Fund, Bond Fund and Strategic Bond Fund for a 30-day period is calculated using the following formula set forth in the SEC rules: Standardized ~ Yield ~ = ~ 2~ [~ (~ {a-b} over cd ~ +~ 1~ ) SUP 6~ -~ 1~ ] The symbols above represent the following factors: a = dividends and interest earned during the 30-day period. b = expenses accrued for the period (net of any expense reimbursements). c = the average daily number of Fund shares outstanding during the 30-day period that were entitled to receive dividends. d = the Fund's maximum offering price (including sales charge) per share on the last day of the period. Each Fund's yield for a 30-day period may differ from the yield for any other periods. The SEC formula assumes that the yield for a 30-day period occurs at a constant rate for a six-month period and is annualized at the end of the six-month period. For the 30 days ended December 31, 1997, the yield of High Income Fund, Bond Fund and Strategic Bond Fund, calculated as described above, was ___%, ____% and _____%, respectively. The "standardized" yield is not based on distributions paid by a Fund to shareholders in the 30-day period, but is a hypothetical yield based upon the return on a Fund's portfolio investments, and may differ from a Fund's "distribution return" described below. o Dividend Yield and Distribution Return. From time to time High Income, Bond and Strategic Bond Funds may quote a "dividend yield" or a "distribution return." Dividend yield is based on that Fund's dividends derived from net investment income during a stated period, and distribution return includes dividends derived from net investment income and from realized capital gains declared during a stated period. Under those calculations, the Fund's dividends and/or distributions declared during a stated period of one year or less (for example, 30 days) are added together, and the sum is divided by the Fund's maximum offering price (equal to its net asset value) per share on the last day of the period. The result may be annualized if the period of measurement is less than one year. The dividend yield of High Income Fund, Bond Fund and Strategic Bond Fund for the quarter ended December 31, 1997, was _____%, _____% and _____%, respectively. Total Return. Each Fund, except Money Fund, may quote its "total return" or "average annual total return." "Average annual total return" (see the formula below) is an average annual compounded rate of return. It is the rate of return based on factors which include a hypothetical initial investment of $1,000 ("P" in the formula below) over a number of years ("n") with an Ending Redeemable Value ("ERV") of that investment, according to the following formula: LEFT ({~ERV~} OVER P~ right) SUP {1/n}~-1~=~Average~Annual~Total~ Return -1- The cumulative "total return" calculation measures the change in value of a hypothetical investment of $1,000 over a stated period. Its calculation uses some of the same factors as average annual total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows: ALIGNC {ERV~-~ P~} over P~ =~Total~ Return Both formulas assume that all dividends and capital gains distributions during the period are reinvested at net asset value per share, and that the investment is redeemed at the end of the period. Set forth below is the "average annual total return" and "total return" for each Fund (using the method described above) during the periods indicated: Average Annual Total Return for: Cumulative Total Fiscal Year Five Year Ten Year Return From Ended Period Period Inception(1) Inception(1) 12/31/97 Ended 12/31/97 Ended to to 12/31/97 12/31/97 12/31/97 High Income Fund Bond Fund Aggressive Growth Fund Growth Fund Multiple Strategies Fund Global Securities Fund Strategic Bond Fund Growth & Income Fund - -------------- (1)Inception dates are as follows: 4/30/86 for High Income Fund; 4/3/85 for Bond Fund and Growth Fund; 8/15/86 for Aggressive Growth Fund; 2/9/87 for Multiple Strategies Fund; 11/12/90 for Global Securities Fund; 5/3/93 for Strategic Bond Fund; and 7/5/95 for Growth & Income Fund. The total return on an investment made in shares of any one of the Funds (except Money Fund) may be compared with performance for the same period of the index shown in that Fund's performance graph in the Prospectus. The performance of Small Cap Growth Fund can be compared to the performance during the same period of the Russell 2000, a widely recognized index of small capitalization U.S. issuers. Yield and total return information may be useful to investors in reviewing performance of the Funds. However, a number of factors should be taken into account before using such performance information as a basis for comparison with alternative investments. An investment in any of these Funds is not insured. Their performance is not guaranteed and will fluctuate over time. Yield and total return for any Fund for any given past period is not an indication or representation by that Fund of future yields or rates of return on its shares. In comparing the performance of one Fund to another, consideration should be given to each Fund's investment policy, portfolio quality, portfolio maturity, type of instrument held and operating expenses. When comparing yield, total return and investment risk of an investment in any of the Funds with those of other investment instruments, investors should understand that certain other investment alternatives such as money market instruments, certificates of deposits ("CDS"), U.S. Government securities or bank accounts provide yields that are fixed or that may vary above a stated minimum, and may be insured or guaranteed. Finally, the performance quotations do not reflect the charges deducted from an Account, as explained in the attached Prospectus for the Policies. If these charges were deducted, that performance would be lower than as described above. In addition, the Policies may have inception dates different than those of the Funds shown above. Other Performance Comparisons. From time to time the Trust may publish the ranking of any of the Funds by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized independent service. Lipper monitors the performance of regulated investment companies, including the Funds, and ranks their performance for various periods based on categories relating to investment objectives. The performance of the Funds is ranked against all other funds underlying variable insurance products. The Lipper performance analysis includes the reinvestment of capital gains distributions and income dividends but does not take sales charges or taxes into consideration. From time to time, the Trust may include in its advertisements and sales literature performance information about the Funds (and the insurance company separate accounts that hold their shares) cited in other newspapers and periodicals, such as The New York Times, which may include performance quotations from other sources, including Lipper and Morningstar. From time to time the Trust may publish the ranking of the performance of any of the separate accounts that offer any of the Funds by Morningstar, Inc., an independent mutual fund monitoring service, that ranks mutual funds, including the Funds, monthly in broad investment categories (domestic stock, international stock, taxable bond, municipal bond and hybrid) based on risk-adjusted investment return. Investment return measures a fund's three, five and ten-year average annual total returns (when available) in excess of 90-day U.S. Treasury bill returns after considering sales charges and expenses. Risk reflects fund performance below 90-day U.S. Treasury bill monthly returns. Risk and return are combined to produce star rankings reflecting performance relative to the average fund in a fund's category. Five stars is the "highest" ranking (top 10%), four stars is "above average" (next 22.5%), three stars is "average" (next 35%), two stars is "below average" (next 22.5%) and one star is "lowest" (bottom 10%). Rankings are subject to change. Class 2 Service Plans The Trust has adopted a Service Plan for Class 2 shares of each Fund under Rule 12b-1 of the Investment Company Act, pursuant to which the each Fund makes payments to the Distributor in connection with the distribution and/or servicing of the shares of Class 2. Each Class 2 Plan has been approved by a vote of (i) the Board of Trustees of the Trust, including a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on that Plan, and (ii) the Manager as the then-sole initial holder of such shares. Under the Class 2 Plans, no payment will be made to any insurance company separate account sponsor or affiliate thereof under a Fund's Class 2 Plan (each is referred to as a "Recipient") in any quarter if the aggregate net asset value of all Fund shares held by the Recipient for itself and its customers did not exceed a minimum amount, if any, that may be determined from time to time by a majority of the Trust's Independent Trustees. Initially, the Board of Trustees has set the fee at the maximum rate allowed under the Plans and set no minimum amount. In addition, the Manager and the Distributor may, under the Plans, from time to time from their own resources (which, as to the Manager, may include profits derived from the advisory fee it receives from each respective Fund) make payments to Recipients for distribution and administrative services they perform. The Distributor and the Manager may, in their sole discretion, increase or decrease the amount of distribution assistance payments they make to Recipients from their own assets. Unless terminated as described below, each Class 2 Plan continues in effect from year to year but only as long as such continuance is specifically approved at least annually by the Trust's Board of Trustees and its Independent Trustees by a vote cast in person at a meeting called for the purpose of voting on such continuance. Any Class 2 Plan may be terminated at any time by the vote of a majority of the Independent Trustees or by the vote of the holders of a "majority" (as defined in the Investment Company Act) of the outstanding shares of that class. No Class 2 Plan may be amended to increase materially the amount of payments to be made unless such amendment is approved by shareholders of the class affected by the amendment. All material amendments must be approved by the Board the Independent Trustees. While the plans are in effect, the Treasurer of the Trust must provide separate written reports to the Trust's Board of Trustees at least quarterly describing the amount of payments made pursuant to each Plan and the purposes for which the payments were made. The Class 2 reports also must include the identity of each Recipient that received any payment. These reports are subject to the review and approval of the Independent Trustees. Unreimbursed expenses incurred with respect to Class 2 shares for any fiscal quarter by the Distributor may not be recovered under the Class 2 Plan in subsequent fiscal quarters. Payments received by the Distributor under any Class 2 Plan will not be used to pay any interest expense, carrying charges, or other financial costs, or allocation of overhead by the Distributor. About Your Account How To Buy Shares Determination of Net Asset Value Per Share. The sale of shares of the Funds is currently limited to Accounts as explained on the cover page of this Statement of Additional Information and the Prospectus. Such shares are sold at their respective offering prices (net asset values without sales charges) and redeemed at their respective net asset values as described in the Prospectus. The net asset value per share of each Fund is determined as of the close of business of The New York Stock Exchange (the "NYSE") on each day that the NYSE is open, by dividing the value of the Fund's net assets by the number of shares that are outstanding. The NYSE normally closes at 4:00 P.M., New York time, but may close earlier on some days (for example, in case of weather emergencies or on days falling before a holiday). The NYSE's most recent annual announcement (which is subject to change) states that it will close on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may also close on other days. Dealers may conduct trading at times when the Exchange is closed (including weekends and holidays). Trading may occur in debt securities and in foreign securities at times when the NYSE is closed (including weekends and holidays or after 4:00 P.M., New York time, on a regular business day). Because the net asset value of the Funds will not be calculated on those days, the net asset values per share of the Funds may be significantly affected at times when shareholders may not purchase or redeem shares. The Trust's Board of Trustees has established procedures for the valuation of each Fund's (other than Money Fund's) securities, generally as follows: (I) equity securities traded on a U.S. securities exchange or on the Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market, Inc. for which last sale information is regularly reported are valued at the last reported sale price on the principal exchange for such security or NASDAQ that day (the "Valuation Date") or, in the absence of sales that day, at the last reported sale price preceding the Valuation Date if it is within the spread of the closing "bid" and "asked" prices on the Valuation Date or, if not, the closing "bid" price on the Valuation Date; (ii) equity securities traded on a foreign securities exchange are valued generally at the last sales price available to the pricing service approved by the Fund's Board of Trustees or to the Manager as reported by the principal exchange on which the security is traded at its last trading session on or immediately preceding the Valuation Date, or, if unavailable, at the mean between "bid" and "asked" prices obtained from the principal exchange or two active market makers in the security on the basis of reasonable inquiry; (iii) a non-money market fund will value (x) debt instruments that had a maturity of more than 397 days when issued, (y) debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity in excess of 60 days , and (z) non-money market type debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity of sixty days or less, at the mean between "bid" and "asked" prices determined by a pricing service approved by the Fund's Board of Trustees or, if unavailable, obtained by the Manager from two active market makers in the security on the basis of reasonable inquiry; (iv) money market-type debt securities held by a non-money market fund that had a maturity of less than 397 days when issued and have a remaining maturity of 60 days or less , and debt instruments held by a money market fund that have a remaining maturity of 397 days or less , shall be valued at cost, adjusted for amortization of premiums and accretion of discount; and (vi)(v) securities (including restricted securities) not having readily-available market quotations are valued at fair value determined under the Board's procedures. If the Manager is unable to locate two market makers willing to give quotes (see (ii) and (iii) above), the security may be priced at the mean between the "bid" and "asked" prices provided by a single active market maker (which in certain cases may be the "bid" price if no " asked" price is available) provided that the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect the current market value. Trading in securities on European and Asian exchanges and over-the-counter markets is normally completed before the close of the NYSE. Events affecting the values of foreign securities traded in securities markets that occur between the time their prices are determined and the close of the NYSE will not be reflected in a Fund's calculation of net asset value unless the Board of Trustees or the Manager, under procedures established by the Board of Trustees, determines that the particular event would materially affect a Fund's net asset value, in which case an adjustment would be made, if necessary. In the case of U.S. Government securities, mortgage-backed securities, foreign fixed-income securities and corporate bonds, when last sale information is not generally available, such pricing procedures may include "matrix" comparisons to the prices for comparable instruments on the basis of quality, yield, maturity, and other special factors involved. The Manager may use pricing services approved by the Board of Trustees to price U.S. Government securities or mortgage-backed securities for which last sale information is not generally available. The Manager will monitor the accuracy of such pricing services which may include comparing prices used for portfolio evaluation to actual sales prices of selected securities. 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. Puts, calls and futures are valued at the last sale price on the principal exchanges on which they are traded or on NASDAQ, as applicable, as determined by a pricing service approved by the Board of Trustees or by the Manager. If there were no sales that day, value shall be the last sale price on the preceding trading day if it is within the spread of the closing "bid" and "ask" prices on the principal exchange or on NASDAQ on the valuation date, or, if not, value shall be the closing "bid" price on the principal exchange or on NASDAQ on the valuation date. If the put, call or future is not traded on an exchange or on NASDAQ, it shall be valued at the mean between "bid" and "ask" prices obtained by the Manager from two active market makers (which in certain cases may be the "bid" price if no "ask" price is available). 