Registration No. 2-62076
File No. 811-2849
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. 36 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 29 / X /
OPPENHEIMER HIGH YIELD FUND
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(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
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(Address of Principal Executive Offices)
1-303-671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc. - Suite 3400
Two World Trade Center, New York, New York 10048-0203
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(Names and Addresses of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On October 1, 1996, 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)(ii)
/ / On __________________, pursuant to paragraph (a)(ii) of Rule
485
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended June 30, 1996, was filed on August 23, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER HIGH YIELD FUND
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
- ----------- ------------------
1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 How the Fund is Managed - Organization and History; The
Transfer Agent; Dividends, Capital Gains and Taxes;
Investment Objectives and Policies - Portfolio Turnover
7 Shareholder Account Rules and Policies; How to Buy Shares;
How to Exchange Shares; Special Investor Services; Service
Plan for Class A Shares; Distribution and Service Plan for
Class B and Class C Shares; How to Sell Shares
8 How to Sell Shares; Special Investor Services
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- ---------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Trustees and Officers of the Fund
15 How the Fund is Managed - Major Shareholders;
16 How the Fund is Managed; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to Sell
Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
- ----------------------
* Not applicable or negative answer.
<PAGE>
Oppenheimer High Yield Fund
Prospectus dated October 1, 1996
Oppenheimer High Yield Fund is a mutual fund with the investment
objective of seeking a high level of current income primarily through
investing in a diversified portfolio of high-yield, lower-rated, fixed-
income securities. As a secondary objective, the Fund seeks capital
growth when consistent with its primary objective. The Fund invests
principally in lower-rated, high-yield debt securities of U.S. companies,
commonly known as "junk bonds."
The Fund may invest up to 100% of its assets in "junk bonds", which
are securities that are speculative and involve greater risks, including
risk of default, than higher-rated securities. An investment in the Fund
is not a complete investment program and is not appropriate for investors
unable or unwilling to assume the high degree of risk associated with
investing in lower-rated, high yield securities. Investors should
carefully consider these risks before investing. Please refer to "Special
Risks of Lower-Rated Securities" on page __.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the October 1, 1996, Statement of Additional Information. For a
free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Because of the Fund's investment policies and practices, the Fund's shares
may be considered to be speculative.
(Logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal amount invested.
These securities have not been approved or disapproved by the Securities
and Exchange Commission or any state securities commission nor has the
Securities and Exchange Commission or any state securities commission
passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Description of Securities Ratings
Appendix B: Special Sales Charge Arrangements for
Shareholders of the Fund Who Were Shareholders of
Former Quest For Value Funds
Appendix C: Special Sales Charge Arrangements for
Shareholders of the Fund Who Were Shareholders of
the Former Connecticut Mutual Investment Accounts, Inc.
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses during its
last fiscal year ended June 30, 1996.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages __ through __ for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 5% in the 1% if shares are
first year, redeemed within 12
declining to months of purchase(2)
1% in the
sixth year
and eliminated
thereafter(2)
Exchange Fee None None None
Redemption Fee None(3) None(3) None(3)
</TABLE>
_____________________
(1) If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares,"
below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares" below for more information on the
contingent deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or by ACH wire through
AccountLink, or for which checkwriting privileges are used (see "How to
Sell Shares").
- Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the
Fund pays management fees to its investment adviser, OppenheimerFunds,
Inc. (which is referred to in this Prospectus as the "Manager"). The
rates of the Manager's fees are set forth in "How the Fund is Managed,"
below. The Fund has other regular expenses for services, such as transfer
agent fees, custodial fees paid to the bank that holds the Fund's
portfolio securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of Additional
Information.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.64% 0.64% 0.64%
12b-1 Distribution Plan Fees 0.20% 1.00% 1.00%
Other Expenses 0.19% 0.20% 0.26%
Total Fund Operating Expenses 1.03% 1.84% 1.90%
</TABLE>
The numbers in the chart above are based upon the Fund's expenses in
its last fiscal year ended June 30, 1996. These amounts are shown as a
percentage of the average net assets of each class of the Fund's shares
for that year. The 12b-1 Distribution Plan Fees for Class A shares are
Service Plan Fees (the maximum fee is 0.25% of average annual net assets
of that class), and for Class B and Class C shares are Distribution and
Service Plan Fees (the maximum fee is 0.25% of average annual net assets
of that class) and an asset-based sales charge of 0.75%. These plans are
described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less, depending on a number of factors, including changes in the
actual amount of assets represented by each class of shares. Class C
shares were not publicly offered before November 1, 1995. Therefore, the
Annual Fund Operating Expenses for Class C shares are estimates based on
expenses that would have been payable if Class C shares had been
outstanding during the entire fiscal year.
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years(*)
<S> <C> <C> <C> <C>
Class A Shares $58 $79 $102 $167
Class B Shares $69 $88 $120 $175
Class C Shares $29 $60 $103 $222
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years(*)
Class A Shares $58 $79 $102 $167
Class B Shares $19 $58 $100 $175
Class C Shares $19 $60 $103 $222
</TABLE>
_________________________
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge imposed
on Class B and Class C shares, long-term holders of Class B and Class C
shares could pay the economic equivalent of more than the maximum front-
end sales charge allowed under applicable regulations. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares
is designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares -- Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns
of the Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Are the Fund's Investment Objectives? The Fund's primary
investment objective is to seek a high level of current income primarily
by investing in a diversified portfolio of high-yield, lower-rated, fixed-
income securities. The Fund has a secondary objective to seek capital
growth when consistent with its primary objective.
- What Does the Fund Invest In? To seek high current income, the
Fund anticipates that under normal market conditions (when the Manager
believes that the financial markets are not in a volatile or unstable
period) at least 80% of its total assets will be invested in high-yield,
lower-rated fixed-income securities, such as long-term debt (commonly
referred to as "junk bonds") preferred stock issues, and foreign
securities. The Fund's remaining assets may be invested in cash or cash
equivalents, or in common stocks and other equity securities when
consistent with the Fund's investment objectives or if acquired as part
of a unit consisting of a combination of fixed-income securities and
equity investments. The Fund may also use hedging instruments and some
derivative investments to try to manage investment risks or increase
income. These investments are more fully explained in "Investment
Objectives and Policies," starting on page ___.
- Who Manages the Fund? The Fund's investment adviser (the "Manager")
is OppenheimerFunds, Inc. Prior to January 6, 1996, the Manager was known
as Oppenheimer Management Corporation. The Manager (including a
subsidiary) advises investment company portfolios having over $50 billion
in assets at June 30, 1996. The Manager is paid an advisory fee by the
Fund, based on its assets. The Fund's portfolio manager, Ralph
Stellmacher, is employed by the Manager and is primarily responsible for
the selection of the Fund's securities. The Fund's Board of Trustees,
elected by shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page ___
for more information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund may invest all or any portion of its assets in high-yield, lower-
rated fixed-income securities. The primary advantage of high-yield
securities is their relatively higher potential investment return.
However, such securities are considered speculative and may be subject to
greater market fluctuations and risks of loss of income and principal and
have less liquidity than investments in higher-rated securities. Fixed-
income securities are also subject to interest rate risks and credit risks
which can negatively impact the value of the security and the Fund's net
asset value per share. There are certain risks associated with
investments in foreign securities, including those related to changes in
foreign currency rates, that are not present in domestic securities.
These changes affect the value of the Fund's investments and its price per
share. In the Oppenheimer funds spectrum, the Fund is generally not as
risky as aggressive growth funds, but is more aggressive than money market
or investment grade bond funds. While the Manager tries to reduce risks
by diversifying investments, by carefully researching securities before
they are purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's
objectives and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Objectives and
Policies" starting on page ___ for a more complete discussion of the
Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund offers an
investor three classes of shares. All classes have the same investment
portfolio, but different expenses. Class A shares are offered with a
front-end sales charge, starting at 4.75%, and reduced for larger
purchases. Class B shares and Class C shares are offered without a front-
end sales charge, but may be subject to a contingent deferred sales charge
if redeemed within 6 years or 12 months of purchase, respectively. There
is also an annual asset-based sales charge on Class B shares and Class C
shares. Please review "How to Buy Shares" starting on page ___ for more
details, including a discussion about factors you and your financial
advisor should consider in determining which class may be appropriate for
you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer or by writing a check against your current account (available for
Class A shares only). Please refer to "How to Sell Shares" on page ___.
The Fund also offers exchange privileges to other Oppenheimer funds,
described in "How To Exchange Shares" on page _____.
- How Has the Fund Performed? The Fund measures its performance by
quoting its yield and total returns, which measure historical performance.
Those yields and returns can be compared to the yields and returns (over
similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad-based market index, which we
have done on page ___. Please remember that past performance does not
guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended June 30, 1996 is included in the Statement of Additional
Information. Class C shares were only offered during a portion of the
fiscal year ended June 30, 1996, commencing on November 1, 1995.
<TABLE>
<CAPTION>
Financial Highlights
Class A
------------------------------------------------------------------------------
Year Ended June 30,
1996 1995 1994 1993 1992
==========================================================
==========================================================
===============
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $13.22 $13.63 $14.16 $13.76 $13.08
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.29 1.30 1.42 1.60 1.79
Net realized and unrealized gain (loss) .27 (.40) (.54) .36 .68
---------- ---------- ---------- ---------- --------
Total income from investment
operations 1.56 .90 .88 1.96 2.47
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.27) (1.30) (1.41) (1.56) (1.79)
Tax return of capital distribution -- (.01) -- -- --
---------- ---------- ---------- ---------- --------
Total dividends and distributions
to shareholders (1.27) (1.31) (1.41) (1.56) (1.79)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.51 $13.22 $13.63 $14.16 $13.76
========== ========== ==========
========== ========
==========================================================
==========================================================
===============
Total Return, at Net Asset Value(3) 12.25% 7.09% 6.27% 15.31% 20.06%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $1,083,913 $1,060,752 $1,049,446 $1,119,056 $902,562
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,092,002 $1,005,746 $1,111,103 $ 978,671 $768,339
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.59% 9.81% 10.10% 11.59% 13.15%
Expenses 1.03% 1.03% 0.96% 0.97% 0.92%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 104.9% 93.7% 96.7% 87.2% 64.0%
<CAPTION>
Class B Class C
---------------------------------------------------------- ----------
Period
Ended
Year Ended June 30, June 30,
1996 1995 1994 1993(2) 1996(1)
<S> <C> <C> <C> <C> <C>
==========================================================
==========================================================
===============
Per Share Operating Data:
Net asset value, beginning of period $13.15 $13.57 $14.12 $13.87 $13.30
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.18 1.20 1.35 .23 .77
Net realized and unrealized gain (loss) .27 (.42) (.60) .27 .19
---------- ---------- ---------- ---------- --------
Total income from investment
operations 1.45 .78 .75 .50 .96
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.17) (1.19) (1.30) (.25) (.76)
Tax return of capital distribution -- (.01) -- -- --
---------- ---------- ---------- ---------- --------
Total dividends and distributions
to shareholders (1.17) (1.20) (1.30) (.25) (.76)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.43 $13.15 $13.57 $14.12 $13.50
========== ========== ==========
========== ========
==========================================================
==========================================================
===============
Total Return, at Net Asset Value(3) 11.40% 6.21% 5.31% 3.54% 7.36%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $279,789 $192,465 $87,509 $10,493 $7,648
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $236,362 $134,550 $51,816 $ 4,405 $3,378
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.75% 8.95% 8.98% 10.84%(4) 8.41%(4)
Expenses 1.84% 1.84% 1.88% 2.28%(4) 1.90%(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 104.9% 93.7% 96.7% 87.2% 104.9%
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
2. For the period from May 3, 1993 (inception of offering) to June 30, 1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1996 were $1,387,208,016 and $1,318,582,145, respectively.
<PAGE>
Investment Objectives and Policies
Objectives. The Fund's primary objective is to seek a high level of
current income primarily by investing mainly in a diversified portfolio
of high-yield, lower-rated fixed-income securities. The Fund generally
invests in long-term debt and preferred stock issues, including
convertible securities. Accordingly, the Fund's investments should be
considered speculative. As a secondary objective, the Fund seeks capital
growth when consistent with its primary objective.
Investment Policies and Strategies. The high yield and high income
sought by the Fund is ordinarily associated with securities in the lower
rating categories of the nationally recognized statistical rating
organizations ("NRSROs"). Consistent with its primary investment
objective, the Fund anticipates that under normal conditions at least 80%
of the value of its total assets will be invested in high yield, lower-
rated income generating securities. The Fund's remaining assets may be
held in cash or cash equivalents, in rights or warrants, or invested in
common stock and other equity securities when such investments are
consistent with its investment objectives or are acquired as part of a
unit consisting of a combination of fixed-income securities and equity
investments. Since market risks are inherent in all securities to varying
degrees, there can be no assurance that the Fund's investment objectives
will be met.
- Special Risks of Lower-Rated Securities. In seeking high current
income, the Fund may invest in higher-yielding, lower-rated debt
securities, commonly known as "junk bonds." There is no restriction on the
amount of the Fund's assets that could be invested in these types of
securities. "Lower-grade" debt securities are those rated below
"investment grade," which means that they have a rating lower than "Baa"
by Moody's Investors Service, Inc. ("Moody's") or lower than "BBB" by
Standard & Poor's Corporation ("S&P") or similar ratings by other NRSROs.
The Fund may invest in securities rated as low as "C" or "D" or which may
be in default at the time the Fund buys them. While securities rated
"Baa" by Moody's or "BBB" by S&P are investment grade and are not regarded
as "junk bonds," those securities may be subject to greater market
fluctuations and risks of loss of income and principal than higher-grade
securities and may be considered to have certain speculative
characteristics.
The Manager does not rely solely on ratings of securities by NRSROs
when selecting investments for the Fund, but evaluates other economic and
business factors as well. The Fund may invest in unrated securities that
the Manager believes offer yields and risks comparable to rated
securities. High-yield, lower-grade securities, whether rated or unrated,
often have speculative characteristics. Lower-grade securities have
special risks that make them riskier investments than investment grade
securities. They may be subject to greater market fluctuations and risk
of loss of income and principal than lower yielding, investment grade
securities. There may be less of a market for them and therefore they may
be harder to sell at an acceptable price. There is a relatively greater
possibility that the issuer's earnings may be insufficient to make the
payments of interest due on the bonds. The issuer's low creditworthiness
may increase the potential for its insolvency ("credit risk"). All
corporate debt securities (whether foreign or domestic) are subject to
some degree of credit risk. Additionally, during an economic downturn,
high-yield bonds might decline in value more than lower yielding,
investment grade bonds. Also, an increase in interest rates could have
a significant negative impact on the value of high-yield bonds.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may
be affected by declines in value of these securities. The Fund is 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.
- Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." Generally, the Fund will not trade for
short-term profits, but when circumstances warrant, it may take advantage
of differences in securities prices and yields or of fluctuations in
interest rates. The Fund may sell securities without regard to the length
of time held. As most purchases made by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs.
Short-term trading may affect the Fund's tax status.
- How the Fund's Portfolio Securities Are Rated. As of June 30, 1996,
the Fund's portfolio included corporate bonds in the following S&P rating
categories or if unrated, determined by the Manager to be comparable to
the category indicated (the amounts shown are dollar-weighted average
values of the bonds in each category measured as a percentage of the
Fund's total assets): AAA, 0.10%; BBB, 2.34%; BB, 21.37%; B, 46.53%; CCC,
5.09%; CC, 0.04%; C, 0.71%; and D, 0.01%. Appendix A to this Prospectus
describes the rating categories. The allocation of the Fund's assets in
securities in the different rating categories will vary over time.
- Interest Rate Risks. In addition to credit risks, described below,
debt securities are subject to changes in value due to changes in
prevailing interest rates. When prevailing interest rates fall, the
values of outstanding debt securities generally rise. Conversely, when
interest rates rise, the values of outstanding debt securities generally
decline. The magnitude of these fluctuations will be greater when the
average maturity of the portfolio securities is longer.
- Credit Risks. Debt securities are also subject to credit risks.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds (which the Fund may hold)
are subject to greater credit risk than higher-rated bonds. Securities
issued or guaranteed by the U.S. Government are subject to little, if any,
credit risk because they are backed by the "full faith and credit of the
U.S. Government," which in general terms means that the U.S. Treasury
stands behind the obligation to pay interest and principal. While the
Manager may rely to some extent on credit ratings by NRSROs, such as
Standard & Poor's or Moody's, in evaluating the credit risk of securities
selected for the Fund's portfolio, it may also use its own research and
analysis. However, many factors affect an issuer's ability to make timely
payments, and there can be no assurance that the credit risks of a
particular security will not change over time.
- Can the Fund's Investment Objectives and Policies Change? The Fund
has investment objectives, described above, as well as investment policies
it follows to try to achieve its objectives. Additionally, the Fund uses
certain investment techniques and strategies in carrying out those
investment policies. The Fund's investment policies and techniques are not
"fundamental" unless this Prospectus or the Statement of Additional
Information says that a particular policy is "fundamental." The Fund's
investment objectives are fundamental policies.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. 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.
- Foreign Securities. The Fund may purchase debt and equity securities
issued or guaranteed by foreign companies or foreign governments,
including foreign government agencies. The Fund may invest up to 100% of
its assets in foreign securities. However, the Fund presently does not
intend that such investments will exceed 25% of its net assets.
Investments in securities of issuers in underdeveloped countries and
emerging markets generally involve more risk and may be considered highly
speculative. Foreign currency will be held by the Fund only in connection
with the purchase or sale of foreign securities.
- Foreign securities have special risks. For example, foreign
issuers are not subject to the same accounting and disclosure requirements
as U.S. companies. The value of foreign investments may be affected by
changes in foreign currency rates, exchange control regulations,
expropriation or nationalization of a company's assets, foreign taxes,
delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other political and economic
factors. Consequently, foreign investments may be less liquid and more
volatile than investments in U.S. securities. More information about the
risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
- Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and
options on futures, securities indices and securities, or enter into
interest rate swap agreements. These are all referred to as "hedging
instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them, described below. The hedging
instruments the Fund may use are described below and in greater detail in
"Other Investment Techniques and Strategies" in the Statement of
Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend
to increase the Fund's exposure to the securities market. Forward
currency contracts are used to try to manage foreign currency risks on the
Fund's foreign investments. Foreign currency options are used to try to
protect against declines in the dollar value of foreign securities the
Fund owns, or to protect against an increase in the dollar cost of buying
foreign securities. Writing covered call options may also provide income
to the Fund for liquidity purposes or to raise cash to distribute to
shareholders.
- Futures. The Fund may buy and sell futures contracts that relate to
interest rates (these are referred to as Interest Rate Futures) and broad-
based securities indices (these are referred to as Financial Futures).
These types of Futures are described in "Hedging" in the Statement of
Additional Information.
- Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls).
The Fund may buy calls only on debt or equity securities, security
indices, foreign currencies, Interest Rate Futures and Financial Futures
or to terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options. When the Fund writes
a call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on an investment gives
the Fund the right to sell the investment at a set price to a seller of
a put on that investment. The Fund may purchase puts that relate to (1)
debt or equity securities, (2) Interest Rate Futures, (3) Financial
Futures, or (4) foreign currencies. The Fund may purchase puts on
investments it does not own. Writing puts requires segregation of liquid
assets to cover the exercise value of the put.
The Fund may buy and sell puts and calls only if certain conditions are
met: (1) options the Fund buys or sells must be listed on a domestic
securities or commodities exchange, or quoted on the Automated Quotation
System of the National Association of Securities Dealers, Inc. (NASDAQ)
or traded in the over-the-counter market; (2) in the case of puts and
calls on foreign currency, they must be traded on a securities or
commodities exchange, or in the over-the-counter market, or quoted by
recognized dealers in those options; (3) each call the Fund writes must
be "covered" while it is outstanding; that means the Fund must own the
investment on which the call was written or it must own other securities
that are acceptable for the escrow arrangements required for calls; (4)
any put written must be covered by segregated liquid assets with not more
than 50% of the Fund's assets subject to puts; (5) the Fund may write
calls on Futures contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to enable
it to satisfy its obligations if the call is exercised; and (6) a call or
put option may not be purchased if the value of all of the Fund's put and
call option positions would exceed 5% of the Fund's total net assets.