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. Credit is adjusted ("marked-to-market") to reflect the current market value of the option. In determining a Fund's gain on investments, if a call or put written by the Fund is exercised, the proceeds are increased by the premium received. If a call or put 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 received was more or less than the cost of the closing transaction. If a Fund exercises a put it holds, the amount the Fund receives on its sale of the underlying investment is reduced by the amount of premium paid by the Fund. Money Fund Net Asset Valuation. Money 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. The Fund operates under SEC Rule 2a-7, under which the Fund may use the amortized cost method of valuing its shares. The amortized cost method values a security initially at its cost and thereafter assumes a constant amortization of any premium or accretion of any 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. The Trust's Board of Trustees has established procedures intended to stabilize Money Fund's net asset value at $1.00 per share. If the 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 Trustees 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 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, Money Fund must abide by certain conditions described above and in the prospectus. For purposes of the Rule, 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 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 amortized cost is higher or lower than the price the Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield on Money Fund shares may tend to be lower 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. Conversely, during periods of rising interest rates, the daily yield on Money Fund shares will tend to be higher than that of a portfolio priced at market value. Dividends, Capital Gains and Taxes Distributions and Taxes. The Trust intends for each Fund to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code. By so qualifying, the Funds will not be subject to Federal income taxes on amounts paid by them as dividends and distributions, as described in the Prospectus. Each Fund is treated as a single entity for purposes of determining Federal tax treatment. The Trust will endeavor to ensure that each Fund's assets are so invested so that all such requirements are satisfied, but there can be no assurance that it will be successful in doing so. The Internal Revenue Code requires that a holder (such as a Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though that Fund receives no interest payment in cash on the security during the year. As an investment company, each Fund must pay out substantially all of its net investment income each year. Accordingly, when a Fund holds zero coupon securities, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the Fund actually received. Such distributions will be made from the cash assets of that Fund or by liquidation of portfolio securities, if necessary. The Fund may realize a gain or loss from such sales. In the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than they would have had in the absence of such transactions. Additional Information About the Funds The Custodian and the Transfer Agent. The Bank of New York is the custodian of the Trust's securities. The custodian's responsibilities include safeguarding and controlling the Trust's portfolio securities, collecting income on the portfolio securities, and handling the delivery of portfolio securities to and from the Trust. The Manager has represented to the Trust that its banking relationships with the Custodian have been and will continue to be unrelated to and unaffected by the relationship between the Trust and the Custodian. It will be the practice of the Trust to deal with the Custodian in a manner uninfluenced by any banking relationship the Custodian may have with the Manager and its affiliates. OppenheimerFunds Services, a subsidiary of the Manager, is responsible as Transfer Agent for maintaining the Trust's shareholder registry and shareholder accounting records, and for administrative functions. It also acts as the shareholder servicing agent for the other Oppenheimer funds. Independent Auditors. The independent auditors of the Trust examine its financial statements and perform other related audit services. They also act as auditors for the Manager and certain other funds advised by the Manager and its affiliates. -2- Appendix A Corporate Industry Classifications Aerospace/Defense Air Transportation Auto Parts Distribution Automotive Beverages Broadcasting Building Materials Cable Television Chemicals Computer Hardware Computer Software Conglomerates Containers Convenience Stores Department Stores Diversified Financial Diversified Media Drug Stores Drug Wholesalers Durable Household Goods Education Electric Utilities Electrical Equipment Electronics Energy Services & Producers Entertainment/Film Environmental Finance, Insurance and Real Estate National Commercial Banks State Commercial Banks Commercial Banks, NEC Savings Institution, Federally Chartered Savings Institutions, Not Federally Chartered Functions Related to Depository Banking, NEC Federal & Federally-Sponsored Credit Agencies Personal Credit Institutions Short-Term Business Credit Institutions Miscellaneous Business Credit Institutions Mortgage Bankers & Correspondence Foreign National Banks Foreign Commercial Banks Foreign-Sponsored Credit Institutions Asset-Backed Securities Finance Services Security & Commodity Brokers, Dealers, Exchanges & Services Security Brokers, Dealers & Flotation Cos. Investment Advice Life Insurance Accident & Health Insurance Fire, Marine & Casualty Insurance Insurance Carriers, NEC Insurance Agents, Brokers & Services Food Gas Utilities Health Care/Drugs Health Care/Supplies & Services Homebuilders/Real Estate Hotel/Gaming Industrial Services Information Technology Leasing & Factoring Leisure Manufacturing Mining Gold & Silver Ores Gold Silver Ores Miscellaneous Metal Ores Crude Petroleum Natural Gas Drilling Oil and Gas Wells Oil and Gas Field Exploration Services Nondurable Household Goods Paper Publishing/Printing Railroads Restaurants Shipping Special Purpose Financial Specialty Retailing Steel Supermarkets Telecommunications - Technology Telephone - Utility Textile/Apparel Tobacco Toys Trucking Wireless Services A-1 APPENDIX B - MAJOR SHAREHOLDERS As of March 31, 1998, the number of shares and approximate percentage of Fund shares held of record by separate accounts of the following insurance companies (and their respective subsidiaries) that held 5% or more of the outstanding shares of one of the Funds were as follows: Life of Monarch ReliaStar Virginia Nationwide Aetna Money Fund High Income Fund Bond Fund Capital Appreciation Fund Growth Fund Multiple Strategies Fund Global Securities Fund Strategic Bond Fund Growth & Income Fund - --------------- *Less than 5% of the outstanding shares of that Fund. (continued) B-1 MassMutual Jefferson-PilotPFL Chubb Acacia Money Fund High Income Fund Bond Fund Capital Appreciation Fund Growth Fund Multiple Strategies Fund Global Securities Fund Strategic Bond Fund Growth & Income Fund - --------------- *Less than 5% of the outstanding shares of that Fund. B-2 American Express Protective CUNA COVA Money Fund High Income Fund Bond Fund Capital Appreciation Fund Growth Fund Multiple Strategies Fund Global Securities Fund Strategic Bond Fund Growth & Income Fund - --------------- B-3 Investment Adviser OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 Transfer Agent OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1-800-525-7048 Custodian The Bank of New York One Wall Street New York, New York 10015 Independent Auditors Deloitte & Touche LLP 555 Seventeenth Street Denver, Colorado 80202 Legal Counsel Myer, Swanson, Adams & Wolf, P.C. 1600 Broadway Denver, Colorado 80202 B-4 OPPENHEIMER VARIABLE ACCOUNT FUNDS FORM N-1A PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits ---------------------------------------------- (a) Financial Statements 1. Financial Highlights (see Parts A and B)* 2. Independent Auditors' Report (see Part B)* 3. Statements of Investments (see Part B)* 4. Statements of Assets and Liabilities (see Part B) herewith.* 5. Statements of Operations (see Part B)* 6. Statements of Changes in Net Assets* 7. Notes to Financial Statements (see Part B)* 8. Independent Auditors' Consent: * (b) Exhibits -------- 1. Seventh Restated Declaration of Trust dated 12/16/97: Filed herewith. 2. By-Laws, amended as of 6/26/90: Previously filed with Registrant's Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. 3. Not Applicable. 4. (i) Oppenheimer Money Fund specimen share certificate: Filed with Registrant's Post- Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. - ---------------- *To be filed by amendment. (ii) Oppenheimer Bond Fund specimen share certificate: Filed with Registrant's Post- Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (iii)Oppenheimer Growth Fund specimen share certificate: Filed with Registrant's Post- Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (iv) Oppenheimer High Income Fund specimen share certificate: Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (v) Oppenheimer Aggressive Growth Fund specimen share certificate: Filed herewith. (vi) Oppenheimer Multiple Strategies Fund specimen share certificate: Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (vii) Oppenheimer Global Securities Fund specimen share certificate: Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (viii)Oppenheimer Strategic Bond Fund specimen share certificate: Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (ix) Oppenheimer Growth & Income Fund specimen share certificate: Filed with Registrant's Post-Effective Amendment No. 30, 4/23/97, and incorporated herein by reference. (x) Oppenheimer Small Cap Growth Fund specimen share certificate: Filed herewith. (xi) Oppenheimer Money Fund Class 2 specimen share certificate: Filed herewith. (xii) Oppenheimer Bond Fund Class 2 specimen share certificate: Filed herewith. (xiii) Oppenheimer Growth Fund Class 2 specimen share certificate: Filed herewith. (xiv) Oppenheimer High Income Fund Class 2 specimen share certificate: Filed herewith. (xvOppenheimer Aggressive Growth Fund Class 2 specimen share certificate: Filed herewith. (xvi) Oppenheimer Multiple Strategies Fund Class 2 specimen share certificate: Filed herewith. (xvii) Oppenheimer Global Securities Fund Class 2 specimen share certificate: Filed herewith. (viii)Oppenheimer Strategic Bond Fund Class 2 specimen share certificate: Filed herewith. (xix) Oppenheimer Growth & Income Fund Class 2 specimen share certificate: Filed herewith. (xx) Oppenheimer Small Cap Growth Fund Class 2 specimen share certificate: Filed herewith. 5. (i) Investment Advisory Agreement for Oppenheimer Money Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (ii) Investment Advisory Agreement for Oppenheimer High Income Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (iii) Investment Advisory Agreement for Oppenheimer Bond Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (iv) Investment Advisory Agreement for Oppenheimer Aggressive Growth Fund 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (v) Investment Advisory Agreement for Oppenheimer Growth Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (vi) Investment Advisory Agreement for Oppenheimer Multiple Strategies Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (vii) Investment Advisory Agreement for Oppenheimer Global Securities Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (viii)Investment Advisory Agreement for Oppenheimer Strategic Bond Fund dated 9/1/94: Filed with Post-Effective Amendment No. 26, 2/13/95, and incorporated herein by reference. (ix) Investment Advisory Agreement for Oppenheimer Growth & Income Fund dated 5/1/95: Filed with Post-Effective Amendment No. 29, 4/22/96, and incorporated herein by reference. (x) Investment Advisory Agreement for Oppenheimer Small Cap Growth Fund dated 5/1/98 - Filed herewith. 6. General Distributor's Agreement for Class 2 Shares dated 2/24/98: Filed herewith. 7. Not Applicable. 8. Custody Agreement between Oppenheimer Variable Account Funds and The Bank of New York, dated 11/12/92: Previously filed with Registrant's Post-Effective Amendment No. 21, 3/12/93, refiled with Registrant's Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. 9. Not Applicable. 10. (i) Opinion and Consent of Counsel, 3/14/85: Previously filed with Registrant's Pre- Effective Amendment No. 1, 3/20/85, refiled with Registrant's Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (ii) Opinion and Consent of Counsel, 4/28/86: Previously filed with Registrant's Post- Effective Amendment No. 5, 8/12/86, refiled with Registrant's Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (iii) Opinion and Consent of Counsel, 7/31/86: Previously filed with Registrant's Post- Effective Amendment No. 5, 8/12/86, refiled with Registrant's Post-Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (iv) Opinion and Consent of Counsel, 1/21/87: Previously filed with Registrant's Post- Effective Amendment No. 7, 2/6/87, refiled with Registrant's Post-Effective Amendment No. 27, 4/27/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (v) Opinion and Consent of Counsel, dated July 31, 1990: Previously filed with Registrant's Post-Effective Amendment No. 15, 9/19/90, refiled with Registrant's Post- Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (vi) Opinion and Consent of Counsel dated April 23, 1993: Previously filed with Registrant's Post-Effective Amendment No. 22, 4/30/93, refiled with Registrant's Post- Effective Amendment No. 27, 4/27/95 pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (vii) Opinion and Consent of Counsel dated April 18, 1995: Filed with Post-Effective Amendment No. 29, 4/22/96, and incorporated herein by reference. Opinion and Consent of Counsel dated __________: To be filed by amendment. 11. Independent Auditors' Consent - To be filed by amendment. 12. Not Applicable. 13. Not Applicable. 14. Not Applicable. 15. (i) Service Plan and Agreement for Class 2 shares of Oppenheimer Money Fund: Filed herewith. (ii) Service Plan and Agreement for Class 2 shares of Oppenheimer Bond Fund: Filed herewith. (iii) Service Plan and Agreement for Class 2 shares of Oppenheimer Growth Fund: Filed herewith. (iv) Service Plan and Agreement for Class 2 shares of Oppenheimer High Income Fund: Filed herewith. (v) Service Plan and Agreement for Class 2 shares of Oppenheimer Aggressive Growth Fund: Filed herewith. (vi) Service Plan and Agreement for Class 2 shares of Oppenheimer Multiple Strategies Fund: Filed herewith. (vii) Service Plan and Agreement for Class 2 shares of Oppenheimer Global Securities Fund: Filed herewith. (viii)Service Plan and Agreement for Class 2 shares of Oppenheimer Strategic Bond Fund: Filed herewith. (ix) Service Plan and Agreement for Class 2 shares of Oppenheimer Growth & Income Fund: Filed herewith. (x) Service Plan and Agreement for Class 2 shares of Oppenheimer Small Cap Growth Fund: Filed herewith. 16. Performance Data Computation Schedules: To be filed by amendment. 17. Financial Data Schedules: To be filed by amendment. -- Powers of Attorney: Filed with Post-Effective Amendment No. 29, 4/22/96, and with Registrant's Post-Effective Amendment No. 24, 2/25/94, and incorporated herein by reference. 18. Not applicable Item 25. Persons Controlled by or under Common Control with Registrant - ------------------------------------------------------------------------------- Registrant does not control any other person. Except that all of Registrant's issued and outstanding shares are held by certain separate accounts, as described in Part B of this Registration Statement, Registrant is not under common control with any other person. Item 26. Number of Holders of Securities No. of Record Holders as of Title of Class (Series) December 31, 1997 ----------------------- ---------------------------- Oppenheimer Money Fund 5 Oppenheimer High Income Fund 9 Oppenheimer Bond Fund 9 Oppenheimer Aggressive Growth Fun 8 Oppenheimer Growth Fund 11 Oppenheimer Multiple Strategies Fund 6 Oppenheimer Global Securities Fund 4 Oppenheimer Strategic Bond Fund 6 Oppenheimer Growth & Income Fund 6 Oppenheimer Small Cap Growth Fund 0 Item 27. Indemnification --------------------- Reference is made to paragraphs (c) through (g) of Section 12 of Article SEVENTH of Registrant's Fifth Restated Declaration of Trust previously filed as an exhibit to this Registration Statement, incorporated herein by reference. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Investment Adviser - -------- ---------------------------------------------------- (a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and certain subsidiaries and affiliates act in the same capacity to other 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. Name and Current Position with OppenheimerFunds, Inc. Other Business and Connections During ("OFI") the Past Two Years - --------------------------- ------------------------------------ Mark J.P. Anson, Vice President Vice President of Oppenheimer Real Asset Management, Inc. ("ORAMI"); formerly Vice President of Equity Derivatives at Salomon Brothers, Inc. Peter M. Antos, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; Senior Vice President of HarbourView Asset Management Corporation ("HarbourView"); prior to March, 1996 he was the senior equity portfolio manager for the Panorama Series Fund, Inc. (the "Company") and other mutual funds and pension funds managed by G.R. Phelps & Co. Inc. ("G.R. Phelps"), the Company's former investment adviser, which was a subsidiary of Connecticut Mutual Life Insurance Company; was also responsible for managing the common stock department and common stock investments of Connecticut Mutual Life Insurance Co. Lawrence Apolito, Vice President None. Victor Babin, Senior Vice President None. Bruce Bartlett, Vice President An officer and/or portfolio manager of certain Oppenheimer funds . Formerly a Vice President and Senior Portfolio Manager at First of America Investment Corp. Beichert, Kathleen None. Rajeev Bhaman, Vice President Formerly Vice President (January 1992 - February, 1996) of Asian Equities for Barclays de Zoete Wedd, Inc. Robert J. Bishop, Vice President Vice President of Mutual Fund Accounting (since May 1996); an officer of other Oppenheimer funds; formerly an Assistant Vice President of OFI/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for OFI. George C. Bowen, Senior Vice President & Treasurer Vice President (since June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc. (the "Distributor"); Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView; Senior Vice President (since February 1992), Treasurer (since July 1991)and a director (since December 1991) of Centennial; President, Treasurer and a director of Centennial Capital Corporation (since June 1989); Vice President and Treasurer (since August 1978) and Secretary (since April 1981) of Shareholder Services, Inc. ("SSI"); Vice President, Treasurer and Secretary of Shareholder Financial Services, Inc. ("SFSI") (since November 1989); Treasurer of Oppenheimer Acquisition Corp. ("OAC") (since June 1990); Treasurer of Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer of ORAMI (since July 1996); Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc. , a broker-dealer (since December 1995); an officer of other Oppenheimer funds. Scott Brooks, Vice President None. Susan Burton, Assistant Vice President None. Adele Campbell, Assistant Vice President & Assistant Treasurer: Rochester Division Formerly Assistant Vice President of Rochester Fund Services, Inc. Michael Carbuto, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial. Ruxandra Chivu, Assistant Vice President None. H.D. Digby Clements, Assistant Vice President: Rochester Division None. O. Leonard Darling, Executive Vice President Trustee (1993 present) of Awhtolia College - Greece. Robert A. Densen, Senior Vice President None. Sheri Devereux, Assistant Vice President None. Robert Doll, Jr., Executive Vice President & Director An officer and/or portfolio manager of certain Oppenheimer funds. John Doney, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Andrew J. Donohue, Executive Vice President, General Counsel and Director Executive Vice President (since September 1993), and a director (since January 1992) of the Distributor; Executive Vice President, General Counsel and a director of HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since (September 1995) and MultiSource Services, Inc. (a broker-dealer) (since December 1995); President and a director of Centennial (since September 1995); President and a director of ORAMI (since July 1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC; Vice President of OppenheimerFunds International, Ltd. ("OFIL") and Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. George Evans, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Edward Everett, Assistant Vice President None. Scott Farrar, Vice President Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly an Assistant Vice President of OFI/Mutual Fund Accounting (April 