- Forward Currency Contracts. Forward currency contracts are
foreign currency exchange contracts. They are used to buy or sell foreign
currency for future delivery at a fixed price. The Fund uses them to try
to "lock in" the U.S. dollar price of a security denominated in a foreign
currency that the Fund has purchased or sold, or to protect against
possible losses from changes in the relative values of the U.S. dollar and
a foreign currency. The Fund may also use "cross hedging" where the Fund
hedges against changes in currencies other than the currency in which a
security it holds is denominated.
- Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest
on a security. For example, they may swap a right to receive floating
interest rate payments for fixed interest rate payments. The Fund enters
into swaps only on securities it owns. The Fund may not enter into swaps
with respect to more than 25% of its total assets. Also, the Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. The use of forward contracts may reduce the gain that would
otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes. These risks are described in greater detail in the Statement of
Additional Information.
- Derivative Investments. In general, a "derivative investment" is
a specially designed investment whose performance is linked to the
performance of another investment or security, such as an option, future,
index, currency or commodity. Derivative instruments may be used by the
Fund in some cases for hedging purposes and in other cases for "non-
hedging" purposes to seek income or total return. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (see "Hedging"), as well as the investments discussed in this
section.
The 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 make fixed
interest payments and/or to pay a fixed sum on the maturity of the note.
Principal and/or interest payments on an index-linked note depend on the
performance of one or more market indices, such as the S & P 500 Index or
a weighted index of commodity futures, such as crude oil, gasoline and
natural gas. The Fund may invest in "debt exchangeable for common stock"
of an issuer or "equity-linked" debt securities of an issuer. At
maturity, the principal amount of the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the
issuer's common stock price at the time of maturity. In either case there
is a risk that the amount payable at maturity will be less than the
expected principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value
at maturity, and/or an interest rate, determined by reference to one or
more foreign currencies. The currency-indexed securities purchased by the
Fund may make payments based on a formula. The payment of principal or
periodic interest may be calculated as a multiple of the movement of one
currency against another currency, or against an index. These investments
may entail increased risk to principal and increased price volatility.
- Derivatives may entail special risks. The company issuing the
instrument may fail to pay the amount due on the maturity of the
instrument. Also, the underlying investment or security might not perform
the way the Manager expected it to perform because the financial markets,
underlying securities, currencies and indices may move in a direction not
anticipated by the Manager. Performance of derivative investments may
also be influenced by interest rate and stock market changes in the U.S.
and abroad. All of this can mean that the Fund will realize less
principal or income from the investment than expected. Certain derivative
investments held by the Fund may be illiquid. Please refer to "Illiquid
and Restricted Securities."
- Asset-Backed Securities. The Fund may invest in securities that
represent undivided fractional interests in pools of consumer loans,
similar in structure to mortgaged-backed securities described below.
Payments of principal and interest on the underlying obligations 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 issuer's other assets. The degree of credit enhancement
varies, and generally applies to only a fraction of the asset-backed
security's par value until exhausted. If the credit enhancement of an
asset-backed security held by the Fund has been exhausted, and if any
required payments of principal and interest are not made with respect to
the underlying loans, the Fund may then experience losses or delays in
receiving payment. Further details are set forth in the Additional
Statement under "Investment Objectives and Policies -- Asset-Backed
Securities."
- Mortgage-Backed Securities and CMOs. The Fund's investments may
include securities which represent participation interests in pools of
residential mortgage loans, including collateralized mortgage-backed
obligations ("CMOs"), which may be issued or guaranteed by agencies or
instrumentalities of the U.S. Government (e.g., GNMA, FNMA and FHLMC
certificates). 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 that are collateralized by a portfolio of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities.
The Fund may also invest in CMOs that are "stripped," that is, the
security is divided into two parts, one of which receives some or all of
the principal payments and the other which receives some or all of the
interest payments. 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 have
the additional risk that if the underlying mortgages are prepaid, which
is more likely to happen if interest rates fall, the Fund will lose the
anticipated cash flow from the interest on the mortgages that were
prepaid. Stripped securities that receive principal payments only are
also subject to increased volatility in price due to interest rate changes
and have the additional risk that the security will be less liquid during
demand or supply imbalances.
Mortgage-backed securities may be less effective than conventional debt
obligations of similar maturity at maintaining yields during periods of
declining interest rates. The Fund may also enter into "forward roll"
transactions with banks or other buyers that provide for future delivery
of the mortgage-backed securities in which it may invest. The Fund is
required to identify cash, U.S. Government securities or other high-grade
debt securities to its custodian bank in an amount equal to its purchase
payment obligation under the roll. Further details are set forth in the
Statement of Additional Information under "Mortgage-Backed Securities."
- Loans of Portfolio Securities. To raise cash for liquidity purposes,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. The Fund must receive collateral for a loan.
After any loan, the value of the securities loaned must not exceed 10% of
the value of the Fund's net assets. There are some risks in connection
with securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to engage in loans
of securities that will exceed 5% of the value of the Fund's net assets
in the coming year.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. The Fund currently intends to invest no more
than 10% of its net assets in illiquid and restricted securities. The
Fund's percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional purchasers.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor of the securities under a repurchase agreement fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its
ability to do so. The Fund will not enter into a repurchase agreement
which causes more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. There is no limit on the
amount of the Fund's net assets that may be subject to repurchase
agreements of seven days or less.
- Participation Interests. The 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 banks or brokers that have
made the loan or are members of the lending syndicate. The Manager has
set certain creditworthiness standards for issuers of loan participations,
and monitors their creditworthiness. Some borrowers may have senior
securities rated as low as "C" by Moody's or "D" by S&P, but may be deemed
acceptable credit risks. Participation interests are considered
investments in illiquid securities (see "Illiquid and Restricted
Securities," above). Their value 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 reduction in its income and a decline in the net asset value
of its shares. Further details are set forth in the Additional Statement
under "Investment Objectives and Policies."
- Temporary Defensive Investments. When bond and stock market prices
are falling or in other volatile economic or unusual business
circumstances, the Fund may invest all or a portion of its assets in
defensive securities. Securities selected for defensive purposes may
include cash or cash equivalents, such as U.S. Treasury Bills and other
short-term obligations of the U.S. Government, its agencies or
instrumentalities, or commercial paper rated "A-1" or better by Standard
& Poor's Corporation or "P-1" or better by Moody's Investors Service, Inc.
or similar ratings by other NRSROs.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the
Fund cannot do any of the following:
- buy securities issued or guaranteed by any one issuer (except the
U.S. Government or its agencies or instrumentalities) if with respect to
75% of its total assets, more than 5% of the Fund's total assets would be
invested in the securities of that issuer, or the Fund would then own more
than 10% of that issuer's voting securities;
- borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes and not for the purpose of leveraging
its investments, and then only up to 10% of the market value of the Fund's
assets; no additional investments may be made whenever borrowings exceed
5% of the Fund's assets;
- buy a security if, as a result of such purchase, more than 25% of
its total assets would be invested in the securities of issuers
principally engaged in the same industry; for purposes of this limitation,
utilities will be divided according to their services; for example, gas,
gas transmission, electric and telephone utilities will each be considered
a separate industry;
- make loans, except by purchasing debt obligations in which the
Fund may invest consistent with its investment policies, or by entering
into repurchase agreements or as described in "Loans of Portfolio
Securities" in the Statement of Additional Information;
- invest more than 5% of the value of its assets in rights and
warrants nor more than 2% of such value in rights and warrants which are
not listed on the New York or American Stock Exchanges; rights and
warrants attached to other securities or acquired in units are not subject
to this limitation; or
- buy securities of an issuer which, together with any predecessor,
has been in operation for less than three years, if as a result, the
aggregate of such investments would exceed 5% of the value of the Fund's
net assets.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply only at the time the Fund purchases a security, and
the Fund need not dispose of a security merely because the size of the
Fund's assets has changed or the security has increased in value relative
to the size of the Fund. There are other fundamental policies discussed
in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was originally incorporated in
Maryland in 1978 but was reorganized in 1986 as a Massachusetts business
trust. The Fund is an open-end, diversified management investment company,
with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and officers of the Fund, and provides more
information about them. Although the Fund will not normally hold annual
meetings, it may hold shareholder meetings from time to time on important
matters, and shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Fund's Declaration of
Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different from the other classes. Therefore, each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees,
under an Investment Advisory Agreement with the Fund which states the
Manager's responsibilities. The Investment Advisory Agreement sets forth
the fees paid by the Fund to the Manager, and describes the expenses that
the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $50 billion
as of June 30, 1996, and with more than 3 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The Portfolio Manager of the Fund is Ralph W.
Stellmacher. He has been the person principally responsible for the day-
to-day management of the Fund's portfolio since January, 1988. Mr.
Stellmacher is a Senior Vice President of the Manager and Vice President
of the Fund, and also serves as an officer of other Oppenheimer funds.
During the past five years, Mr. Stellmacher has also served as an officer
and portfolio manager of other Oppenheimer funds.
- Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional
assets as the Fund grows: 0.75% 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 the next $200
million and 0.50% of average annual net assets over $1 billion. The
Fund's management fee for its last fiscal year was 0.64% of average annual
net assets for its Class A, Class B and Class C shares, which may be
higher than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the Investment Advisory
Agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts
as the Fund's Distributor. The Distributor also distributes the shares
of the other Oppenheimer funds and is sub-distributor for funds managed
by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund on an "at-cost" basis. It also acts as the
shareholder servicing agent for other Oppenheimer funds. Shareholders
should direct inquiries about their accounts to the Transfer Agent at the
address and toll-free number shown below in this Prospectus and on the
back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms
"total return", "average annual total return" and "yield" to illustrate
its performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will usually
be different, as a result of the different kinds of expenses each class
bears. These returns measure the performance of a hypothetical account
in the Fund over various periods and do not show the performance of each
shareholder's account (which will vary if dividends are received in cash,
or shares are purchased or sold). The Fund's performance information may
help you see how well your Fund has done over time and to compare it to
other funds or market indices as we have done on pages __ and __.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Fund's performance. The Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are
shown for Class B or Class C shares, normally the contingent deferred
sales charge that applies to the period for which total return is shown
has been deducted. Total returns may also be quoted "at net asset value,"
without the sales charge, and those returns would be reduced if sales
charges were deducted. However, total returns may also be shown based on
the change in net asset value, without considering the effect of the
contingent deferred sales charge, and those returns would be less if
sales charges were deducted.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its last fiscal year ended June 30, 1996,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index and a narrower market index.
- Management's Discussion of Performance. The calendar year 1996 has
been a volatile year for fixed income investors. Amid all the discussion
of higher interest rates and falling bond prices it is important to note
that there has been a significant disparity of performance between the
various sectors of the fixed income markets. On a year to date basis the
average high yield fund is up 6.93% which compares favorably with the
average return on U.S. government funds, which is down 2.75%.
The strong year-to-date performance of the high yield market is largely
due to the favorable economic climate which has resulted in relatively
healthy corporate cash flows and a low default rate. In addition, the
high yield market has benefited from strong investor flows and a series
of merger and acquisition transactions which has resulted in deleveraging
for many high yield issuers. The Fund generated strong relative
performance by being aggressively invested during January and February of
1996 when the high yield market rallied. In addition, the Fund has been
diversified into international fixed income markets which have generated
stellar year to date performance.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund held until June 30, 1996, in the case of Class A
shares, over a ten-year period, in the case of Class B shares, from the
inception of the Class on May 3, 1993, and in the case of Class C shares,
from the inception of the Class on November 1, 1995, with all dividends
and capital gains distributions reinvested in additional shares.
The Fund's performance is compared to the performance of the Merrill
Lynch High Yield Bond Master Index. The Merrill Lynch High Yield Bond
Master Index consists of fixed-rate, coupon-bearing bonds with an
outstanding par which is greater than or equal to $50 million, a maturity
range greater than or equal to one year and a credit rating which must be
less than BBB/Baa3 (by Standard & Poor's or Moody's, respectively) rated
but not in default. This Index is used as a measure of the performance
of the high-yield corporate bond market which is the market in which the
Fund principally invests. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data below shows the effect of taxes. Also, the
Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments
are not limited to the securities in any one index. Moreover, the index
data does not reflect any assessment of the risk of the individual
investments included in the index.
Class A Shares
Comparison of Change in Value
of $10,000 Hypothetical Investment in:
Oppenheimer High Yield Fund
and the Merrill Lynch High Yield Bond Master Index
(Graph)
Average Annual Total Returns of the Fund at 6/30/96
1-Year 5-Year 10-Year1
Class A: 6.92% 10.99% 9.36%
Class B Shares
Comparison of Change in Value
of $10,000 Hypothetical Investment in:
Oppenheimer High Yield Fund
and the Merrill Lynch High Yield Bond Master Index
(Graph)
Average Annual Total Return of the Fund at 6/30/96
1-Year Life2
Class B: 6.40% 7.88%
Class C Shares
Comparison of Change in Value
of $10,000 Hypothetical Investment in:
Oppenheimer High Yield Fund
and the Merrill Lynch High Yield Bond Master Index
(Graph)
Cumulative Total Return of the Fund at 6/30/96
Life3
Class C: 6.36%
_______________________________
1 The inception date of the Fund (Class A shares) was 7/28/78. The
average annual total returns and ending account value in the graph reflect
reinvestment of all dividends and capital gains distributions and are
shown net of the applicable 4.75% maximum initial sales charge.
2 Class B shares of the Fund were first publicly offered on 5/3/93.
The average annual total returns reflect reinvestment of all dividend and
capital gains distributions and are shown net of the applicable 5% and 3%
contingent deferred sales charges, respectively, for the 1-year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
3 Class C Shares of the Fund were first publicly offered on 11/1/95.
The cumulative total return and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 1% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are
not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes
of shares. The different classes of shares represent investments in the
same portfolio of securities but may be subject to different expenses and
will likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
OppenheimerFunds prototype 401(k) plans). If you purchase Class A shares
as part of an investment of at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. Sales charge rates are
described in "Buying Class A Shares" below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years of
buying them, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares as described in "Buying
Class B Shares" below.
- Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1% as described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors to consider are how much
you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to Class A, Class B and Class C and
considered the effect of the annual asset-based sales charge on Class B
and Class C expenses (which, like all expenses, will affect your
investment return). For the sake of comparison, we have assumed that
there is a 10% rate of appreciation in the investment each year. Of
course, the actual performance of your investment cannot be predicted and
will vary, based on the Fund's actual investment returns and the operating
expenses borne by each class of shares, and which class of shares you
invest in. The factors discussed below are not intended to be investment
advice or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to
consider in purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares of
different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest.
For example, the reduced sales charges available for larger purchases of
Class A shares may, over time, offset the effect of paying an initial
sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C
shares for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases
toward six years, Class C shares might not be as advantageous as Class A
shares. That is because the annual asset-based sales charge on Class C
shares will have a greater impact on your account over the longer term
than the reduced front-end sales charge available for larger purchases of
Class A shares. For example, Class A might be more advantageous than
Class C (as well as Class B) for investments of more than $100,000
expected to be held for 5 or 6 years (or more). For investments over
$250,000 expected to be held 4 to 6 years (or more), Class A shares may
become more advantageous than Class C (and Class B). If investing
$500,000 or more, Class A may be more advantageous as your investment
horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares or
$1 million or more of Class C shares from a single investor.
- Investing for the Longer Term. If you are investing for the longer-
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A
shares and the reduced initial sales charges available for larger
investments in Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time,
using the assumed annual performance return stated above, and therefore
you should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. For example, share certificates are not available for Class B or
Class C shares and if you are considering using your shares as collateral
for a loan, that may be a factor to consider. Also, checkwriting
privileges are not available for Class B or Class C shares. Additionally,
the dividends payable to Class B and Class C shareholders will be reduced
by the additional expenses borne solely by those classes, such as the
asset-based sales charges described below and in the Statement of
Additional Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class of shares than for selling another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charges and asset-based sales charges is the
same as the purpose of the front-end sales charge on sales of Class A
shares: to compensate the Distributor for commissions it pays to dealers
and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans.
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as
little as $250 (if your IRA is established under an Asset Builder Plan,
the $25 minimum applies), and subsequent investments may be as little as
$25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends or distributions from the Fund or other
Oppenheimer funds (a list of them appears in the Statement of Additional
Information, or you can ask your dealer or call the Transfer Agent), or
by reinvesting distributions from unit investment trusts that have made
arrangements with the Distributor.
- How Are Shares Purchased? You can buy shares several ways: through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. The Distributor may appoint
certain servicing agents as Distributor's agent to accept purchase (and
redemption) orders. When you buy shares, be sure to specify Class A,
Class B or Class C shares. If you do not choose, your investment will be
made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the application, the
Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member to transmit funds electronically to purchase shares, to have the
Transfer Agent send redemption proceeds or to transmit dividends and
distributions to your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up to
four other Oppenheimer funds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (plus any initial sales charge
that applies). That price is determined after the Distributor receives
the purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor or its designated agent
must receive your order by the time of day The New York Stock Exchange
closes which is normally 4:00 P.M., New York time, but may be earlier on
some days (all references to time in this Prospectus mean "New York
time"). The net asset value of each class of shares is determined as of
that time on each day The New York Stock Exchange is open (which is
referred to in this Prospectus as a "regular business day"). If you buy
shares through a dealer, the dealer must receive your order by the close
of The New York Stock Exchange, on a regular business day and transmit it
to the Distributor so that it is received before the Distributor's close
of business that day, which is normally 5:00 P.M. The Distributor may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix B to this
Prospectus sets forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases
of shares of the Fund (including purchases by exchange) by a person who
was a shareholder of one of the Former Quest for Value Funds (as defined
in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Commission
Front-End Front-End as
Sales Charge as Sales Charge as Percentage
Percentage of Percentage of of Offering
Amount of Purchase Offering Price Amount Invested Price
- ------------------ -------------- --------------- -----------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more
but less than $100,000 4.50% 4.71% 3.75%
$100,000 or more
but less than $250,000 3.50% 3.63% 2.75%
$250,000 or more
but less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but less
than $1 million 2.00% 2.04% 1.60%
$1 million or more None None None
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
- Purchases aggregating $1 million or more, or
- Purchases by an OppenheimerFunds prototype 401(k) plan that: (1)
buys shares costing $500,000 or more, or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more.
The Distributor pays dealers of record commissions on those purchases
in an amount equal to the sum of 1.0% of (1) the first $2.5 million, plus
0.50% of the next $2.5 million, plus 0.25% of purchases over $5 million.
That commission will be paid only on the amount of those purchases in
excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k)
prototype plans) that were not previously subject to a front-end sales
charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
either (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all Oppenheimer funds you purchased subject to
the Class A contingent deferred sales charge. In determining whether a
contingent deferred sales charge is payable, the Fund will first redeem
shares that are not subject to the sales charge, including shares
purchased by reinvestment of dividends and capital gains, and then will
redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
contingent deferred sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of Oppenheimer funds
(other than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also count Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the Oppenheimer
funds. The value of those shares will be based on the greater of the
amount you paid for the shares or their current value (at offering price).