1994- May 1996), and a Fund Controller for OFI. Leslie A. Falconio, Assistant Vice President None. Katherine P. Feld, Vice President and Secretary Vice President and Secretary of the Distributor ; Secretary of HarbourView , MultiSource and Centennial ; Secretary, Vice President and Director of Centennial Capital Corporation; Vice President and Secretary of ORAMI. Ronald H. Fielding, Senior Vice President; Chairman: Rochester Division An officer, Director and/or portfolio manager of certain Oppenheimer funds ; Presently he holds the following other positions: Director (since 1995) of ICI Mutual Insurance Company; Governor (since 1994) of St. John's College; Director (since 1994 - present) of International Museum of Photography at George Eastman House; Director (since 1986) of GeVa Theatre. Formerly he held the following positions: formerly, Chairman of the Board and Director of Rochester Fund Distributors, Inc. ("RFD") ; President and Director of Fielding Management Company, Inc. ("FMC") ; President and Director of Rochester Capital Advisors, Inc. ("RCAI") ; Managing Partner of Rochester Capital Advisors, L.P., President and Director of Rochester Fund Services, Inc. ("RFS") ; President and Director of Rochester Tax Managed Fund, Inc.; Director (1993 - 1997) of VehiCare Corp.; Director (1993 - 1996) of VoiceMode. John Fortuna, Vice President None. Patricia Foster, Vice President Formerly she held the following positions: An officer of certain Oppenheimer funds (May, 1993 - January, 1996); Secretary of Rochester Capital Advisors, Inc. and General Counsel (June, 1993 - January 1996) of Rochester Capital Advisors, L.P. Jennifer Foxson, Assistant Vice President None. Paula C. Gabriele, Executive Vice President Formerly, Managing Director (1990-1996) for Bankers Trust Co. Robert G. Galli, Vice Chairman Trustee of the New York-based Oppenheimer Funds Funds.. Formerly Vice President and General Counsel of Oppenheimer Acquisition Corp. Linda Gardner, Vice President None. Alan Gilston, Vice President Formerly Vice President for Schroder Capital Management International. Jill Glazerman, Assistant Vice President None. Jeremy Griffiths, Chief Currently a Member and Fellow of the Institute of Chartered Accountants; formerly an accountant for Arthur Young (London, U.K.). Robert Grill, Vice President Formerly Marketing Vice President for Bankers Trust Company (1993-1996); Steering Committee Member, Subcommittee Chairman for American Savings Education Council (1995-1996). Caryn Halbrecht, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly Vice President of Fixed Income Portfolio Management at Bankers Trust. Elaine T. Hamann, Vice President Formerly Vice President (September, 1989 - January, 1997) of Bankers Trust Company. Glenna Hale, Director of Investor Marketing Formerly, Vice President (1994-1997) of Retirement Plans Services for OppenheimerFunds Services. Thomas B. Hayes, Vice President None. Barbara Hennigar, Executive Vice President and Chief Executive Officer of OppenheimerFunds Services, a division of the Manager President and Director of SFSI; President and Chief executive Officer of SSI. Dorothy Hirshman, None. Assistant Vice President Alan Hoden, Vice President None. Merryl Hoffman, Vice President None. Nicholas Horsley, Vice President Formerly a Senior Vice President and Portfolio Manager for Warburg, Pincus Counsellors, Inc. (1993-1997), Co- manager of Warburg, Pincus Emerging Markets Fund (12/94 - 10/97), Co-manager Warburg, Pincus Institutional Emerging Markets Fund - Emerging Markets Portfolio (8/96 - 10/97), Warburg Pincus Japan OTC Fund, Associate Portfolio Manager of Warburg Pincus International Equity Fund, Warburg Pincus Institutional Fund - Intermediate Equity Portfolio, and Warburg Pincus EAFE Fund. Scott T. Huebl, Assistant Vice President None. Richard Hymes, Assistant Vice President None. Jane Ingalls, Vice President None. Byron Ingram, Assistant Vice President None. Ronald Jamison, Vice President Formerly Vice President and Associate General Counsel at Prudential Securities, Inc. Frank Jennings, Vice President An officer and/or portfolio manager of certain Oppenheimer funds ; formerly, a Managing Director of Global Equities at Paine Webber's Mitchell Hutchins division. Thomas W. Keffer, Senior Vice President Formerly Senior Managing Director (1994 - 1996) of Van Eck Global. Avram Kornberg, Vice President None. Joseph Krist, Assistant Vice President None. Paul LaRocco, Vice President An officer and/or portfolio manager of certain Oppenheimer funds ; formerly, a Securities Analyst for Columbus Circle Investors. Michael Levine, Assistant Vice President None. Shanquan Li, Vice President Director of Board (since 2/96), Chinese Finance Society; formerly, Chairman (11/94-2/96) , Chinese Finance Society; and Director (6/94-6/95), Greater China Business Networks. Stephen F. Libera, Vice President An officer and/or portfolio manager for certain Oppenheimer funds; a Chartered Financial Analyst; a Vice President of HarbourView; prior to March 1996 , the senior bond portfolio manager for Panorama Series Fund Inc., other mutual funds and pension accounts managed by G.R. Phelps; also responsible for managing the public fixed-income securities department at Connecticut Mutual Life Insurance Co. Mitchell J. Lindauer, Vice President None. David Mabry, Assistant Vice President None. Steve Macchia, Assistant Vice President None. Bridget Macaskill, President, Chief Executive Officer and Director Chief Executive Officer (since September 1995); President and director (since June 1991) of HarbourView; Chairman and a director of SSI (since August 1994), and SFSI (September 1995); President (since September 1995) and a director (since October 1990) of OAC; President (since September 1995) and a director (since November 1989) of Oppenheimer Partnership Holdings, Inc. , a holding company subsidiary of OFI; a director of ORAMI (since July 1996) ; President and a director (since October 1997) of OFIL, an offshore fund manager subsidiary of OFI and Oppenheimer Millennium Funds plc (since October 1997); President and a a director of other Oppenheimer funds; a director of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice President of OFI. Wesley Mayer, Vice President Formerly Vice President (January, 1995 - June, 1996) of Manufacturers Life Insurance Company. Loretta McCarthy, Executive Vice President None. Kevin McNeil, Vice President Treasurer (September, 1994 - present) for the Martin Luther King Multi-Purpose Center (non-profit community organization); Formerly Vice President (January, 1995 -April, 1996) for Lockheed Martin IMS. Tanya Mrva, Assistant Vice President None. Lisa Migan, Assistant Vice President None. Robert J. Milnamow, Vice President An officer and/or portfolio manager of certain Oppenheimer funds ; formerly a Portfolio Manager (August, 1989 - August, 1995) with Phoenix Securities Group. Denis R. Molleur, Vice President None. Linda Moore, Vice President Formerly, Marketing Manager (July 1995-November 1996) for Chase Investment Services Corp. Tanya Mrva, Assistant Vice President None. Kenneth Nadler, Vice President None. David Negri, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Barbara Niederbrach, Assistant Vice President None. Robert A. Nowaczyk, Vice President None. Richard M. O'Shaugnessy, Assistant Vice President: Rochester Division None. Gina M. Palmieri, Assistant Vice President None. Robert E. Patterson, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. John Pirie, Assistant Vice President Formerly, a Vice President with Cohane Rafferty Securities, Inc. Tilghman G. Pitts III, Executive Vice President and Director Chairman and Director of the Distributor. Jane Putnam, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Russell Read, Senior Vice PresFormerly a consultant for Prudential Insurance on behalf of the General Motors Pension Plan. Thomas Reedy, Vice President An officer and/or portfolio manager of certain Oppenheimer funds ; formerly, a Securities Analyst for the Manager. David Robertson, Vice President None. Adam Rochlin, Vice President Company. None. Michael S. Rosen Vice President; President, Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds ; Formerly, Vice President (June, 1983 - January, 1996) 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. Richard H. Rubinstein, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; formerly Vice President and Portfolio Manager/Security Analyst for Oppenheimer Capital Corp., an investment adviser. Lawrence Rudnick, Assistant Vice President None. James Ruff, Executive Vice President None. Valerie Sanders, Vice President None. Ellen Schoenfeld, Assistant Vice President None. Stephanie Seminara, Vice President Formerly, Vice President of Citicorp Investment Services Richard Soper, Vice President None. Nancy Sperte, Executive Vice President None. Donald W. Spiro, Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based Oppenheimer Funds; formerly Chairman of the Manager and the Distributor. Richard A. Stein, Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P. Arthur Steinmetz, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Ralph Stellmacher, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds. John Stoma, Senior Vice President, Director Retirement Plans Formerly Vice President of U.S. Group Pension Strategy and Marketing for Manulife Financial. Michael C. Strathearn, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; a Vice President of HarbourView; prior to March 1996 , an equity portfolio manager for Panorama Series Fund, Inc. and other mutual funds and pension accounts managed by G.R. Phelps. 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 An officer and/or portfolio manager of certain Oppenheimer funds; formerly Managing Director of Buckingham Capital Management. Gary Tyc, Vice President, Assistant Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI. Ashwin Vasan, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Dorothy Warmack, Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Jerry Webman, Senior Vice President Director of New York-based tax-exempt fixed income Oppenheimer funds; Formerly, Managing Director and Chief Fixed Income Strategist at Prudential Mutual Funds. Christine Wells, Vice President None. Joseph Welsh, Assistant Vice President None. Kenneth B. White, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered Financial Analyst; Vice President of HarbourView; prior to March 1996 , an equity portfolio manager for Panorama Series Fund, Inc. and other mutual funds and pension funds managed by G.R. Phelps. William L. Wilby, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of HarbourView. Carol Wolf, Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial; Vice President, Finance and Accounting and member of the Board of Directors of the Junior League of Denver, Inc.; Point of Contact: Finance Supporters of Children; Member of the Oncology Advisory Board of the Childrens Hospital; Member of the Board of Directors of the Colorado Museum of Contemporary Art. Caleb Wong, Assistant Vice President None. Robert G. Zack, Senior Vice President and Assistant Secretary, Associate General Counsel Assistant Secretary of SSI (since May 1985), and SFSI (since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds. Jill Zachman, Assistant Vice President: Rochester Division None. Arthur J. Zimmer, Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial. The Oppenheimer Funds include the New York-based Oppenheimer Funds, the Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set forth below: New York-based Oppenheimer Funds - -------------------------------- Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer International Growth Fund Oppenheimer International Small Company Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer Series Fund, Inc. Oppenheimer U.S.Government Trust Oppenheimer World Bond Fund Quest/Rochester Funds - --------------------- Limited Term New York Municipal Fund Oppenheimer Bond Fund For Growth Oppenheimer MidCap Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest For Value Funds Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Value Fund, Inc. Rochester Fund Municipals Denver-based Oppenheimer Funds - ------------------------------ Centennial America Fund, L.P. Centennial California Tax Exempt Trust Centennial Government Trust Centennial Money Market Trust Centennial New York Tax Exempt Trust Centennial Tax Exempt Trust Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Equity Income Fund Oppenheimer High Yield Fund Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Funds, Inc. Oppenheimer Municipal Fund Oppenheimer Real Asset Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama Series Fund, Inc. The New York Tax-Exempt Income Fund, Inc. The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203. The address of the Denver-based Oppenheimer Funds, Shareholder Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services, Centennial Asset Management Corporation, Centennial Capital Corp., and Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,Colorado 80012. The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver, Colorado 80203. The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York 14625-2807. Item 29. Principal Underwriter - -------- --------------------- Not applicable. Item 30. Location of Accounts and Records ------------------------------------------ The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act and rules promulgated thereunder are in possession of OppenheimerFunds, Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado 80112. Item 31. Management Services -------------------------- Not Applicable. Item 32. Undertakings ------------ (a) Not Applicable. (b) Not Applicable. (c) Not Applicable. C-1 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Arapahoe and State of Colorado on the 29th day of January, 1998. OPPENHEIMER VARIABLE ACCOUNT FUNDS By: /s/ James C. Swain * -------------------- James C. Swain, Chairman Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: Signatures: Title Date - ----------- ----------------- -------------- /s/ James C. Swain* Chairman of the Board January 29, 1998 - --------------------- of Trustees and James C. Swain Principal Executive Officer /s/ George Bowen* Treasurer and January 29, 1998 - ---------------------- Principal Financial George Bowen and Accounting Officer /s/ Robert G. Avis* Trustee January 29, 1998 - ---------------------- Robert G. Avis /s/ William A. Baker* Trustee January 29, 1998 - ---------------------- William A. Baker /s/ Charles Conrad, Jr.* Trustee January 29, 1998 - ---------------------- Charles Conrad, Jr. /s/ Sam Freedman* Trustee January 29, 1998 - ---------------------- Sam Freedman /s/ Raymond J. Kalinowski* Trustee January 29, 1998 - ---------------------- Raymond J. Kalinowski /s/ C. Howard Kast* Trustee January 29, 1998 - ---------------------- C. Howard Kast /s/ Robert M. Kirchner* Trustee January 29, 1998 - ---------------------- Robert M. Kirchner /s/ Ned M. Steel* Trustee January 29, 1998 - ----------------------- Ned M. Steel *By: /s/ Robert G. Zack ------------------------------------- Robert G. Zack, Attorney-in-Fact C-2 OPPENHEIMER VARIABLE ACCOUNT FUNDS EXHIBIT INDEX Exhibit No. Description - ----------- ----------------- 24(b)(i) (Seventh Restated Declaration of Trust dated 12/16/97 24(b)(4)(v) Oppenheimer Aggressive Growth Fund Specimen Share Certificate 24(b)(4)(x) Oppenheimer Small Cap Growth Fund Specimen Share Certificate 24(b)(4)(xi) Oppenheimer Money Fund Class 2 specimen share certificate 24(b)(4)(xii) Oppenheimer Bond Fund Class 2 specimen share certificate 24(b)(4)(xiii) Oppenheimer Growth Fund Class 2 specimen share certificate 24(b)(4)(xiv) Oppenheimer High Income Fund Class 2 specimen share certificate 24(b)(4)(xv) Oppenheimer Aggressive Growth Fund Class 2 specimen share certificate 24(b)(4)(xvi) Oppenheimer Multiple Strategies Fund Class 2 specimen share certificate 24(b)(4)(xvii) Oppenheimer Global Securities Fund Class 2 specimen share certificate 24(b)(4)(viii) Oppenheimer Strategic Bond Fund Class 2 specimen share certificate 24(b)(4)(xix) Oppenheimer Growth & Income Fund Class 2 specimen share certificate 24(b)(4)(xx) Oppenheimer Small Cap Growth Fund Class 2 specimen share certificate 24(b)(5)(x) Investment Advisory Agreement for Oppenheimer Small Cap Growth Fund dated 5/1/98 24(b)(6) General Distributor's Agreement for Class 2 shares dated 2/24/98 24(b)(15)(i) Service Plan and Agreement for Class 2 shares of Oppenheimer Money Fund dated 2/24/98 24(b)(15)(ii) Service Plan and Agreement for Class 2 shares of Oppenheimer Bond Fund dated 2/24/98 24(b)(15)(iii) Service Plan and Agreement for Class 2 shares of Oppenheimer Growth Fund dated 2/24/98 24(b)(15)(iv) Service Plan and Agreement for Class 2 shares of Oppenheimer High Income Fund dated 2/24/98 24(b)(15)(v) Service Plan and Agreement for Class 2 shares of Oppenheimer Aggressive Growth Fund dated 2/24/98 24(b)(15)(vi) Service Plan and Agreement for Class 2 shares of Oppenheimer Multiple Strategies Fund dated 2/24/98 24(b)(15)(vii) Service Plan and Agreement for Class 2 shares of Oppenheimer Global Securities Fund dated 2/24/98 24(b)(15)(viii) Service Plan and Agreement for Class 2 shares of Oppenheimer Strategic Bond Fund dated 2/24/98 24(b)(15)(ix) Service Plan and Agreement for Class 2 shares of Oppenheimer Growth & Income Fund dated 2/24/98 24(b)(15)(x) Service Plan and Agreement for Class 2 shares of Oppenheimer Small Cap Growth Fund dated 2/24/98 C-3 EX-3 2 SEVENTH RESTATED DECLARATION OF TRUST SEVENTH RESTATED DECLARATION OF TRUST OF OPPENHEIMER VARIABLE ACCOUNT FUNDS SEVENTH RESTATED DECLARATION OF TRUST, made as of December 16, 1997 by and among the individuals executing this Sixth Restated Declaration of Trust as the initial Trustees. WHEREAS, (I) by Declaration of Trust dated August 28, 1984, the Trustees establish a Trust initially named Oppenheimer Variable Life Funds, a trust fund under the laws of the Commonwealth of Massachusetts, for the investment and reinvestments of fund contributed thereto, (ii) by the First Restated Declaration of Trust dated March 11, 1986, the Trustees amended and restated said Declaration of Trust to create two new Series of Shares, and (iii) by the Second Restated Declaration of Trust dated August 15, 1986, the Trustees further amended and restated said Declaration of Trust to change the Trust's name to Oppenheimer Variable Account Funds and to make certain other changes, (iv) by the Third Restated Declaration of Trust dated October 21, 1986, the Trustees amended and restated said Declaration of Trust to create a new Series of Shares, (v) by the Fourth Restated Declaration of Trust dated June 4, 1990, the Trustees amended and restated said Declaration of Trust to create a new Series of Shares, (vi) by the Fifth Restated Declaration of Trust dated February 25, 1993, the Trustees amended and restated said Declaration of Trust to create a new series of shares, (vii) by the Sixth Restated Declaration of Trust dated February 28, 1995, the Trustees amended and restated said Declaration of Trust to create a new Series of Shares; -1- WHEREAS, the Trustees desire to further amend such Declaration of Trust without shareholder approval, as permitted under ARTICLE FOURTH, to create two additional Series of Shares in addition to the nine Series previously established and designated, and to fix and determine the relative rights and preferences of such Additional Series of Shares as set forth in said ARTICLE FOURTH; NOW, THEREFORE, the Trustees declare that all money and property held or delivered to the Trust Fund hereunder shall be held and managed under this Seventh Restated Declaration of Trust IN TRUST as herein set forth below. FIRST: This Trust shall be known as OPPENHEIMER VARIABLE ACCOUNT FUNDS. The address of Oppenheimer Variable Account Funds is 6803 South Tucson Way, Englewood, Colorado 80112. The Registered Agent for service is Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, Massachusetts 01111, Attention: Legal Department. SECOND: Whenever used herein, unless otherwise required by the context or specifically provided: 1. All terms used in this Declaration of Trust which are defined in the 1940 Act (defined below) shall have the meanings given to them in the 1940 Act. 2. "Board" or "Board of Trustees" or the "Trustees" means the Board of Trustees of the Trust. 3. "By-Laws" means the By-Laws of the Trust as amended from time to time. 4. "Commission" means the Securities and Exchange Commission. -2- 5. "Declaration of Trust" shall mean this Declaration of Trust as amended or restated from time to time. 6. The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations of the Commission thereunder, all as amended from time to time. 7. "Series" refers to Series of Shares established and designated under or in accordance with the provisions of Article FOURTH. 8. "Shareholder" means a record owner of Shares of the Trust. 9. "Shares" refers to the transferable units of interest into which the beneficial interest in the Trust or any Series of the Trust (as the context may require) shall be divided from time to time and includes fractions of Shares as well as whole Shares. 10. The "Trust" refers to the Massachusetts business trust created by this Declaration of Trust, as amended or restated from time to time. 11. "Trustees" refers to the individual trustees in their capacity as trustees hereunder of the Trust and their successor or successors for the time being in office as such trustees. THIRD: The purpose or purposes for which the Trust is formed and the business or objects to be transacted, carried on and promoted by it are as follows: 1. To hold, invest or reinvest its funds, and in connection therewith to hold part or all of its funds in cash, and to purchase or otherwise acquire, hold for investment or otherwise, sell, sell short, assign, negotiate, transfer, exchange or otherwise dispose -3- of or turn to account or realize upon, securities (which term "securities" shall for the purposes of this Declaration of Trust, without limitation of the generality thereof, be deemed to include any stocks, shares, bonds, financial futures contracts, indexes, debentures, notes, mortgages or other obligations, and any certificates, receipts, warrants 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) created or issued by any issuer (which term "issuer" shall for the purposes of this Declaration of Trust, without limitation of the generality thereof be deemed to include any persons, firms, associations, corporations, syndicates, combinations, organizations, governments, or subdivisions thereof) and in financial instruments (whether they are considered as securities or commodities); and to exercise, as owner or holder of any securities or financial instruments, all rights, powers and privileges in respect thereof; and to do any and all acts and things for the preservation, protection, improvement and enhancement in value of any or all such securities or financial instruments. 2. To borrow money and pledge assets in connection with any of the objects or purposes of the Trust, and to issue notes or other obligations evidencing such borrowings, to the extent permitted by the 1940 Act and by the Trust's fundamental investment policies under the 1940 Act. 3. To issue and sell its Shares in such Series and amounts -4- and on such terms and conditions, for such purposes and for such amount or kind of consideration (including without limitation thereto, securities) now or hereafter permitted by the laws of the Commonwealth of Massachusetts and by this Declaration of Trust, as the Trustees may determine. 4. To purchase or otherwise acquire, hold, dispose of, resell, transfer, reissue or cancel its Shares, or to classify or reclassify any unissued Shares or any Shares previously issued and reacquired of any Series into one or more series that may have been established and designated from time to time, all without the vote or consent of the Shareholders of the Trust, in any manner and to the extent now or hereafter permitted by this Declaration of Trust. 5. To conduct its business in all its branches at one or more offices in Colorado and elsewhere in any part of the world, without restriction or limit as to extent. 6. To carry out all or any of the foregoing objects and purposes as principal or agent, and alone or with associates or to the extent now or hereafter permitted by the laws of Massachusetts, as a member of, or as the owner or holder of any stock of, or share of interest in, any issuer, and in connection therewith or make or enter into such deeds or contracts with any issuers and to do such acts and things and to exercise such powers, as a natural person could lawfully make, enter into, do or exercise. 7. To do any and all such further acts and things and to exercise any and all such further powers as may be necessary, incidental, relative, conducive, appropriate or desirable for the -5- accomplishment, carrying out or attainment of all or any of the foregoing purposes or objects. The foregoing objects and purposes shall, except as otherwise expressly provided, 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 this Declaration of Trust, and shall each be regarded as independent and construed as powers as well as objects and purposes, and the enumeration of specific purposes, objects and powers shall not be construed to limit or restrict in any manner the meaning of general terms or the general powers of the Trust now or hereafter conferred by the laws of the Commonwealth of Massachusetts nor shall the expression of one thing be deemed to exclude another, though it be of a similar or dissimilar nature, not expressed; provided, however, that the Trust shall not carry on any business, or exercise any powers, in any state, territory, district or country except to the extent that the same may lawfully be carried on or exercised under the laws thereof. FOURTH: (A) The beneficial interest in the Trust shall be divided into Shares, all without par value, but the Trustees shall have the authority from time to time, without obtaining shareholder approval, to create one or more Series of Shares in addition to the Series specifically established and designated in part (B) of this Article FOURTH, as they deem necessary or desirable, to establish and designate such Series, and to fix and determine the relative rights and preferences as between the different Series of Shares as -6- to right of redemption and the price, terms and manner of redemption, special and relative rights as to dividends and other distributions and on liquidation, sinking or purchase fund provisions, conversion on liquidation, sinking or purchase fund provisions, conversion rights, and conditions under which the several Series shall have individual voting rights or no voting rights. Except as aforesaid, all Shares of the different Series shall be identical. The number of authorized Shares and the number of Shares of each Series that may be issued is unlimited, and the Trustees may issue Shares of any Series for such consideration and on such terms as they may determine (or for no consideration if pursuant to a Share dividend or split-up), all without action or approval of the Shareholders. All Shares when so issued on the terms determined by the Trustees shall be fully paid and non-assessable. The Trustees may classify or reclassify any unissued Shares or any Shares previously issued and reacquired of any Series into one or more Series that may be established and designated from time to time. The Trustees may hold as treasury Shares (of the same or some other Series), reissue for such consideration and on such terms as they may determine, or cancel, at their discretion from time to time, any Shares of any Series reacquired by the Trust. The establishment and designation of any Series of Shares in addition to that established and designated in part (B) of this Article FOURTH shall be effective upon the execution by a majority of the Trustees of an instrument setting forth such establishment -7- and designation and the relative rights and preferences of such Series, or as otherwise provided in such instrument. At any time that there are no Shares outstanding of any particular Series previously established and designated, the Trustees may by an instrument executed by a majority of their number abolish that Series and the establishment and designation thereof. Each instrument referred to in this paragraph shall be an amendment to this Declaration of Trust, and may be made by the Trustees without shareholder approval. Any Trustee, officer or other agent of the Trust, and any organization in which any such person is interested may acquire, own, hold and dispose of Shares of any Series of the Trust to the same extent as if such person were not a Trustee, officer or other agent of the Trust; and the Trust may issue and sell or cause to be issued and sold and may purchase Shares of any Series from any such person or any such organization subject only to the general limitations, restrictions or other provisions applicable to the sale or purchase of Shares of such Series generally. (B) Without limiting the authority of the Trustees set forth in part (A) of this Article FOURTH to establish and designate any further Series, the Trustees hereby establish and designate eleven Series of Shares: "Oppenheimer Money Fund," "Oppenheimer Bond Fund," and "Oppenheimer Growth Fund," established by the Declaration of Trust dated August 28, 1984; "Oppenheimer High Income Fund" and "Oppenheimer Capital Appreciation Fund," established by the First Restated Declaration of Trust dated March -8- 11, 1986; "Oppenheimer Multiple Strategies Fund," established by the Third Restated Declaration of Trust dated October 21, 1986; "Oppenheimer Global Securities Fund" established by the Fourth Restated Declaration of Trust dated June 4, 1990; "Oppenheimer Strategic Bond Fund" established by the Fifth Restated Declaration of Trust dated February 25, 1993; "Oppenheimer Growth & Income Fund" established by this Sixth Restated Declaration of Trust dated February 28, 1995 and "Oppenheimer Discovery Fund" and "Oppenheimer Real Asset Fund" established by this Seventh Restated Declaration of Trust dated December 16, 1997. The Shares of Oppenheimer Money Market Fund, Oppenheimer Bond Fund, Oppenheimer Growth Fund, Oppenheimer High Income Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund, Oppenheimer Strategic Bond Fund, Oppenheimer Growth & Income Fund, Oppenheimer Discovery Fund and Oppenheimer Real Asset Fund and any Shares of any further Series that may from time to time be established and designated by the Trustees shall (unless the Trustees otherwise determine with respect to some further Series at the time of establishing and designating the same) have the following relative rights and preferences: (i) Assets Belonging to Series. All consideration received by the Trust for 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 -9- payments derived from any 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 Trust. Such consideration, assets, 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 reinvestment of such proceeds, in whatever form the same may be, together with any General Items allocated to that Series as provided in the following sentence, are herein referred to as "assets belonging to" that Series. In the event that there are any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series (collectively "General Items"), the Trustees shall allocate such General Items 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 they, in their sole discretion, deem fair and equitable; and any General Items so allocated to a particular Series shall belong to that Series. Each such allocation by the Trustees shall be conclusive and binding upon the shareholders of all Series for all purposes. (ii) Liabilities Belonging to Series. The assets belonging to each particular Series shall be charged with the liabilities of the Trust 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 -10- of the Trust which are not readily identifiable as belonging to any particular Series shall be allocated and charged by the Trustees 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 Trustees in their sole discretion deem fair and equitable. The liabilities, expenses, costs, charges and reserves allocated and so charged to a Series are herein referred to as "liabilities belonging to" that Series. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the holders of all Series for all purposes. (iii) Dividends. Dividends and distributions on Shares of a particular Series may be paid to the holders of Shares of that Series, with such frequency as the Trustees may determine, which may be daily or otherwise pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine, from such of the income, and capital gains accrued or realized, from the assets belonging to that Series, as the Trustees may determine, after providing for actual and accrued liabilities 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 Trustees may determine that no dividend or distribution shall be payable on Shares as to which -11- the Shareholder's purchase order and/or payment have not been received by the time or times established by the Trustees under such program or procedure. Such dividends and distributions may be made in cash or Shares or a combination thereof as determined by the Trustees or pursuant to any program that the Trustees may have in effect at the time for the election by each Shareholder of the mode of the making of such dividend or distribution to that Shareholder. Any such dividend or distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with paragraph 13 of Article SEVENTH. (iv) Liquidation. In the event of the liquidation or dissolution of the Trust, the Shareholders of each Series that has been established and designated shall be entitled to receive, as a Series, when and as declared by the Trustees, the excess of the assets belonging to that Series over the liabilities belonging to that Series. The assets so distributable to the Shareholders of any particular Series shall be distributed among such Shareholders in proportion to the number of Shares of that Series held by them and recorded on the books of the Trust. (v) Transfer. All Shares of each particular Series shall be transferable, but transfers of Shares of a particular Series will be recorded on the Share transfer records of the Trust applicable to that Series only at such times as Shareholders shall have the right to require the Trust to redeem Shares of that Series and at such other times as may be permitted by the Trustees. (vi) Equality. All Shares of each particular Series -12- shall represent an equal proportionate interest in the assets belonging to that Series (subject to the liabilities belonging to that Series), and each Share of any particular Series shall be equal to each other Share of that Series; but the provisions of this sentence shall not restrict any distinctions permissible under subsection (iii) of part (B) of this Article FOURTH that may exist with respect to dividends and distributions on Shares of the same Series. The Trustees may from time to time divide or combine the Shares of any particular Series into a greater or lesser number of Shares of that Series without thereby changing the proportionate beneficial interest in the assets belonging to that Series or in any way affecting the rights of Shares of any other Series. (vii) Fractions. Any fractional Share of any Series, if any such fractional Share is outstanding, shall carry proportionately all the rights and obligations of a whole Share of that Series, including those rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust. (viii) Conversion Rights. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that holders of Shares of any Series shall have the right to 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 Trustees. (ix) Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust or of a transfer or similar -13- agent for the Trust, which books shall be maintained separately for the Shares of each Series that has been established and designated. No certification certifying the ownership of Shares need be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the use of facsimile signatures, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders and as to the number of Shares of each Series held from time to time by each such Shareholder. (x) Investments in the Trust. The Trustees may accept investments in the Trust from such persons and on such terms and for such consideration, not inconsistent with the provisions of the 1940 Act, as they from time to time authorize. The Trustees may authorize any distributor, principal underwriter, custodian, transfer agent or other person to accept orders for the purchase or sale of Shares that conform to such authorized terms and to reject any purchase or sale orders for Shares whether or not conforming to such authorized terms. FIFTH: The following provisions are hereby adopted with respect to voting Shares of the Trust and certain other rights: 1. The Shareholders shall have the power to vote (I) for the election of Trustees, when that issue is submitted to them, (ii) with respect to the amendment of this Declaration of Trust, except when the Trustees are granted authority to amend the -14- Declaration of Trust without shareholder approval, (iii) to the same extent as the shareholders of a Massachusetts business corporation, as to whether or not a court action, proceeding or claim should be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, and (iv) with respect to such additional matters relating to the Trust as may be required by the 1940 Act or required by law, by this Declaration of Trust, or the By-Laws of the Trust or any registration statement of the Trust with the Commission or any State, or as the Trustees may consider desirable. 2. The Trust will not hold shareholder meetings of shareholders unless required to do so by the 1940 Act, the provisions of this Declaration of Trust or other applicable law, or unless such meeting is expressly authorized by the Trustees. 