The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A shares and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the sales
charge rate that applies to your purchases of Class A shares. The total
amount of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of
this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for
their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
- dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor (1) providing specifically
for the use of shares of the Fund in particular investment products or
employee benefit plans made available to their clients (those clients may
be charged a transaction fee by their dealer, broker or adviser on the
purchase or sale of Fund shares) or (2) that have entered into an
agreement with the Distributor to sell shares to defined contribution
employee retirement plans for which the dealer, broker or investment
adviser provides administration services;
- employee benefit plans purchasing shares through a shareholder
servicing agent which the Distributor has appointed as agent to accept
those purchase orders;
- directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons;
- accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are
directors or trustees of the company or trust which is the beneficial
owner of such accounts;
- any unit investment trust that has entered into an appropriate
agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund
were exchanged for Class A shares of that Fund due to the termination of
the Class B and C TRAC-2000 program on November 24, 1995; or
- qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through DCXchange,
a sub-transfer agency mutual fund clearinghouse, provided that such
arrangements are consummated and share purchases commence by December 31,
1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor; or
- shares purchased and paid for with the proceeds of shares redeemed
in the past 12 months from a mutual fund (other than a fund managed by the
Manager or any of its subsidiaries) on which an initial sales charge or
contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information; or
- purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series;
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans"); or
- to return excess contributions made to Retirement Plans; or
- to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value; or
- involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and
Policies," below); or
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month
(and no further commission will be payable if the shares are redeemed
within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or purposes: (1) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must occur after the participant's
account was established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
shareholder accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. The Distributor uses all
of those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares and to reimburse
itself (if the Fund's Board of Trustees authorizes such reimbursements,
which it has not yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the service providers or their customers. The payments under
the Plan increase the annual expenses of Class A shares. For more
details, please refer to "Distribution and Service Plans" in the Statement
of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charges"
below. Class B shares held for a period greater than 6 years
automatically convert to Class A shares.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Purchase On Redemptions in That Year
Payment Was Made (As % of Amount Subject to Charge)
- --------------------------------------------------------------
<S> <C>
0-1 5.0%
- --------------------------------------------------------------
1-2 4.0%
- --------------------------------------------------------------
2-3 3.0%
- --------------------------------------------------------------
3-4 3.0%
- --------------------------------------------------------------
4-5 2.0%
- --------------------------------------------------------------
5-6 1.0%
- --------------------------------------------------------------
6 and following None
- --------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
</TABLE>
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
This Plan is described below under "Buying Class C Shares - Distribution
and Service Plans for Class B and Class C shares."
- Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchases in certain types of
transactions, nor will it apply to shares redeemed in certain
circumstances, as described below under "Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. The Class C
contingent deferred sales charge is paid to the Distributor for its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Distribution and Service Plans for Class B and Class C Shares.
The Fund has adopted Distribution and Service Plans for Class B and Class
C shares to compensate the Distributor for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the
Plans, the Fund pays the Distributor an annual "asset-based sales charge"
of 0.75% per year on Class B shares that are outstanding for 6 years or
less and on Class C shares. The Distributor also receives a service fee
of 0.25% per year. If either Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments of the asset-based
sales charge and service fee to the Distributor for distributing shares
before the Plan was terminated.
Under each Plan, both fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close
of each regular business day during the period. The asset-based sales
charge allows investors to buy Class B or Class C shares without a front-
end sales charge while allowing the Distributor to compensate dealers that
sell those shares.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C
shares. Those services are similar to those provided under the Class A
Service Plan, described above. The Distributor pays the 0.25% service
fees to dealers in advance for the first year after Class B or Class C
shares have been sold by the dealer and retains the service fee paid by
the Fund in that year. After the shares have been held for a year, the
Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the
time of sale. Including the advance of the service fee, the total amount
paid by the Distributor to the dealer at the time of sale of Class B
shares is 4.00% of the purchase price. The Fund pays the asset-based
sales charge to the Distributor to reimburse it for its services rendered
in distributing Class B shares. The Distributor retains the asset-based
sales charge to recoup the sales commissions it pays, the advances of
service fee payments it makes, and its financing costs and certain other
costs of distributing and selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the
time of sale. Including the advance of the service fee, the total amount
paid by the Distributor to the dealer at the time of sale of Class C
shares is 1.00% of the purchase price. Those payments, retained by the
Distributor during the first year Class C shares are outstanding, are at
a fixed rate that is not related to the Distributor's expenses. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
The Distributor's actual expenses in selling Class B and Class C
shares may be more than the payments it receives from contingent deferred
sales charges collected on redeemed shares and from the Fund under the
Distribution and Service Plans for Class B and Class C shares. Therefore,
those expenses may be carried over and paid in future years. At June 30,
1996, the end of the Class B Plan year, the Distributor had incurred
unreimbursed expenses under the Plan of $10,766,237 (equal to 3.85% of the
Fund's net assets represented by Class B shares on that date), which have
been carried over into the present Plan year. At June 30, 1996, the end
of the Class C Plan year, the Distributor had incurred unreimbursed
expenses under the Plan of $135,220 (equal to 1.77% of the Fund's net
assets represented by Class C shares on that date), which have been
carried over into the present Plan year.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases if the Transfer Agent is notified that these
conditions apply at redemption:
- distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic Withdrawal
Plan after the participant reaches age 59-1/2, as long as the payments are
no more than 10% of the account value annually (measured from the date the
Transfer Agent receives the request), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans following
the death or disability of the last surviving shareholder, including a
trustee of a "grantor" trust or revocable living trust for which the
trustee is also the sole beneficiary (the death or the disability must
have occurred after the account was established, and for disability you
must provide evidence of a determination of disability by the Social
Security Administration);
- returns of excess contributions to Retirement Plans;
- to make distributions from retirement plans that qualify as
"substantially equal periodic payments" under Section 72(t) of the
Internal Revenue Code, provided the distributions do not exceed 10% of the
account value annually, measured from the date the Transfer Agent receives
the request;
- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies"; and
- for distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order,
as defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; and
- shares issued in plans of reorganization to which the Fund is a
party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to
your account at your bank or other financial institution to enable you to
send money electronically between those accounts to perform a number of
types of account transactions. These include purchases of shares by
telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and
sending dividends and distributions or Automatic Withdrawal Plan payments
directly to your bank account. Please refer to the Application for details
or call the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each Oppenheimer funds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer
funds without paying a sales charge. This privilege applies to Class A
shares that you purchased subject to an initial sales charge and to Class
A or Class B shares on which you paid a contingent deferred sales charge
when you redeemed them. This privilege does not apply to Class C shares.
You must be sure to ask the Distributor for this privilege when you send
your payment. Please consult the Statement of Additional Information for
more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
- 401(k) Prototype Retirement Plans for businesses.
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The redemption check is not payable to all shareholders listed on
the account statement
- The redemption check is not sent to the address of record on your
account statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling,
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address Send courier or
for requests by mail: Express Mail requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue
Denver, Colorado 80217 Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan or under a share
certificate by telephone.
- To redeem shares through a service representative, call
1-800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink or by Wire. There are
no dollar limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH transfer to
your bank is initiated on the business day after the redemption. You do
not receive dividends on the proceeds of the shares you redeemed while
they are waiting to be transferred.
Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account. The bank must be a member of the Federal Reserve
wire system. There is a $10 fee for each Federal Funds wire. To place a
wire redemption request, call the Transfer Agent at 1-800-852-8457. The
wire will normally be transmitted on the next bank business day after the
shares are redeemed. There is a possibility that the wire may be delayed
up to seven days to enable the Fund to sell securities to pay the
redemption proceeds. No dividends are accrued or paid on the proceeds of
shares that have been redeemed and are awaiting transmittal by wire. To
establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B shares, Class C shares or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write a
check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you
can exchange Class A shares of this Fund only for Class A shares of
another fund. At present, Oppenheimer Money Market Fund, Inc. offers only
one class of shares, which are considered to be Class A shares for this
purpose. In some cases, sales charges may be imposed on exchange
transactions. Please refer to "How to Exchange Shares" in the Statement
of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. That list can change
from time to time.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
- For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. For more information about
taxes affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange that day, which is normally
4:00 P.M. but may be earlier on some days, on each day the Exchange is
open by dividing the value of the Fund's net assets attributable to a
class by the number of shares of that class that are outstanding. The
Fund's Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more
completely in the Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will
be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may not be
able to complete a telephone transaction and should consider placing your
order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the values of the securities in the Fund's portfolio fluctuate, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed
"in kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or employer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income on each regular business day and
pays those dividends to shareholders monthly. Normally dividends are paid
on or about the last business day of the month, but the Board of Trustees
can change that date. Also, dividends paid on Class A shares generally are
expected to be higher than for Class B and Class C shares because expenses
allocable to Class B and Class C shares will generally be higher.
During the Fund's fiscal year ended June 30, 1996, the Fund
maintained the practice, to the extent consistent with the amount of the
Fund's net investment income and other distributable income, of attempting
to pay dividends on Class A shares at a constant level, although the
amount of such dividends were subject to change from time to time
depending on market conditions, the composition of the Fund's portfolio
and expenses borne by the Fund or borne separately by that Class. The
practice of attempting to pay dividends on Class A shares at a constant
level required the Manager, consistent with the Fund's investment
objectives and investment restrictions, to monitor the Fund's portfolio
and select higher yielding securities when deemed appropriate to maintain
necessary net investment income levels. The Fund's dividend was reduced
in June, 1996 and the Board of Trustees may change the Fund's targeted
dividend level at any time without prior notice to shareholders; the Fund
does not otherwise have a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following its
fiscal year which ended June 30. Long-term capital gains will be
separately identified in the tax information the Fund sends you after the
end of the calendar year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the Fund will
pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
have them sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another Oppenheimer Fund Account.
You can reinvest all distributions in another Oppenheimer fund account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you have held
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Distributions are
subject to federal income tax and may be subject to state or local taxes.
Your distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. Generally speaking a
capital gain or loss is the difference between the price you paid for the
shares and the price you receive when you sell them.
- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
Appendix: Description of Ratings
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality
and to carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as "high-grade" bonds. They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and have speculative
characteristics as well.
The investments in which the Fund will principally invest will be in
the lower-rated categories described below.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered well-assured. Often the
protection of interest and principal payments may be very moderate and not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely
poor prospects of ever retaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this capacity than for bonds in the "A" category.
The investments in which the Fund will principally invest will be in
the lower-rated categories, described below.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
APPENDIX A TO PROSPECTUS OF
OPPENHEIMER HIGH YIELD FUND
Graphic material included in Prospectus of Oppenheimer High Yield
Fund: "Comparison of Total Return of Oppenheimer High Yield Fund with the
Merrill Lynch High Yield Bond Master Index - Change in Value of a $10,000
Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer High
Yield Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund. In the
case of the Fund's Class A shares, that graph will cover each of the
Fund's last ten fiscal years from 6/30/85 through 6/30/96 and in the case
of the Fund's Class B shares, will cover the period from inception of the
class (5/3/93) through 6/30/96. The graph will compare such values with
hypothetical $10,000 investments over the same time periods in the Merrill
Lynch High Yield Bond Master Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Merrill Lynch
High Yield Bond Master Index, is set forth in the Prospectus under "Fund
Information - Management's Discussion of Performance."