3. At all meetings of Shareholders, each Shareholder shall be entitled to one vote on each matter submitted to a vote of the Shareholders of the affected Series (as defined in Rule 18f-2 or its successor under the 1940 Act) for each Share standing in his name on the books of the Trust on the date, fixed in accordance with the By-Laws, for determination of Shareholders of the affected Series entitled to vote at such meeting (except, if the Board so determines, for Shares redeemed prior to the meeting), and each such Series shall vote as an individual class ("Individual Class Voting"); provided, however, that as to any matter with respect to which a vote of all Shareholders is required by the 1940 Act or other applicable law, such requirements as to a vote by all -15- Shareholders shall apply in lieu of Individual Class Voting as described above. Any fractional Share shall carry proportionately all the rights of a whole Share, including the right to vote and the right to receive dividends. The presence of a quorum at any meeting of the Shareholders shall be determined in the manner provided for in the By-Laws. If at any meeting of the Shareholders there shall be less than a quorum present, the Shareholders present at such meeting may, without further notice, adjourn the same from time to time until a quorum shall attend, but no business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted had the meeting not been adjourned. 4. Each Shareholder, upon request to the Trust in proper form determined by the Trust, shall be entitled to require the Trust to redeem from the net assets of that Series all or part of the Shares of such Series standing in the name of such Shareholder. The method of computing such net asset value, the time at which such net asset value shall be computed and the time within which the Trust shall make payment therefor, shall be determined as hereinafter provided in Article SEVENTH of this Declaration of Trust. Notwithstanding the foregoing, the Trustees, when permitted or required to do so by the 1940 Act, may suspend the right of the Shareholders to require the Trust to redeem Shares. 5. No Shareholder shall, as such holder, have any right to purchase or subscribe for any security of the Trust which it may issue or sell, other than such right, if any, as the Trustees, in their discretion, may determine. -16- 6. All persons who shall acquire Shares shall acquire the same subject to the provisions of the Declaration of Trust. 7. Cumulative voting for the election of Trustees shall not be allowed. SIXTH: (A) The persons who shall act as initial Trustees until the first meeting or until their successors are duly chosen and qualify are the initial trustees who executed the Declaration of Trust as of August 28, 1984. However, the By-Laws of the Trust may fix the number of Trustees at a number greater than that of the number of initial Trustees and may authorize the Trustees to increase or decrease the number of Trustees, to fill the vacancies on the Board which may occur for any reason, including any vacancies created by any such increase in the number of Trustees, to set and alter the terms of office of the Trustees and to lengthen or lessen their own terms of office or make their terms of office of indefinite duration, all subject to the 1940 Act. Unless otherwise provided by the By-Laws of the Trust, the Trustees need not be Shareholders. (B) A Trustee at any time may be removed either with or without cause by resolution duly adopted by the affirmative vote of the holders of two-thirds of the outstanding Shares, present in person or by proxy at any meeting of Shareholders called for such purpose; such a meeting shall be called by the Trustees when requested in writing to do so by the record holders of not less than ten per cent of the outstanding Shares. A Trustee may also be removed by the Board of Trustees as provided in the By-Laws of the -17- Trust. (C) The Trustees shall make available a list of names and addresses of all Shareholders as recorded on the books of the Trust, upon receipt of the request, in writing signed by not less than ten Shareholders who have been such for at least six months holding in the aggregate shares of the Trust valued at not less than $25,000 at current offering price (as defined in the Trust's Prospectus and/or Statement of Additional Information) or holding not less than 1% in amount of the entire amount of Shares issued and outstanding; such request must state that such Shareholders wish to communicate with other shareholders with a view to obtaining signatures to a request for a meeting to take action pursuant to part (B) of this Article SIXTH and be accompanied by a form of communication to the Shareholders. The Trustees may, in their discretion, satisfy their obligation under this part (C) by either making available the Shareholder list to such Shareholders at the principal offices of the Trust, or at the offices of the Trust's transfer agent, during regular business hours, or by mailing a copy of such communication and form of request, at the expense of such requesting Shareholders, to all other Shareholders and the Trustees may also take such action as may be permitted under Section 16(C) of the 1940 Act. (D) The Trust may at any time or from time to time apply to the Commission for one or more exemptions from all or part of said Section 16(C) and, if an exemptive order or orders are issued by the Commission, such order or orders shall be deemed part of Section -18- 16(C) for the purposes of parts (B) and (C) of this Article SIXTH. SEVENTH: The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Trust, the Trustees and the Shareholders. 1. As soon as any Trustee is duly elected by the Shareholders or the Trustees and shall have accepted this Trust, the Trust estate shall vest in the new Trustee or Trustees, together with the continuing Trustees, without any further act or conveyance, and he shall be deemed a Trustee hereunder. 2. The death, declination, resignation, retirement, removal, or incapacity of the Trustees, or any one of them shall not operate to annul or terminate the Trust; in such event the Trust shall continue in full force and effect pursuant to the terms of this Declaration of Trust. 3. The assets of the Trust shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. All of the assets of the Trust shall at all times be considered as vested in the Trustees. No Shareholder shall have, as such holder of beneficial interest in the Trust, any authority, power or right whatsoever to transact business for or on behalf of the Trust, or on behalf of the Trustees, in connection with the property or assets of the Trust, or in any part thereof, except the rights to receive the income and distributable amounts arising therefrom and of a particular Series as set forth herein. 4. The Trustees in all instances shall act as principals, and -19- are and shall be free from the control of the Shareholders. The Trustees shall have full power and authority to do any and all acts and to make and execute, and to authorize the officers of the Trust to make and execute, any and all contracts and instruments that they may consider necessary or appropriate in connection with the management of the Trust. The Trustees shall not in any way be bound or limited by present or future laws or customs in regard to Trust investments, but shall have full authority and power to make any and all investments which they, in their uncontrolled discretion, shall deem proper to accomplish the purpose of this Trust. Subject to any applicable limitation in this Declaration of Trust or by the By-Laws of the Trust, the Trustees shall have power and authority: (a) to adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and to amend and repeal them to the extent that they do not reserve that right to the Shareholders; (b) to elect and remove such officers and appoint and terminate such officers as they consider appropriate with or without cause, and (c) to employ a bank or trust company as custodian or any assets of the Trust subject to any conditions set forth in this Declaration of Trust or in the By-Laws; (d) to retain a transfer agent and shareholder servicing agent, or both; (e) to provide for the distribution of Shares either -20- through a principal underwriter or the Trust itself or both; (f) to set record dates in the manner provided for in the By-Laws; (g) to delegate such authority as they consider desirable to any officers of the Trust and to any agent, custodian or underwriter; (h) to vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property held in Trust hereunder; and to execute and deliver powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (I) to exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities held in trust hereunder; (j) to hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or either in its own name or in the name of a custodian or a nominee or nominees, subject in either case to proper safeguards according to the usual practice of Massachusetts business trusts or investment companies; (k) to consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern, any security of which is held in the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by -21- such corporation or concern, and to pay calls or subscriptions with respect to any security held in the Trust; (l) to compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes; (m) to make, in the manner provided in the By-Laws, distributions of income and of capital gains to Shareholders; (n) to borrow money to the extent and in the manner permitted by the 1940 Act and the Trust's fundamental policy thereunder as to borrowing; (o) to enter into investment advisory or management contracts, subject to the 1940 Act, with any one or more corporations, partnerships, trusts, associations or other persons; if the other party or parties to any such contract are authorized to enter into securities transactions on behalf of the Trust, such transactions shall be deemed to have been authorized by all of the Trustees; (p) to change the name of the Trust or any of its Series, without shareholder approval, as they consider appropriate; and (q) to establish fees and/or compensation, for the Trustees and for committees of the Board of Trustees, to be paid by the Trust or any Series thereof in such manner and amount as the Trustees may determine. 5. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the -22- Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. 6. (a) The Trustees shall have no power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever, and the liability of a Shareholder for the acts, omissions to act or obligations of the Trust is hereby expressly disclaimed, other than such as the Shareholder may at any time personally agree to pay by way of subscription to any Shares or otherwise. Every note, bond, contract or other undertaking issued by or on behalf of the Trust or the Trustees relating to the Trust shall include a notice and provision limiting the obligation represented thereby to the Trust and its assets (but the omission of such notice and provision shall not operate to impose any liability or obligation on any Shareholder). (b) Whenever this Declaration of Trust calls for or permits any action to be taken by the Trustees hereunder, such action shall mean that taken by the Board of Trustees by vote of the majority of a quorum of Trustees as set forth from time to time in the By-Laws of the Trust or as required by the 1940 Act. (c) The Trustees shall possess and exercise any and all such additional powers as are reasonably implied from the powers herein contained such as may be necessary or convenient in the conduct of any business or enterprise of the Trust, to do and perform anything necessary, suitable, or proper for the accomplishment of any of the purposes, or the attainment of any one -23- or more of the objects, herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of the Trust, and to do and perform all other acts and things necessary or incidental to the purposes herein before set forth, or that may be deemed necessary by the Trustees. (d) The Trustees shall have the power, to the extent not inconsistent with the 1940 Act, to determine conclusively whether any moneys, securities, or other properties of the Trust are, for the purposes of this Trust, to be considered as capital or income and in what manner any expenses or disbursements are to be borne as between capital and income whether or not in the absence of this provision such moneys, securities, or other properties would be regarded as capital or income and whether or not in the absence of this provision such expenses or disbursements would ordinarily be charged to capital or to income. 7. The By-Laws of the Trust may divide the Trustees into classes and prescribe the tenure of office of the several classes, but no class shall be elected for a period shorter than that from the time of the election following the division into classes until the next meeting at which Trustees are elected and thereafter for a period shorter than the interval between meetings or for a period longer than five years, and the term of office of at least one class shall expire each year. 8. The Shareholders shall have the right to inspect the records, documents, accounts and books of the Trust, subject to reasonable regulations of the Trustees, not contrary to -24- Massachusetts law, as to whether and to what extent, and at what times and places, and under what conditions and regulations, such right shall be exercised. 9. Any officer elected or appointed by the Trustees, by the Shareholders or otherwise, may be removed at any time, with or without cause, in such lawful manner as may be provided in the ByLaws of the Trust. 10. If the By-Laws so provide, the Trustees, and any committee thereof shall have power to hold their meetings, to have an office or offices and, subject to the provisions of the laws of Massachusetts, to keep the books of the Trust outside of said Commonwealth at such places as may from time to time be designated by them, and to take action without a meeting by unanimous written consent or by telephone or similar method of communication. 11. Securities held by the Trust shall be voted in person or by proxy by the President or a Vice-President, or such officer or officers of the Trust as the Trustees shall designate for the purpose, or by a proxy or proxies thereunto duly authorized by the Trustees, except as otherwise ordered by vote of the holders of a majority of the Shares outstanding and entitled to vote in respect thereto. 12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or employee, individually, or any partnership of which any Trustee, officer or employee may be a member, or any corporation or association of which any Trustee, officer or employee may be an officer, director, trustee, employee or -25- stockholder, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Trust, and in the absence of fraud no contract or other transaction shall be hereby affected or invalidated; provided that when a Trustee, or a partnership, corporation or association of which a Trustee is a member, officer, director, trustee, employee or stockholder is so interested, such fact shall be disclosed or shall have been known to the Trustees, including those Trustees who are neither "interested" nor "affiliated" persons as those terms are defined in the 1940 Act, or a majority thereof; and any Trustee who is so interested, or who is also a director, officer, trustee, employee or stockholder of such other corporation or a member of such partnership which is so interested, may be counted in determining the existence of a quorum at any meeting of the Trustees which shall authorize any such contract or transaction, and may vote thereat to authorize any such contract or transaction, with like force and effect as if he were not such director, officer, trustee, employee or stockholder of such other trust or corporation or association or a member of a partnership so interested. (b) Specifically, but without limitation of the foregoing, the Trust may enter into a management or investment advisory contract or underwriting contract and other contracts with, and may otherwise do business with any manager or investment adviser for the Trust and/or principal underwriter of the Shares of the Trust or any subsidiary or affiliate of any such manager or investment adviser and/or principal underwriter and may permit any -26- such firm or corporation to enter into any contracts or other arrangements with any other firm or corporation relating to the Trust notwithstanding that the Trustee of the Trust may be composed in part of partners, directors, officers or employees of any such firm or corporation, and officers of the Trust may have been or may be or become partners, directors, officers or employees of any such firm or corporation, and in the absence of fraud the Trust and any such firm or corporation may deal freely with each other, and no such contract or transaction between the Trust and any such firm or corporation shall be invalidated or in any way affected thereby, nor shall any Trustee or officer of the Trust be liable to the Trust or to any Shareholder or creditor thereof or to any other person for any loss incurred by it or him solely because of the existence of any such contract or transaction; provided that nothing herein shall protect any director or officer of the Trust against any liability to the trust or to 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. (c) (1) As used in this paragraph the following terms shall have the meanings set forth below: (I) the term "indemnitee" shall mean any present or former Trustee, officer or employee of the Trust, any present or former Trustee, or officer of another trust or corporation whose securities are or were owned by the Trust or of which the Trust is or was a creditor and who served or serves in such capacity at the -27- request of the Trust, any present or former investment advisor or principal underwriter of the Trust and the heirs, executors, administrators, successors and assigns of any of the foregoing; however, whenever conduct by an indemnitee is referred to, the conduct shall be that of the original indemnitee rather than that of the heir, executor, administrator, successor or assignee; (ii) the term "covered proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which an indemnitee is or was a party or is threatened to be made a party by reason of the fact or facts under which he or it is an indemnitee as defined above; (iii) the term "disabling conduct" shall mean willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office in question; (iv) the term "covered expenses" shall mean expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by an indemnitee in connection with a covered proceeding; and (v) the term "adjudication of liability" shall mean, as to any covered proceeding and as to any indemnitee, an adverse determination as to the indemnitee whether by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent. (d) The Trust shall not indemnify any indemnitee for any covered expenses in any covered proceeding if there has been an -28- adjudication of liability against such indemnitee expressly based on a finding of disabling conduct. (e) Except as set forth in paragraph (d) above, the Trust shall indemnify any indemnitee for covered expenses in any covered proceeding, whether or not there is an adjudication of liability as to such indemnitee, if a determination has been made that the indemnitee was not liable by reason of disabling conduct by (I) a final decision on the merits of the court or other body before which the covered proceeding was brought; or (ii) in the absence of such decision, a reasonable determination, based on a review of the facts, by either (a) the vote of a majority of a quorum of Trustees who are neither "interested persons", as defined in the 1940 Act nor parties to the covered proceedings, or (b) an independent legal counsel in a written opinion; provided that such Trustees or counsel, in reaching such determination, may but need not presume the absence