<TABLE>
<CAPTION>
Merrill Lynch
Fiscal Oppenheimer High Yield Bond
Year Ended High Yield Fund A Master Index
<S> <C> <C>
06/30/86 $ 9,525 $10,000
06/30/87 $10,538 $10,248
06/30/88 $11,248 $10,903
06/30/89 $12,257 $12,677
06/30/90 $12,361 $14,273
06/30/91 $13,832 $14,797
06/30/92 $16,607 $16,271
06/30/93 $19,151 $17,961
06/30/94 $20,351 $17,711
06/30/95 $21,793 $21,717
06/30/96 $24,463 $26,735
Merrill Lynch
Fiscal Oppenheimer High Yield Bond
Year Ended High Yield Fund B Master Index
05/03/93 $10,000 $10,000
06/30/93 $10,355 $10,235
06/30/94 $10,905 $10,093
06/30/95 $11,581 $12,375
06/30/96 $12,707 $15,235
<PAGE>
Merrill Lynch
Fiscal Oppenheimer High Yield Bond
Year Ended High Yield Fund C Master Index
11/1/95 $10,000 $10,000
06/30/96 $10,636 $11,553
</TABLE>
<PAGE>
APPENDIX B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers
for Class A, Class B and Class C shares of the Fund described elsewhere
in this Prospectus are modified as described below for those shareholders
of (i) Quest for Value Fund, Inc., Quest for Value Growth and Income Fund,
Quest for Value Opportunity Fund, Quest for Value Small Capitalization
Fund and Quest for Value Global Equity Fund, Inc. on November 24, 1995,
when OppenheimerFunds, Inc. became the investment adviser to those funds,
and (ii) Quest for Value U.S. Government Income Fund, Quest for Value
Investment Quality Income Fund, Quest for Global Income Fund, Quest for
Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund
and Quest for Value California Tax-Exempt Fund when those funds merged
into various Oppenheimer funds on November 24, 1995. The funds listed
above are referred to in this Prospectus as the "Former Quest for Value
Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by
such shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds or (ii)
received by such shareholder pursuant to the merger of any of the Former
Quest for Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for
Class A shares purchased by a "Qualified Retirement Plan" through a single
broker, dealer or financial institution, or by members of "Associations"
formed for any purpose other than the purchase of securities if that
Qualified Retirement Plan or that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this purpose
only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan,
and SEP/IRA or IRA plan for employees of a single employer.
<TABLE>
<CAPTION>
Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
</TABLE>
For purchases by Qualified Retirement plans and Associations having
50 or more eligible employees or members, there is no initial sales charge
on purchases of Class A shares, but those shares are subject to the Class
A contingent deferred sales charge described on pages and of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of eligible employees
in a Qualified Retirement Plan or members of an Association or the sales
charge rate that applies under the Rights of Accumulation described above
in the Prospectus. In addition, purchases by 401(k) plans that are
Qualified Retirement Plans qualify for the waiver of the Class A initial
sales charge if they qualified to purchase shares of any of the Former
Quest For Value Funds by virtue of projected contributions or investments
of $1 million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of Associations, or
as eligible employees in Qualified Retirement Plans also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Fund's Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund purchased by exchange of shares of other
Oppenheimer funds that were acquired as a result of the merger of Former
Quest for Value Funds into those Oppenheimer funds, and which shares were
subject to a Class A contingent deferred sales charge prior to November
24, 1995 will be subject to a contingent deferred sales charge at the
following rates: if they are redeemed within 18 months of the end of the
calendar month in which they were purchased, at a rate equal to 1.0% if
the redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent six
months. Class A shares of any of the Former Quest for Value Funds
purchased without an initial sales charge on or before November 22, 1995
will continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current
prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
- Participants in Qualified Retirement Plans that purchased shares
of any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's
Distributor will pay a commission to the dealer for purchases of Fund
shares as described above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest for Value Fund
or into which such fund merged, if those shares were purchased prior to
March 6, 1995: in connection with (i) distributions to participants or
beneficiaries of plans qualified under Section 401(a) of the Internal
Revenue Code or from custodial accounts under Section 403(b)(7) of the
Code, Individual Retirement Accounts, deferred compensation plans under
Section 457 of the Code, and other employee benefit plans, and returns of
excess contributions made to each type of plan, (ii) withdrawals under an
automatic withdrawal plan holding only either Class B or Class C shares
if the annual withdrawal does not exceed 10% of the initial value of the
account, and (iii) liquidation of a shareholder's account if the aggregate
net asset value of shares held in the account is less than the required
minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired by merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest For Value Fund
or into which such fund merged, if those shares were purchased on or after
March 6, 1995, but prior to November 24, 1995: (1) distributions to
participants or beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans under
Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions
are made either (a) to an individual participant as a result of separation
from service or (b) following the death or disability (as defined in the
Code) of the participant or beneficiary; (2) returns of excess
contributions to such retirement plans; (3) redemptions other than from
retirement plans following the death or disability of the shareholder(s)
(as evidenced by a determination of total disability by the U.S. Social
Security Administration); (4) withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual withdrawals
do not exceed 10% of the initial value of the account; and (5) liquidation
of a shareholder's account if the aggregate net asset value of shares held
in the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or
Class C shares of the Fund described in this section if within 90 days
after that redemption, the proceeds are invested in the same Class of
shares in this Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and that were transferred to an OppenheimerFunds
prototype 401(k) plan shall be eligible for an additional one-time payment
by the Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged
for Class A shares, or (ii) the plan assets were transferred to an
OppenheimerFunds prototype 401(k) plan, shall be eligible for an
additional one-time payment by the Distributor of 1% of the value of the
plan assets transferred, but that payment may not exceed $5,000.
<PAGE>
Appendix C: Special Sale Charge Arrangements for Fund Shareholders of
the Fund Who Were Shareholders of the Former Connecticut Mutual Investment
Accounts, Inc.
The initial and contingent sales charge rates and waivers for Class
A and Class B shares described elsewhere in this Prospectus are modified
as described below for those shareholders of the Fund who were
shareholders of Connecticut Mutual Investment Accounts, Inc. on March 17,
1996 ("former CMIA shareholders").
- - Prior Class A CDSC and Class A Sales Charge Waivers
- Class A Contingent Deferred Sales Charge. Certain former CMIA
shareholders are entitled to continue to make additional purchases of
Class A shares of the Fund at net asset value without the Class A initial
sales charge, but subject to the Class A contingent deferred sales charge
that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within
one year of purchase, they will be assessed a 1% contingent deferred sales
charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such
redemptions, any shares not subject to the prior Class A CDSC will be
redeemed first).
Those former CMIA shareholders who are eligible for the prior Class
A CDSC are: (1) persons whose purchases of Class A shares of the former
CMIA funds were $500,000 prior to March 18, 1996, as a result of direct
purchases or purchases pursuant to the CMIA funds' policies on Combined
Purchases or Rights of Accumulation, who still hold those shares in any
of the Oppenheimer funds, and (2) persons whose intended purchases under
a Statement of Intention entered into prior to March 18, 1996, with the
CMIA funds' former general distributor to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to purchase
shares at net asset value without being subject to the Class A initial
sales charge.
Class A shares of the former CMIA funds that were purchased at net
asset value prior to March 18, 1996, remain subject to the prior Class A
CDSC. If any additional Class A shares are purchased by those
shareholders at net asset value pursuant to this arrangement they will be
subject to the prior Class A CDSC.
- Class A Sales Charge Waivers. Additional Class A shares of the
Fund may be purchased without a sales charge by a person who was in one
or more of the categories described below and acquired Class A shares of
the CMIA funds prior to March 18, 1996 and still holds Class A shares of
any Oppenheimer funds: (1) any purchaser, provided the total initial
amount invested in the former CMIA funds totaled $500,000 or more,
including investments made pursuant to the Combined Purchases, Statement
of Intention and Rights of Accumulation features available at the time of
the initial purchase and such investment is still held in one or more of
the Oppenheimer funds; (2) any participant in a qualified plan, provided
that the total initial amount invested by the plan in any one or more of
the former CMIA funds totaled $500,000 or more; (3) Directors of the
former CMIA funds and members of their immediate families; (4) employee
benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C.
("CMFS"), the CMIA funds' prior distributor, and its affiliated companies;
(5) one or more members of a group of a least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; (6) any holder of a
variable annuity contract issued in New York State by Connecticut Mutual
Life Insurance Company through the Panorama Separate Account which was
beyond the applicable surrender charge period and which was used to fund
a qualified plan, if that holder exchanges the variable annuity contract
for Class A shares of the Fund; and (7) an institution acting as a
fiduciary on behalf of an individual or individuals, if such institution
was directly compensated by the individual(s) for recommending the
purchase of the shares of the CMIA funds, provided the institution had an
agreement with CMFS. Purchases of Class A shares made pursuant to (1) and
(2) above may be subject to the applicable Class A CDSC.
- - Class A and Class B Contingent Deferred Sales Charge Waivers
In addition to the waivers set forth above under the caption "How to
Buy Shares," the contingent deferred sales charge will be waived for
redemptions of Class A and Class B shares of the Fund and acquired through
the reorganization of the Connecticut Mutual Income Account Series of CMIA
with the Fund and the shares of that series were acquired prior to March
18, 1996, (ii) were acquired by exchange from another CMIA fund and the
shares of that fund were purchased prior to March 18, 1996 and (iii) were
exchanged or redeemed in the following cases:
(1) by the estate of the deceased shareholder; (2) upon the
disability of the shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, as amended (Code); (3) for retirement
distributions (or loans) to participants or beneficiaries from retirement
plans qualified under Sections 401(a) or 403(b)(7) of the Code, or from
IRAs, deferred compensation plans created under Section 457 of the Code,
or other employee benefit plans; (4) in whole or in part, in connection
with shares sold by any state, county, or city, or any instrumentality,
department, authority, or agency thereof, that is prohibited by applicable
investment laws from paying a sales charge or commission in connection
with the purchase of shares of any registered investment management
company; (5) in connection with the former CMIA fund's right to
involuntarily redeem or liquidate a Fund; (6) in connection with automatic
redemptions of Class A shares and Class B shares in certain retirement
plan accounts pursuant to an Automatic Withdrawal Plan but limited to no
more than 12% of the original value annually; and (7) as involuntary
redemptions of shares by operation of law, or under procedures set forth
in the former CMIA fund's Articles of Incorporation, or as adopted by the
Board of Directors of the former CMIA funds.