of disabling conduct on the part of the indemnitee by reason of the manner in which the covered proceeding was terminated. (f) Covered expenses incurred by an indemnitee in connection with a covered proceeding shall be advanced by the Trust to an indemnitee prior to the final disposition of a covered proceeding upon the request of the indemnitee for such advance and the undertaking by or on behalf of the indemnitee to repay the advance unless it is ultimately determined that the indemnitee is entitled to indemnification thereunder, but only if one or more of the following is the case: (I) the indemnitee shall provide a -29- security for such undertaking; (ii) the Trust shall be insured against losses arising out of any lawful advances; or (iii) there shall have been a determination, based on a review of the readily available facts (as opposed to a full trial-type inquiry) that there is a reason to believe that the indemnitee ultimately will be found entitled to indemnification, by either independent legal counsel in a written opinion or by the vote of a majority of a quorum of trustees who are neither "interested persons" as defined in the 1940 Act nor parties to the covered proceeding. (g) Nothing herein shall be deemed to affect the right of the Trust and/or any indemnitee to acquire and pay for any insurance covering any or all indemnitees to the extent permitted by the 1940 Act or to affect any other indemnification rights to which any indemnitee may be entitled to the extent permitted by the 1940 Act. 13. For purposes of the computation of net asset value, as in this Declaration of Trust referred to, the following rules shall apply: (a) The net asset value per Share of any Series, as of the time of valuation on any day, shall be the quotient obtained by dividing the value, as at such time, of the net assets of that Series (i.e., the value of the assets of that Series less its liabilities exclusive of its surplus) by the total number of Shares of that Series outstanding at such time. The assets and liabilities of any Series shall be determined in accordance with generally accepted accounting principles; provided, however, that -30- in determining the liabilities of any Series there shall be included such reserves as may be authorized or approved by the Trustees, and provided further that in connection with the accrual of any fee or refund payable to or by an investment adviser of the Trust for such Series, the amount of which accrual is not definitely determinable as of any time at which the net asset value of each Share of that Series is being determined due to the contingent nature of such fee or refund, the Trustees are authorized to establish from time to time formulae for such accrual, on the basis of the contingencies in question to the date of such determination, or on such other basis as the Trustees may establish. (1) Shares of a Series to be issued shall be deemed to be outstanding as of the time of the determination of the net asset value per Share applicable to such issuance and the net price thereof shall be deemed to be an asset of that Series; (2) Shares of a Series to be redeemed by the Trust shall be deemed to be outstanding until the time of the determination of the net asset value applicable to such redemption and thereupon and until paid the redemption price thereof shall be deemed to be a liability of that Series; and (3) Shares of a Series voluntarily purchased or contracted to be purchased by the Trust pursuant to the provisions of paragraph 4 of Article FIFTH shall be deemed to be outstanding until whichever is the later of (I) the time of the making of such purchase or contract of purchase, and (ii) the time of which the -31- purchase price is determined, and thereupon and until paid, the purchase price thereof shall be deemed to be a liability of that Series. (b) The Trustees are empowered, in their absolute discretion, to establish bases or times, or both, for determining the net asset value per Share of any Series in accordance with the 1940 Act and to authorize the voluntary purchase by any Series, either directly or through an agent, of Shares of any Series upon such terms and conditions and for such consideration as the Trustees shall deem advisable in accordance with the 1940 Act. 14. Payment of the net asset value per Share of any Series properly surrendered to it for redemption shall be made by the Trust within seven days after tender of such shares to the Trust for such purpose plus any period of time during which the right of the holders of the shares of that Series to require the Trust to redeem such shares has been suspended, or as specified in any applicable law or regulation. Any such payment may be made in portfolio securities of that Series and/or in cash, as the Trustees shall deem advisable, and no Shareholder shall have a right, other than as determined by the Trustees, to have his Shares redeemed in kind. 15. The Trust shall have the right, at any time and without prior notice to the Shareholder, to redeem Shares of the Series held by such Shareholder held in any account registered in the name of such Shareholder for its current net asset value, if and to the extent that such redemption is necessary to reimburse either that -32- Series of the Trust or the distributor (i.e., principal underwriter) of the Shares for any loss either has sustained by reason of the failure of such Shareholder to make timely and good payment for Shares purchased or subscribed for by such Shareholder, regardless of whether such Shareholder was a Shareholder at the time of such purchase or subscription; subject to and upon such terms and conditions as the Trustees may from time to time prescribe. EIGHTH: The name "Oppenheimer" included in the name of the Trust and of any Series shall be used pursuant to a royalty-free, non-exclusive license from OppenheimerFunds, Inc. ("OFI"), incidental to and as part of an advisory, management or supervisory contract which may be entered into by the Trust with OFI. The license may be terminated by OFI upon termination of such advisory management or supervisory contract or without cause upon 60 days' notice, in which case neither the Trust nor any Series shall have any further right to use the name "Oppenheimer" in its name or otherwise and the Trust, the Shareholders and its officers and Trustees shall promptly take whatever action may be necessary to change its name and the names of any Series accordingly. NINTH: 1. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or -33- in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the Trust estate to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust shall, upon request by the Shareholder, assume the defense of any such claim made against any Shareholder for any act or obligation of the Trust and satisfy any judgment thereon. 2. It is hereby expressly declared that a trust and not a partnership is created hereby. No individual Trustee hereunder shall have any power to bind the Trust, the Trust's officers or any Shareholder. All persons extending credit to, doing business with, contracting with or having or asserting any claim against the Trust or the Trustees shall look only to the assets of the Trust for payment under such credit, transaction, contract or claim; and neither the Shareholders nor the Trustees, nor any of their agents, whether past, present or future, shall be personally liable therefor; notice of such disclaimer shall be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a Trustee against any liability to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee hereunder. 3. The exercise by the Trustees of their powers and discretion hereunder in good faith and with reasonable care under the circumstances then prevailing, shall be binding upon everyone -34- interested. Subject to the provisions of paragraph 2 of this Article NINTH, the Trustees shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operations of this Declaration of Trust, applicable laws, contracts, obligations, transactions, or any business or dealings the Trust may enter into, and subject to the provisions of paragraph 2 of this Article NINTH, shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. 4. This Trust shall continue without limitation of time but subject to the provisions of sub-sections (a), (b), (c) and (d) of this paragraph 4. (a) The Trustees, with the favorable vote of the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of any one or more Series entitled to vote, may sell and convey the assets of that Series (which sale may be subject to the retention of assets for the payment of liabilities and expenses) to another issuer for a consideration which may be or include securities of such issuer. Upon making provision for the payment of liabilities, by assumption by such issuer or otherwise, the Trustees shall distribute the remaining proceeds ratably among the holders of the outstanding Shares of the Series the assets of which have been so transferred. (b) The Trustees, with the favorable vote of the holders -35- of a majority of the outstanding voting securities, as defined in the 1940 Act, of any one or more Series entitled to vote, may at any time sell and convert into money all the assets of that Series. Upon making provisions for the payment of all outstanding obligations, taxes and other liabilities, accrued or contingent, of that Series, the Trustees shall distribute the remaining assets of that Series ratably among the holders of the outstanding Shares of that Series. (c) The Trustees, with the favorable vote of the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, of any one or more Series entitled to vote, may at any time otherwise alter, transfer or convert the assets of such Series. (d) Upon completion of the distribution of the remaining proceeds or the remaining assets as provided in sub-sections (a), (b), and (c), whenever applicable, the Series the assets of which have been so transferred shall terminate, and if all the assets of the Trust have been so transferred, the Trust shall terminate and the Trustees shall be discharged of any and all further liabilities and duties hereunder and the right, title and interest of all parties shall be canceled and discharged. 5. The original or a copy of this instrument and of each declaration of trust supplemental hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each supplemental or restated declaration of trust shall be filed with the Massachusetts -36- Secretary of State, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such supplemental or restated declarations of trust have been made and as to any matters in connection with the Trust hereunder, and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such restated or supplemental declaration of trust. In this instrument or in any such supplemental or restated declaration of trust, references to this instrument, and all expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to this instrument as amended or affected by any such restated or supplemental declaration of trust. This instrument may be executed in any number of counterparts, each of which shall be deemed as original. 6. The Trust set forth in this instrument is created under and is to be governed by and construed and administered according to the laws of the Commonwealth of Massachusetts. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. 7. The Board of Trustees is empowered to cause the redemption of the Shares held in any account if the aggregate net asset value of such Shares (taken at cost or value, as determined by the Board) has been reduced to $200 or less upon such notice to the shareholder in question, with such permission to increase the -37- investment in question and upon such other terms and conditions as may be fixed by the Board of Trustees in accordance with the 1940 Act. 8. In the event that any person advances the organizational expenses of the Trust, such advances shall become an obligation of the Trust subject to such terms and conditions as may be fixed by, and on a date fixed by, or determined with criteria fixed by the Board of Trustees, to be amortized over a period or periods to be fixed by the Board. 9. Whenever any action is taken under this Declaration of Trust under any authorization to take action which is permitted by the 1940 Act or other applicable law, such action shall be deemed to have been properly taken if such action is in accordance with the construction of the 1940 Act then in effect as expressed in "no action" letters of the staff of the Commission or any release, rule, regulation or order under the 1940 Act or any decision of a court of competent jurisdiction, notwithstanding that any of the foregoing shall later be found to be invalid or otherwise reversed or modified by any of the foregoing. 10. Any action which may be taken by the Board of Trustees under this Declaration of Trust or its By-Laws may be taken by the description thereof in the then effective prospectus or statement of additional information relating to the Shares under the Securities Act of 1933 or in any proxy statement of the Trust rather than by formal resolution of the Board. 11. Whenever under this Declaration of Trust, the Board of -38- Trustees is permitted or required to place a value on assets of the Trust, such action may be delegated by the Board, and/or determined in accordance with a formula determined by the Board, to the extent permitted by the 1940 Act. 12. If authorized by vote of the Trustees and the favorable vote of the holders of a majority of the outstanding voting securities, as defined in the 1940 Act, entitled to vote, or by any larger vote which may be required by applicable law in any particular case, the Trustees shall amend or otherwise supplement this instrument, by making a Restated Declaration of Trust or a Declaration of Trust supplemental hereto, which thereafter shall form a part hereof; any such Supplemental or Restated Declaration of Trust may be executed by and on behalf of the Trust and the Trustees by an officer or officers of the Trust. -39- IN WITNESS WHEREOF, the undersigned have executed this instrument as of the 16th day of December, 1997. /s/ William A. Baker /s/ Charles Conrad, Jr. William A. Baker, Trustee Charles Conrad, Jr., Trustee 197 Desert Lakes Drive 6301 Princeville Circle Palm Springs, CA 92264 Huntington Beach, CA 92648 /s/ Ned M. Steel /s/ Robert M. Kirchner Ned M. Steel, Trustee Robert M. Kirchner, Trustee 3416 S. Race Street 2800 S. University Boulevard Englewood, CO 80110 Denver, CO 80210 /s/ Raymond J. Kalinowski /s/ C. Howard Kast Raymond J. Kalinowski, TC. Howard Kast, Trustee 44 Portland Drive 2252 East Alameda St. Louis, MO 63131 Denver, CO 80209 /s/ James C. Swain /s/ Jon S. Fossel James C. Swain, Trustee Jon S. Fossel, Trustee 355 Adams Street 187 Mead Street Denver, CO 80206 Waccabuc, NY 10597 /s/ Robert G. Avis /s/Sam Freedman Robert G. Avis, Trustee Sam Freedman, Trustee 1706 Warson Estates Drive 4975 Lake Shore Drive St. Louis, MO 63124 Littleton, Colorado 80123 EX-99 3 AGGRESSIVE GROWTH FUND SHARE CERTIFICATE OPPENHEIMER AGGRESSIVE GROWTH FUND Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER AGGRESSIVE GROWTH FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP 683811 509 (at left) is the owner of (centered) FULLY PAID SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER AGGRESSIVE GROWTH FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) ----------------------- ------------------- SECRETARY PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned SHAREHOLDER SERVICES, INC. (a DIVISION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT -__________________ Custodian - -------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - ----------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - ----------------------------------- (Both must sign if joint tenancy) Signature(s)_____________________ guaranteed Name of Firm or Bank by: - -------------------------- Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right correspond with the name(s) as written upon of above paragraph) the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, a Federally- signature(s)) chartered savings and loan association, a foreign bank having a U.S. correspondent bank or member firm of a national securities exchange. EX-99 4 SMALL CAP GROWTH SPECIMEN SHARE CERT OPPENHEIMER SMALL CAP GROWTH FUND Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER SMALL CAP GROWTH FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER SMALL CAP GROWTH FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill _______________________ ___________________ TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian _______________ (Cust) (Minor) UNDER UGMA/UTMA ___________________ (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) ______________________________________________________________ (Please print or type name and address of assignee) ______________________________________________________ __________________________________________________________ Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ________________________________ (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 5 MONEY FUND SHARE CERTIFICATE OPPENHEIMER MONEY FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER MONEY FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER MONEY FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 6 BOND FUND SHARE CERTIFICATE OPPENHEIMER BOND FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER BOND FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER BOND FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVISON OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - ____________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ---------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - ------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ _________________________________________________________ Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ----------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 7 GROWTH FUND SHARE CERTIFICATE OPPENHEIMER GROWTH FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER GROWTH FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER GROWTH FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 8 HIGH YIELD FUND SHARE CERTIFICATE OPPENHEIMER HIGH INCOME FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER HIGH INCOME FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER HIGH INCOME FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 9 OPPENHEIMER AGGRESSIVE GROWTH FUND SHARE CERT. OPPENHEIMER AGGRESSIVE GROWTH FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER AGGRESSIVE GROWTH FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER AGGRESSIVE GROWTH FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 10 MULTIPLE STRATEGIES SHARE CERTIFICATE OPPENHEIMER MULTIPLE STRATEGIES FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER MULTIPLE STRATEGIES FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER MULTIPLE STRATEGIES FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 11 GLOBAL SECURITIES SHARE CERTIFICATE OPPENHEIMER GLOBAL SECURITIES FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER GLOBAL SECURITIES FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER GLOBAL SECURITIES FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVISON OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - ___________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA ________________ (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - ----------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ ----------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 12 STRATEGIC BOND FUND SHARE CERTIFICATE OPPENHEIMER STRATEGIC BOND FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER STRATEGIC BOND FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER STRATEGIC BOND FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 13 GROWTH & INCOME FUND SHARE CERTIFICATE OPPENHEIMER GROWTH & INCOME FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER GROWTH & INCOME FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER GROWTH & INCOME FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-99 14 SMALL CAP GROWTH FUND SHARE CERTIFICATE OPPENHEIMER SMALL CAP GROWTH FUND Class 2 Share Certificate (8-1/2" x 11") I. FACE OF CERTIFICATE (All text and other matter lies within 8-1/4" x 10-3/4" decorative border, 5/16" wide) (upper left corner): NUMBER [of shares] (upper right) CLASS 2 SHARES (centered below boxes) Oppenheimer Variable Account Funds A MASSACHUSETTS BUSINESS TRUST SERIES: OPPENHEIMER SMALL CAP GROWTH FUND (at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR CERTAIN DEFINITIONS (box with number) CUSIP (at left) is the owner of (centered) FULLY PAID CLASS 2 SHARES OF BENEFICIAL INTEREST OF OPPENHEIMER SMALL CAP GROWTH FUND a series of OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter called the "Fund"), transferable only on the books of the Fund by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Declaration of Trust of the Fund to all of which the holder by acceptance hereof assents. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Fund and the signatures of its duly authorized officers. (signature Dated: (signature at left of seal) at right of seal) /s/ George C. Bowen /s/ Bridget A. Macaskill ----------------------- ------------------- TREASURER PRESIDENT (centered at bottom) 1-1/2" diameter facsimile seal with legend OPPENHEIMER VARIABLE ACCOUNT FUNDS SEAL 1984 COMMONWEALTH OF MASSACHUSETTS (at lower right, printed vertically) Countersigned OPPENHEIMERFUNDS SERVICES (A DIVSION OF OPPENHEIMERFUNDS, INC.) Denver (Colo.) Transfer Agent By ____________________________ Authorized Signature II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension) The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS NOT TC - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT/TRANSFER MIN ACT - __________ Custodian - --------------- (Cust) (Minor) UNDER UGMA/UTMA - ------------------- (State) Additional abbreviations may also be used though not on above list. For Value Received ................ hereby sell(s), assign(s), and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE AND PROVIDE CERTIFICATION BY TRANSFEREE (box for identifying number) - -------------------------------------------------------------- (Please print or type name and address of assignee) - ------------------------------------------------------ - ---------------------------------------------------------- Class 2 Shares of the beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________ Attorney to transfer the said shares on the books of the within named Fund with full power of substitution in the premises. Dated: ______________________ Signed: __________________________ - -------------------------------- (Both must sign if joint tenancy) Signature(s) __________________________ guaranteed Name of Firm or Bank by: _____________________________ Signature of Officer (text printed NOTICE: The signature(s) to this assignment vertically to right must correspond with the name(s) as of above paragraph) written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. (text printed in Signatures must be guaranteed by a U.S. box to left of commercial bank or trust company, signature(s) a Federally-chartered savings and loan association, a foreign bank having a U.S. firm of a national securities exchange. EX-10 15 INVESTMENT ADVISORY AGREEMENT INVESTMENT ADVISORY AGREEMENT AGREEMENT made the 1st day of May, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS (hereinafter referred to as the "Trust"), and OPPENHEIMERFUNDS, INC. (hereinafter referred to as "OFI"). WHEREAS, the Trust is an open-end, diversified series management investment company registered as such with the Securities and Exchange Commission (the "Commission") pursuant to the Investment Company Act of 1940 (the "Investment Company Act"), and OFI is a registered investment adviser; and WHEREAS, OPPENHEIMER SMALL CAP GROWTH FUND (the "Fund") is a series of the Trust having a separate portfolio, investment policies and investment restrictions; and NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, it is agreed by and between the parties, as follows: 1. General Provision. a. The Trust 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 the Trust's Board of Trustees the benefit of its best judgment, effort, advice and recommendations and shall, at all times conform to, and use its best efforts to enable the Fund to conform to: (i) the provisions of the Investment Company Act and any rules or regulations thereunder; (ii) any other applicable provisions of state or Federal law; (iii) the provisions of the Declaration of Trust and By-Laws of the Trust as amended from time to time; (iv) policies and determinations of the Board of Trustees of the Trust; (v) the fundamental policies and investment restrictions of the Fund as reflected in the Trust's registration statement under the Investment Company Act or as such policies may, from time to time, be amended by the Fund's shareholders; and (vi) the Prospectus and Statement of Additional Information of the Trust 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 trustees and officers of the Trust with respect to any matters dealing with the business and affairs of the Trust including the valuation of portfolio securities of the Fund which securities are either not registered for public sale or not traded on any securities market. 2. Investment Management. a. OFI shall, subject to the direction and control by the Trust's Board of Trustees: (i) regularly provide investment advice and recommendations to the Fund with respect to its investments, investment policies and the purchase and sale of securities; (ii) supervise continuously the investment program of the Fund and the composition of its portfolio and determine what securities shall be purchased or sold by the Fund; and (iii) arrange, subject to the provisions of paragraph 7 hereof, for the purchase of securities and other investments for the Fund and the sale of securities and other investments held in the portfolio of the Fund. b. Provided that the Trust 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. OFI shall not be liable for any loss sustained by the Trust and/or the Fund in connection with matters to which this Agreement relates, except a loss resulting by reason of OFI'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. 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, stockholders or employees from buying, selling or trading any securities for its or their own account or for the account of others for whom it or they may be acting, provided that such activities will not adversely affect or otherwise impair the performance by OFI of its duties and obligations under this Agreement. 3. Other Duties of OFI. OFI shall, at its own expense, provide and supervise the activities of all administrative and clerical personnel as shall be required to provide effective administration for the Fund, including the compilation and maintenance of such records with respect to its operations as may reasonably be required; the preparation and filing of such reports with respect thereto as shall be required by the Commission; composition of periodic reports with respect to operations of the Fund for its shareholders; composition of proxy materials for meetings of the Fund's shareholders, and the composition of such registration statements as may be required by Federal securities laws for continuous public sale of shares of the Fund. OFI shall, at its own cost and expense, also provide the Trust with adequate office space, facilities and equipment. OFI shall, at its own expense, provide such officers for the Fund as the Fund's Board may request. 4. Allocation of Expenses. All other costs and expenses of the Fund not expressly assumed by OFI under this Agreement, shall be paid by the Trust, including, but not limited to: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums for fidelity and other coverage requisite to its operations; (iv) compensation and expenses of its trustees other than those associated or affiliated with OFI; (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 legal obligation which the Trust may have on behalf of the Fund to indemnify its officers and trustees 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, trustees or employees of the Trust shall not receive any compensation from the Trust for their services. The expenses with respect to any two or more series of the Trust shall be allocated in proportion to the net assets of the respective series except where allocations of direct expenses can be made. 5. Compensation of OFI. The Trust agrees to pay OFI on behalf of the Fund 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 -2- computed on the aggregate net asset value of the Fund as of the close of each business day and payable monthly at the annual rate of: 0.75% of the first $200 million of average annual net assets; 0.72% of the next $200 million; 0.69% of the next $200 million; 0.66% of the next $200 million ; and 0.60% of average annual net assets over $800 million. 6. Use of Name "Oppenheimer." OFI hereby grants to the Trust a royalty-free, non-exclusive license to use the name "Oppenheimer" in the name of the Trust and 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 Trust's Board, 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 Trust shall promptly take whatever action may be necessary to change its name and the name of the Fund and discontinue any further use of the name "Oppenheimer" in the name of the Trust or 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 purchase and sale of the Fund's portfolio securities, to employ or deal with such members of securities or commodities exchanges, brokers or dealers (hereinafter "broker-dealers"), including "affiliated" broker-dealers (as that term is defined in the Investment Company Act), as may, in its best judgment, implement the policy of the Fund to obtain, at reasonable expense, the "best execution" (prompt and reliable execution at the most favorable security price obtainable) of the Fund's portfolio transactions as well as to obtain, consistent with the provisions of subparagraph (c) of this paragraph 7, the benefit of such investment information or research as will be of significant assistance to the performance by 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 Fund's portfolio transactions to broker-dealers, other than an affiliated broker-dealer, qualified to obtain best execution of such transactions who provide brokerage and/or research services (as such services are defined in Section 28(e)(3) of the Securities Exchange Act of 1934) for the Fund and/or other accounts for which OFI or its affiliates exercise "investment discretion" (as that term is defined in Section 3(a)(35) of the Securities Exchange Act of 1934) and to cause the Trust 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 -3- 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 or its 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 purposes contemplated by this Agreement and that the total commissions paid by the Trust over a representative period selected by the Trust's trustees 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 Trustees of the Trust and the provisions of this paragraph 7. e. The Trust 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 Trust; 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 shares of the Fund and the other funds advised by OFI and its affiliates as a factor in the selection of broker-dealers for its portfolio transactions. 8. Duration. This Agreement will take effect on the date first set forth above. Unless earlier terminated pursuant to paragraph 10 hereof, this Agreement shall remain in effect until two years from the date of execution hereof, and thereafter will continue in effect from year to year, so long as such continuance shall be approved at least annually by the Trust's Board of Trustees, including the vote of the majority of the trustees of the Trust who are not parties to this Agreement or "interested persons" (as defined in the Investment Company Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval, or by the holders of a "majority" (as defined in the Investment Company Act) of the outstanding voting securities of the Fund and by such a vote of the Trust's Board of Trustees. 9. Disclaimer of Trustee or Shareholder Liability. OFI understands and agrees that the obligations of the Trust under this Agreement are not binding upon any Trustee or shareholder of the Trust or Fund personally, but bind only the Trust and the Trust's property. OFI represents that it has notice of the provisions of the Declaration of Trust of the Trust disclaiming Trustee or shareholder liability for acts or obligations of the Trust. -4- 10. Termination. This Agreement may be terminated: (i) by OFI at any time without penalty upon sixty days' written notice to the Trust (which notice may be waived by the Trust); or (ii) by the Trust 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 Trust shall be directed or approved by the vote of a majority of all of the trustees of the Trust then in office or by the vote of the holders of a "majority" of the outstanding voting securities of the Fund (as defined in the Investment Company Act). 11. Assignment or Amendment. This Agreement may not be amended or the rights of OFI hereunder sold, transferred, pledged or otherwise in any manner encumbered without the affirmative vote or written consent of the holders of the "majority" of the outstanding voting securities of the Trust. This Agreement shall automatically and immediately terminate in the event of its "assignment," as defined as stated below. 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. OPPENHEIMER VARIABLE ACCOUNT FUNDS for OPPENHEIMER SMALL CAP GROWTH FUND By: OPPENHEIMERFUNDS, INC. By: EX-1 16 GENERAL DISTRIBUTOR'S AGREEMENT GENERAL DISTRIBUTOR'S AGREEMENT BETWEEN OPPENHEIMER VARIABLE ACCOUNT FUNDS AND OPPENHEIMERFUNDS DISTRIBUTOR, INC. Date: February 24, 1998 OPPENHEIMERFUNDS DISTRIBUTOR, INC. Two World Trade Center, Suite 3400 New York, New York 10048 Dear Sirs: OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust"), a Massachusetts business trust, is registered as an investment company under the Investment Company Act of 1940 (the "1940 Act") consisting of one or more series ("Series") and an indefinite number of one or more classes of its shares of beneficial interest for each Series have been registered under the Securities Act of 1933 (the "1933 Act") to be offered for sale to the public in a continuous public offering in accordance with the terms and conditions set forth in the Prospectus and Statement of Additional Information ("SAI") included in the Trust's Registration Statement as it may be amended from time to time (the "Current Prospectus and/or SAI"). In this connection, the Trust desires that your firm (the "General Distributor") act in a principal capacity as General Distributor for the sale and distribution of Class 2 shares of beneficial interest ("Shares") for the following Series: Oppenheimer Money Fund, Oppenheimer Bond Fund, Oppenheimer Growth Fund, Oppenheimer High Income Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund, Oppenheimer Strategic Bond Fund, Oppenheimer Growth & Income Fund and Oppenheimer Small Cap Growth Fund which have been registered as described above and of any additional Class 2 and subsequent Classes of Shares which may become registered during the term of this Agreement. You have advised the Trust 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 Trust hereby appoints you as the sole General Distributor for sale of its Shares, pursuant to the aforesaid continuous public offering of its Shares and the Trust further agrees from and after the date of this Agreement that it will not, without your consent, sell or agree to sell any Shares otherwise than through you, except (a) the Trust may itself sell Shares as an investment to the officers, trustees or directors and bona fide present and former full-time employees of the Trust, the Trust's Investment Adviser and affiliates thereof, and to other -1- investors who are identified in the current Prospectus and/or SAI; (b) the Trust may issue Shares in connection with a merger, consolidation or acquisition of assets on such basis as may be authorized or permitted under the 1940 Act; (c) the Trust may issue Shares for the reinvestment of dividends and other distributions of the Trust or of any other Trust if permitted by the current Prospectus and/or SAI; and (d) the Trust may issue Shares as underlying securities of a unit investment trust if such unit investment trust has elected to use Shares as an underlying investment; provided that in no event as to any of the foregoing exceptions shall Shares be issued and sold at less than the then-existing net asset value. 2. Sale of Shares. You hereby accept such appointment and agree to use your best efforts to sell Shares, provided, however, that when requested by the Trust at any time because of market or other economic considerations or abnormal circumstances of any kind, or when agreed to by mutual consent of the Trust and the General Distributor, you will suspend such efforts. The Trust 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 of the Trust. 3. 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. Shares of the Trust may be sold by you only at net asset value without sales charge upon receipt of Federal Funds for the purchase of any Shares sold by you pursuant to provisions hereof. (b) You agree promptly to issue or to cause the duly appointed transfer or shareholder servicing agent of the Trust to issue as your agent confirmations of all accepted purchase orders and to transmit a copy of such confirmations to the Trust. 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 Trust to be paid promptly after receipt of payment from the originating insurance company, 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 insurance company, dealer or broker or investor. In no event shall the General Distributor make payment to the Trust later than permitted by applicable rules of the National Association of Securities Dealers, Inc. Notwithstanding the provisions of part (a) of this Section 3 of this Agreement, purchase orders received from an authorized insurance company or dealer after the latest determination of the Trust's net asset value on a regular business day will receive that latest net asset value if the request to the insurance company or dealer by its customer to arrange such purchase prior to the latest determination of the Trust's net -2- asset value that day complies with the requirements governing such requests as stated in the current Prospectus and/or SAI. (c) If the originating insurance company or 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 insurance company or dealer or broker, or investor. You agree promptly to reimburse the Trust for losses suffered by it that are attributable to any such cancellation, or to errors on your part in relation to the effective date of accepted purchase orders, limited to the amount that such losses exceed contemporaneous gains realized by the Trust 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 Trust agrees that if such investor fails to make you whole for any loss you pay to the Trust on such canceled purchase order, the Trust will reimburse you for such loss to the extent of the aggregate redemption proceeds of any other Shares of the Trust owned by such investor, on your demand that the Trust exercise its right to claim such redemption proceeds. The Trust 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 Trust 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 Trust to the extent set forth in the current Prospectus and/or SAI. 4. Repurchase of Shares. (a) In connection with the repurchase of Shares, you are appointed and shall act as Agent of the Trust. You are authorized, for so long as you act as General Distributor of the Trust, to repurchase, from authorized insurance companies or dealers, certificated or uncertificated shares of the Trust ("Shares") on the basis of orders received from each insurance company or dealer ("authorized insurance company") with which you have a participation agreement for the sale of Shares and permitting resales of Shares to you, provided that such authorized insurance company, at the time of placing such resale order, shall represent (i) if such Shares are represented by certificate(s), that certificate(s) for the Shares to be repurchased have been delivered to it by the registered owner with a request for the redemption of such Shares executed in the manner and with the signature guarantee required by the then current effective prospectus and/or SAI, or (ii) if such Shares are uncertificated, that -3- 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 current effective prospectus of the Trust. (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 Trust, or, if so directed, to any duly appointed transfer or shareholder servicing agent of the Trust. In your discretion, you may accept repurchase requests made by a financially responsible insurance company or 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 Trust shall be a third party beneficiary of such indemnification. (c) Upon receipt by the Trust 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 current effective Prospectus or SAI, the Trust will pay or cause its duly appointed transfer or shareholder servicing agent promptly to pay to the originating authorized insurance company the redemption price of the repurchased Shares (other than repurchased Shares subject to the provisions of part (d) of Section 4 of this Agreement) next determined after your receipt of the dealer's repurchase order. (d) Notwithstanding the provisions of part (c) of Section 4 of this Agreement, repurchase orders received from an authorized dealer after the latest determination of the Trust's redemption price on a regular business day will receive that day's latest redemption price if the request to the dealer by its customer to arrange such repurchase prior to the latest determination of the Trust's redemption price that day complies with the requirements governing such requests as stated in the current Prospectus and/or SAI. (e) You will make every reasonable effort and take all reasonably available measures to assure the accurate performance of all services to be performed by you hereunder within the requirements of any statute, rule or regulation pertaining to the redemption of shares of a regulated investment company and any requirements set forth in the then current Prospectus and/or SAI of the Trust. 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 a Fund harmless from the effect of any errors or omissions which might cause an over- or under-redemption of a Fund's Shares and/or an excess or non- payment of dividends, capital gains distributions, or other distributions. -4- (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 Trust, you agree promptly to reimburse the Trust for any amount by which any loss shall exceed then- existing gains so arising. 5. 1933 Act Registration. The Trust has delivered to you a copy of its current Prospectus and SAI. The Trust agrees that it will use its best efforts to continue the effectiveness of the Trust's Registration Statement filed under the 1933 Act. The Trust 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 Trust will furnish you at your expense with a reasonable number of copies of the current Prospectus and SAI and any amendments thereto for use in connection with the sale of Shares. 6. 1940 Act Registration. The Trust has already registered under the 1940 Act as an investment company, and it will use its best efforts to maintain such registration and to comply with the requirements of the 1940 Act. 7. Duties of Distributor: (a) Neither you nor any of your officers will take any long or short position in the shares of the Trust, but this provision shall not prevent you or your officers from acquiring shares of the Trust for investment purposes only; (b) You shall furnish to the Trust any pertinent information required to be inserted with respect to you as General Distributor within the purview of the Securities Act of 1933 in any reports or registration required to be filed with any governmental authority; (c) You will not make any representations inconsistent with the information contained in the Current Prospectus and/or SAI. (d) You shall maintain such records as may be reasonably required for the Trust or its transfer or shareholder servicing agent to respond to shareholder requests or complaints, and to permit the Trust to maintain proper accounting records, and you shall make such records available to the Trust 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 Trust's current Prospectus and/or SAI and all applicable laws, rules and regulations with respect to the purchase, sale and distribution of Shares. -5- 8. Allocation of Costs. The Trust shall pay the cost of composition and printing of sufficient copies of its Prospectus and SAI as shall be required for periodic distribution to its shareholders and the expense of registering Shares for sale under federal securities laws. You shall pay the expenses normally attributable to the sale of Shares, other than as paid under the Trust's Service 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 direct or indirect shareholders) and any sales literature used by you in the public sale of the Shares. 9. Duration. This Agreement shall take effect on the date first written above, and shall supersede any and all prior General Distributor's Agreements by and among the Trust and you. Unless earlier terminated pursuant to Section 10 hereof, this Agreement shall remain in effect until September 30, 1999. 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 Trust's Board of Trustees or by vote of a majority of the voting securities of the Trust; and (b) by the vote of a majority of the Trustees, who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of any such person, cast in person at a meeting called for the purpose of voting on such approval. 10. 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 Trust); (b) by the Trust 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 Trust and the General Distributor, provided that such termination by the Trust pursuant to part (b) of this Section 10 shall be directed or approved by the Board of Trustees of the Trust or by the vote of the holders of a "majority" of the outstanding voting securities of the Trust. 11. 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. 12. Disclaimer of Shareholder Liability. The General Distributor understands and agrees that the obligations of the Trust under this Agreement are not binding upon any shareholder or any Trustee of the Trust personally, but bind only the Trust and the Trust's property; the General Distributor represents that it has notice of the provisions of the Declaration of Trust of the Trust disclaiming shareholder and Trustee liability for acts or obligations of the Trust. -6- 13. 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, kindly so indicate by signing in the space provided below. OPPENHEIMER VARIABLE ACCOUNT FUNDS By: Accepted: OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: EX-1 17 SERVICE PLAN & AGREEMENT - MONEY FUND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER MONEY FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER MONEY FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 1 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees 2 to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the 3 amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER MONEY FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ OFMI\66012b 4 EX-1 18 SERVICE PLAN AND AGREEMENT FOR BOND FUND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER BOND FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER BOND FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 1 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees 2 to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the 3 amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER BOND FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ OFMI\63012b 4 EX-1 19 SERVICE PLAN AND AGREEMENT FOR GROWTH FUND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER GROWTH FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER GROWTH FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 20 SERVICE PLAN AND AGREEMENT FOR HIGH INCOME FUND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER HIGH INCOME FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER HIGH INCOME FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 1 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees 2 to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the 3 amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER HIGH INCOME FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 21 SERVICE PLAN AND AGREE. FOR AGGRESSIVE GROWTH FUND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER AGGRESSIVE GROWTH FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER AGGRESSIVE GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER AGGRESSIVE GROWTH FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 22 SERVICE PLAN AND AGREE. FOR MULTIPLE STRATEGIES SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER MULTIPLE STRATEGIES FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER MULTIPLE STRATEGIES FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER MULTIPLE STRATEGIES FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 23 SERVICE PLAN AND AGREEMENT FOR GLOBAL SECURITIES SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER GLOBAL SECURITIES FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER GLOBAL SECURITIES FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER GLOBAL SECURITIES FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 24 SERVICE PLAN AND AGREEMENT FOR STRATEGIC BOND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER STRATEGIC BOND FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER STRATEGIC BOND FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER STRATEGIC BOND FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 25 SERVICE PLAN AND AGREE. FOR GROWTH & INCOME SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER GROWTH & INCOME FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER GROWTH & INCOME FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER GROWTH & INCOME FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ EX-1 26 SERVICE PLAN AND AGREEMENT FOR SMALL CAP GROWTH SERVICE PLAN AND AGREEMENT WITH OPPENHEIMERFUNDS DISTRIBUTOR, INC. AND OPPENHEIMER VARIABLE ACCOUNT FUNDS FOR CLASS 2 SHARES OF OPPENHEIMER SMALL CAP GROWTH FUND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 24th day of February, 1998, by and between OPPENHEIMER VARIABLE ACCOUNT FUNDS for the account of its OPPENHEIMER SMALL CAP GROWTH FUND (the "Fund") and OPPENHEIMERFUNDS DISTRIBUTOR, INC. (the "Distributor"). 1. The Plan. This Plan is the Fund's written service plan for its Class 2 Shares described in the Fund's registration statement as of the date this Plan takes effect, contemplated by and to comply with Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc., pursuant to which the Fund will reimburse the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts ("Accounts") that hold Class 2 Shares (the "Shares") 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 insurance company or affiliate thereof or other institution which: (i) has rendered services in connection with the personal service and maintenance of Accounts; (ii) shall furnish the Distributor (on behalf of the Fund) with such information as the Distributor shall reasonably request to answer such questions as may arise concerning such service; and (iii) has been selected by the Distributor to receive payments under the Plan. Notwithstanding the foregoing, a majority of the Trust's Board of Trustees (the "Board") who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements relating to this Plan (the "Independent Trustees") may remove any broker, dealer, bank or other institution as a Recipient, whereupon such entity's rights as a third-party beneficiary hereof shall terminate. (b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned beneficially or of record by: (i) such Recipient, (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"), or (iii) separate accounts created by such Recipient, but in no event shall any such Shares be deemed owned by more than one Recipient for purposes of this Plan. In the event that two entities would otherwise qualify as Recipients as to the same Shares, the Recipient which is the dealer of record on the 1 Fund's books shall be deemed the Recipient as to such Shares for purposes of this Plan. 3. Payments. (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 charges or other financial costs, or allocation of overhead by the Distributor, or for any other purpose other than for the payments described in this Section 3. The amount payable to the Distributor each quarter will be reduced to the extent that reimbursement payments otherwise permissible under the Plan have not been authorized by the Board for that quarter. Any unreimbursed expenses incurred for any quarter by the Distributor may not be recovered in later periods. (b) The Distributor shall make payments to any Recipient quarterly, within forty-five (45) days of the end of each calendar quarter, at a rate not to exceed .0625% (.25% on an annual basis) of the average during the calendar quarter of the aggregate net asset value of the Shares computed as of the close of each business day, of Qualified Holdings owned beneficially or of record by the Recipient or by its Customers. However, no such payments shall be made to any Recipient for any such quarter in which its Qualified Holdings do not equal or exceed, at the end of such quarter, the minimum amount ("Minimum Qualified Holdings"), if any, to be set from 2 time to time by a majority of the Independent Trustees. A majority of the Independent Trustees may at any time or from time to time increase or decrease and thereafter adjust the rate of fees to be paid to the Distributor or to any Recipient, but not to exceed the rate set forth above, and/or increase or decrease the number of shares constituting Minimum Qualified Holdings. The Distributor shall notify all Recipients of the Minimum Qualified Holdings and the rate of payments hereunder applicable to Recipients, and shall provide each Recipient with written notice within thirty (30) days after any change in these provisions. Inclusion of such provisions or a change in such provisions in a revised current prospectus shall constitute sufficient notice. (c) Under the Plan, payments may be made to Recipients: (i) by OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits derived from the advisory fee it receives from the Fund or from Oppenheimer Variable Account Funds), or (ii) by the Distributor (a subsidiary of OFI), from its own resources. 4. Selection and Nomination of Trustees. While this Plan is in effect, the selection or replacement of Independent Trustees and the nomination of those persons to be Trustees of the Trust who are not "interested persons" of the Fund or the Trust shall be committed to the discretion of the Independent Trustees. Nothing herein shall prevent the Independent Trustees from soliciting the views or the involvement of others in such selection or nomination if the final decision on any such selection and nomination is approved by a majority of the incumbent Independent Trustees. 5. Reports. While this Plan is in effect, the Treasurer of the Trust shall provide at least quarterly a written report to the Trust'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 Trustees or by a vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of the Class, on not more than sixty days written notice to any other party to the agreement; (ii) such agreement shall automatically terminate in the event of its "assignment" (as defined in the 1940 Act); (iii) it shall go into effect when approved by a vote of the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such agreement; and (iv) it shall, unless terminated as herein provided, continue in effect from year to year only so long as such continuance is specifically approved at least annually by the Board and its Independent Trustees cast in person at a meeting called for the purpose of voting on such continuance. 7. Effectiveness, Continuation, Termination and Amendment. This Plan has been approved by a vote of the Independent Trustees cast in person at a meeting called on February 24, 1998 for the purpose of voting on this Plan, and shall take effect on the date that the Fund's Registration Statement is declared effective by the Securities and Exchange Commission. Unless terminated as hereinafter provided, it shall continue in effect until October 31, 1999 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 Trustees by a vote 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 3 Trustees or by the vote of the holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting securities of Class 2. This Plan may not be amended to increase materially the amount of payments to be made without approval of the Class 2 Shareholders, in the manner described above, and all material amendments must be approved by a vote of the Board and of the Independent Trustees. 8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands that the obligations of the Trust under this Plan are not binding upon any Trustee or shareholder of the Fund personally, but bind only the Fund and the Fund's property. The Distributor represents that it has notice of the provisions of the Declaration of Trust of the Fund disclaiming shareholder and Trustee liability for acts or obligations of the Trust and the Fund. OPPENHEIMER VARIABLE ACCOUNT FUNDS on behalf of OPPENHEIMER SMALL CAP GROWTH FUND By: _____________________________ OPPENHEIMERFUNDS DISTRIBUTOR, INC. By: _____________________________ -----END PRIVACY-ENHANCED MESSAGE-----