<PAGE>
Oppenheimer High Yield Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
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 Additional Statement, and if given or
made, such information and representations must not be relied upon as
having been authorized by the Fund, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0280.001.1096 * Printed on recycled paper
<PAGE>
Oppenheimer High Yield Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated October 1, 1996
This Statement of Additional Information of Oppenheimer High Yield
Fund is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated October
1, 1996. It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the
Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objectives and Policies
Investment Policies and Strategies
Other Investment Techniques and Strategies
Other Investment Restrictions
How the Fund is Managed
Organization and History
Trustees and Officers of the Fund
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
<PAGE>
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
The Fund's investment adviser, OppenheimerFunds, Inc. (the "Manager"),
evaluates the investment merits of fixed-income securities primarily
through the exercise of its own investment analysis. This may include
consideration of the financial strength of the issuer, including its
historical 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
its continuing ability to meet its future obligations. The Manager also
may consider anticipated changes in business conditions, levels of
interest rates of bonds as contrasted with levels of cash dividends,
industry and regional prospects, the availability of new investment
opportunities and the general economic, legislative and monetary outlook
for specific industries, the nation and the world.
- Investment Risks of Fixed-Income Securities. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments on a security as they become due.
Generally, higher yielding lower-grade bonds are subject to credit risk
to a greater extent than lower-yielding, investment grade bonds. Interest
rate risk refers to the fluctuations in value of fixed-income securities
resulting solely from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing interest
rates will generally reduce the market value of already-issued fixed-
income investments, and a decline in interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which
tend to produce higher yields, are subject to potentially greater changes
in their prices from changes in interest rates than obligations with
shorter maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest payable
on those securities, nor the cash income from such securities. However,
those price fluctuations will be reflected in the valuations of the
securities and therefore the Fund's net asset values.
- Special Risks - High Yield Securities. As stated in the Prospectus,
the corporate debt securities in which the Fund will principally invest
are lower-rated debt securities, commonly known as "junk bonds." The Fund
may invest in securities rated as low as "C" by Moody's or "D" by Standard
& Poor's. The Manager will not rely solely on the ratings assigned by
rating services and may invest, without limitation, in unrated securities
which offer, in the opinion of the Manager, comparable yields and risks
as those rated securities in which the Fund may invest.
Risks of high yield securities may include: (i) limited liquidity and
secondary market support, (ii) substantial market price volatility
resulting from changes in prevailing interest rates, (iii) subordination
to the prior claims of banks and other senior lenders, (iv) the operation
of mandatory sinking fund or call/redemption provisions during periods of
declining interest rates that could cause the Fund to reinvest premature
redemption proceeds only 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 Fund's net asset
value. For example, federally insured savings and loan associations have
been required to divest their investments in high yield bonds.
- Warrants and Rights. Warrants and Rights basically are options to
purchase equity securities at set prices valid for a specified period of
time. The price of Warrants does not necessarily move in a manner
parallel to the prices of the underlying securities. Rights are similar
to Warrants but normally have a short duration and are distributed
directly by the issuer to its shareholders. Warrants and Rights have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the
U.S. dollar will result in a change in the amount of income the Fund has
available for distribution. Because a portion of the Fund's investment
income may be received in foreign currencies, the Fund will be required
to compute its income in U.S. dollars for distribution to shareholders,
and therefore the Fund will absorb the cost of currency fluctuations.
After the Fund has distributed income, subsequent foreign currency losses
may result in the Fund's having distributed more income in a particular
fiscal period than was available from investment income, which could
result in a return of capital to shareholders.
Investing in foreign securities offers the Fund potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians holding them must be approved by the
Fund's Board of Trustees where required under applicable rules of the
Securities and Exchange Commission.
- Brady Bonds. The Fund may invest in U.S. dollar-denominated,
collateralized Brady Bonds. These debt obligations of foreign entities
may be fixed-rate par bonds or floating rate discount bonds and are
generally collateralized in full as to principal due at maturity by U.S.
Treasury zero coupon obligations which have the same maturity as the Brady
Bonds. Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final
maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute the "residual risk"). In the event of default with respect to
collateralized Brady Bonds as a result of which the payment obligations
of the issuer are accelerated, the zero coupon Treasury securities held
as collateral for the payment of principal will not be distributed to
investors nor will such obligations be sold and the proceeds distributed.
The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal
the principal payments which would have then been due on the Brady Bonds
in the normal course. In addition, in light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans to public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are to be viewed as speculative.
- Risks of Foreign Investing. Investing in foreign securities
involves special additional risks and considerations not typically
associated with investing in securities of issuers traded in the U.S.
These include: reduction of income by foreign taxes; fluctuation in value
of foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack
of uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less liquidity
on foreign markets than in the U.S.; less regulation of foreign issuers,
stock exchanges and brokers than in the U.S.; greater difficulties in
commencing lawsuits; higher brokerage commission rates than in the U.S.;
increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities; possibilities in some countries
of expropriation, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable
differences between the U.S. economy and foreign economies. In the past,
U.S. Government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be re-imposed.
- Asset-Backed Securities. The value of asset-backed securities is
affected by changes in the market's perception of 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 a credit enhancement is exhausted. The risks of investing in
asset-backed securities derive from depending upon payment of the
underlying consumer loans by the individual borrowers, and 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
below for prepayments of a pool of mortgage loans underlying mortgage-
backed securities.
- 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 provide for periodic payment of interest in fixed amounts (usually
semi-annually) with principal payments at maturity or specified call
dates. The mortgage-backed securities in which the Fund may invest may
be backed by the full faith and credit of the U.S. Treasury (e.g. direct
pass-through certificates of the Government National Mortgage
Association); some are supported by the right of the issuer to borrow from
the U.S. Government (e.g. obligations of the Federal Home Loan Bank); and
some are backed by only the credit of the issuer itself. Any such
guarantees do not extend to the value of or yield of the mortgage-backed
securities themselves or to the net asset value of the Fund's shares.
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 on the security backed by the pool 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 on a basis comparable with other debt
securities, 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 a time of higher or lower prevailing
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 shareholders more than debt obligations
that pay interest semi-annually. Due to 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
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.
- GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA Certificates") are mortgage-backed securities which
evidence an undivided interest in a pool or pools of mortgages. The GNMA
Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest
and principal payments due on the mortgage pool, net of fees paid to the
"issuer" and GNMA, regardless of whether the mortgagor actually makes the
payments.
The National Housing Act authorized the GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration (the "FHA") or
guaranteed by the Veterans Administration (the "VA"). The GNMA guarantee
is backed by the full faith and credit of the U.S. Government. The GNMA
is also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
- FNMA Securities. The Federal National Mortgage Association ("FNMA")
was established to create a secondary market in mortgages insured by the
FHA. FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each
FNMA Certificate represents a pro rata share of all interest and principal
payments made and owed on the underlying pool. FNMA guarantees timely
payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
- FHLMC Securities. The Federal Home Loan Mortgage Corporation
(FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types of
mortgage pass-through securities ("FHLMC Certificates"), mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semi-annually and return principal once a year in guaranteed minimum
payments. The expected average life of these securities is approximately
ten years. The FHLMC securities are not backed by the full faith and
credit of the U.S. Government.
- Participation Interests. The Fund may invest in participation
interests, subject to the limitation on its net assets that may be
invested in illiquid investments. These participation interests provide
the Fund an undivided interest in a loan made by the issuing bank in the
proportion that the Fund's participation interest bears to the total
principal amount of the loan. No more than 5% of the Fund's net assets
can be invested in participation interests of the same borrower. The Fund
must look to the creditworthiness of the borrowing corporation, which is
obligated to make payments of principal and interest on the loan. In the
event the borrower fails to pay scheduled interest or principal payments,
the Fund would 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 bank to perform its obligations 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.
Other Investment Techniques and Strategies
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. During the period between commitment by the
Fund and settlement (generally within two months but usually not exceeding
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 segregate or identify
with its Custodian, cash, U.S. Government Securities or other high grade
debt obligations at least equal to the value of purchase commitments until
payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure to do so may result
in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous. If the Fund chooses to (i) dispose of the right to
acquire a when-issued security prior to its acquisition or (ii) dispose
of its right to deliver or receive against a forward commitment, it may
incur a gain or loss. 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 the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. However, the Fund may sell when-
issued securities and forward commitments 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 a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
- Mortgage-Backed Security Rolls. The Fund may enter into "forward
roll" transactions with respect to mortgage-backed securities in which it
can invest. In a forward roll transaction, which is considered to be a
borrowing by the Fund, the Fund will sell a mortgage security to selected
banks or other entities and simultaneously agree to repurchase a similar
security (same type, coupon and maturity) from the institution at a
specified later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with
different prepayment histories than those sold. Risks of mortgage-backed
security rolls include: (i) the risk of prepayment prior to maturity, (ii)
the risk that the Fund may not be entitled to receive interest and
principal payments on the securities sold and that the proceeds of the
sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the roll,
and (iii) the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to
purchase the securities. The Fund will enter into only "covered" rolls.
Upon entering into a mortgage-backed security roll, the Fund will be
required to identify or segregate cash, U.S. Government Securities or
other high-grade debt securities with its Custodian in an amount equal to
its obligation under the roll.
- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund purchases 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 having total domestic assets of at
least $1 billion or a broker-dealer with a net worth of at least $50
million and which has been designated a primary dealer in government
securities) which must meet credit requirements set by the Fund's Board
of Trustees from time to time for delivery on an agreed-on 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 the resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the collateral's value
must equal or exceed the repurchase price to fully collateralize the
repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially
sound and will continuously monitor the collateral's value.
- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
- Hedging. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) sell Interest Rate Futures or Financial Futures
("Futures"), (ii) buy puts on securities indices or on securities, or
(iii) write covered calls on securities indices or on Futures. When
hedging to permit the Fund to establish a position in the debt securities
market as a temporary substitute for purchasing particular debt securities
(which the Fund will normally purchase, and then terminate that hedging
position), the Fund may: (i) buy Futures, or (ii) buy calls on Futures,
securities indices or on securities. When hedging to protect against
declines in the dollar value of a foreign currency-denominated security,
the Fund may: (a) purchase puts on that foreign currency, (b) write calls
on that currency or (c) enter into forward currency contracts.
Additionally, the Fund may write covered call options and put options to
attempt to increase the Fund's income.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. This formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is "in-the-money," that is,
exercisable below (for a put) or above (for a call) the market price of
the underlying security. For any OTC option the Fund writes, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities) the amount of assets used to cover OTC
options it has written, equal to the formula price for the repurchase of
the OTC option less the amount by which the OTC option is "in-the-money."
The Fund will also treat as illiquid any OTC options held by it. The
Securities and Exchange Commission is evaluating whether OTC options
should be considered liquid securities, and the procedure described above
could be affected by the outcome of that evaluation.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's investment activities in the underlying cash
market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional Information about the Hedging Instruments the Fund
may use is provided below.
- Futures. The Fund may buy and sell Interest Rate Futures and
Financial Futures. Interest Rate Futures obligate one party to deliver
and the other to take a specific debt security at a specified price on a
specified date. No monetary amount is paid or received by the Fund on the
purchase or sale of an Interest Rate Future. The obligation underlying
the Interest Rate Futures may be satisfied by actual delivery of the
security or by entering into an offsetting contract.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with the
futures commission merchant (the "futures broker"). 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.
At any time prior to expiration of the Future, the Fund may elect to
close out its position by taking an opposite position, at which time a
final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. At that time the Fund
will realize a gain or a loss. Although Interest Rate Futures, by their
terms, call for settlement by delivery or acquisition of debt securities,
in most cases the obligation is fulfilled by entering into an offsetting
position. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Financial Futures are futures contracts, on a financial index composed
of several underlying securities. Financial Futures are similar to
Interest Rate Futures except that settlement is made in cash instead of
actual delivery, and net gain or loss on options on Financial Futures
depends on price movements of the securities included in the index. The
strategies which the Fund employs regarding Financial Futures are similar
to those described above with regard to Interest Rate Futures.
- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency. There is a risk that use of Forward
Contracts may reduce the gain that would otherwise result from a change
in the relationship between the U.S. dollar and a foreign currency.
The Fund may also enter into a forward contract to sell a foreign
currency other than that in which the underlying security is denominated.
This may be done in the expectation that there is a greater correlation
between the foreign currency of the forward contract and the foreign
currency of the underlying investment than between the U.S. dollar and the
foreign currency of the underlying investment or, as a tactical allocation
to take advantage of differences in foreign interest rates. This
technique is referred to as "cross hedging." Cross hedges may be
established with the U.S. dollar as the base currency or with another
currency correlated with the U.S. dollar as the base.
The success of cross hedging is dependent on many factors, including
the ability of the Manager to correctly identify and monitor the
correlation between foreign currencies, the U.S. dollar and other base
currencies correlated with the U.S. dollar. To the extent that these
correlations are not identical, the Fund may experience losses or gains
on both the underlying security and the cross currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does
not enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received. The Fund may also use cross hedges to effect a
transaction hedge.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a Forward
Contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency for a fixed U.S. dollar amount. Conversely, if the
Fund believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, it may enter into a Forward Contract to buy
that foreign currency for a fixed U.S. dollar amount. Additionally, the
Fund may use a cross hedge to effect a position hedge.
The Fund's Custodian will place cash not available for investment or
U.S. Government securities or other liquid high-quality debt securities
in a separate account of the Fund having a value equal to the aggregate
amount of the Fund's commitments under forward contracts to cover its
short positions. If the value of the securities placed in a separate
account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts. As an
alternative to maintaining all or part of the separate account, the Fund
may purchase a call option permitting the Fund to purchase the amount of
foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
forward contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not
entered into such contracts.
The precise matching of the Forward Contract amounts and the value of
the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs. The Fund may enter into Forward Contracts or maintain a net
exposure on such contracts only if: (1) the consummation of the contracts
would not obligate the Fund to deliver or accept delivery of an amount of
foreign currency in excess of the value of the Fund's portfolio securities
or other assets denominated in that currency, or (2) the Fund maintains
cash, U.S. Government securities or liquid high-grade debt securities in
a segregated account in an amount not less than the value of the Fund's
total assets committed to the consummation of the contract.
At or before the maturity of a Forward Contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing
a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Fund may close out a Forward Contract requiring
it to purchase a specified currency by entering into a second contract
entitling it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss as a
result of entering into such an offsetting Forward Contract under either
circumstance to the extent the exchange rate or rates between the
currencies involved differed on the execution dates of the first contract
and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
- Writing Call Options. The Fund may write (i.e. sell) call options
("calls") on equity and debt securities that are traded on U.S. and
foreign securities exchanges and over-the-counter markets, to enhance
income through the receipt of premiums from expired calls and any net
profits from closing purchase transactions. After any such sale up to
100% of the Fund's total assets may be subject to calls. All such calls
written by the Fund must be "covered" while the call is outstanding (i.e.
the Fund must own the securities subject to the call or other securities
acceptable for applicable escrow requirements). Calls on Futures
(discussed below) must be covered by deliverable securities or by liquid
assets segregated to satisfy the Futures contract. When the Fund writes
a call on a security it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call on the same security
during the call period at a fixed exercise price (which may differ from
the market price of the underlying security), regardless of market price
changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call
period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium 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 lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
- Writing Put Options. The Fund may write put options on equity and
debt securities or Futures but only if such puts are covered by segregated
liquid assets. The Fund will not write puts if, as a result, more than
50% of the Fund's net assets would be required to be segregated to cover
such put obligations. In writing puts, there is the risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated
liquid assets equal to the exercise price of the put has the same economic
effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option period
to buy the underlying investment from the buyer of the put at the exercise
price, even though the value of the investment may fall below the exercise
price. If the put lapses unexercised, the Fund (as the writer of the put)
realizes a gain in the amount of the premium. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the current market value of the underlying investment any
transaction costs incurred minus the sum of the exercise price and the
premium received.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments
by the Fund. The Fund will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from writing puts
are considered short-term gains for Federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
- Purchasing Calls and Puts. The Fund may purchase calls on equity
or debt securities, indices, foreign currencies and Futures that are
traded on U.S. and foreign securities exchanges and the U.S. over-the-
counter markets, in order to protect against the possibility that the
Fund's portfolio will not fully participate in an anticipated rise in
value of the long-term debt securities market. The value of equity or
debt securities underlying calls purchased by the Fund will not exceed the
value of the portion of the Fund's portfolio invested in cash or cash
equivalents (i.e. securities with maturities of less than one year). When
the Fund purchases a call (other than in a closing purchase transaction),
it pays a premium and, except as to calls on indices or Futures, has the
right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. When the Fund purchases a call on an index or Future, it pays a
premium, but settlement is in cash rather than by delivery of the
underlying investment to the Fund. In purchasing a call, the Fund
benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of
the call price plus the transaction costs and the premium paid 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.
The Fund may purchase put options ("puts") which relate to equity or
debt securities (whether or not it holds such securities in its
portfolio), indices, foreign currencies or Futures. When the Fund
purchases a put, it pays a premium and, except as to puts on indices, has
the right to sell the underlying investment to a seller of a corresponding
put on the same investment during the put period at a fixed exercise
price. Buying a put on an investment the Fund owns enables the Fund to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling such 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.)
Buying a put on an investment it does not own, either a put on an index
or a put on a Future not held by the Fund, permits the Fund either to
resell the put or buy the underlying investment and sell it at the
exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not
exercised, the put will become worthless on its expiration date. In the
event of a decline in the stock market, 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 an index, or on
a Future not held by it, the put protects the Fund to the extent that the
index or Future moves in a similar pattern to the securities held. In the
case of a put on an index or Future, settlement is in cash rather than by
delivery by the Fund of the underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts
and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question
(and thus on price movements in the stock market generally) rather than
on price movements in individual securities or futures contracts. When
the Fund buys a call on an index or Future, it pays a premium. During the
call period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an amount of
cash to settle the call if the closing level of the index or Future upon
which the call is based is greater than the exercise price of the call.
That cash payment is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple
(the "multiplier") which determines the total dollar value for each point
of difference. When the Fund buys a put on an index or Future, it pays
a premium and has the right during the put period to require a seller of
a corresponding put, upon the Fund's exercise of its put, to deliver to
the Fund an amount of cash to settle the put if the closing level of the
index or Future upon which the put is based is less than the exercise
price of the put. That cash payment is determined by the multiplier, in
the same manner as described above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys 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 such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying
investments.
- Options on Foreign Currencies. The Fund intends to write and
purchase calls on foreign currencies. The Fund may purchase and write
puts and calls on foreign currencies that are traded on a securities or
commodities exchange or quoted by major recognized dealers in such
options, for the purpose of protecting against declines in the dollar
value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the dollar
value of a foreign currency in which securities to be acquired are
denominated, the increased cost of such securities may be partially offset
by purchasing calls or writing puts on that foreign currency. If a
decline in the dollar value of a foreign currency is anticipated, the
decline in value of portfolio securities denominated in that currency may
be partially offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and transactions
costs. A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in a currency other than that underlying the option.
This is a cross-hedging strategy. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account with the
Fund's custodian, cash or U.S. Government Securities in an amount not less
than the value of the underlying foreign currency in U.S. dollars marked-
to-market daily.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under the master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation." The value of
securities subject to interest rate swaps will not exceed 25% of the
Fund's net assets.
- Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use
of futures and options thereon as established by the Commodities Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related option premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through one
or more brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities,
including other investment companies having the same advisor as the Fund
or having 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 the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
- Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay taxes on them. This avoids a "double tax" on that income and
capital gains, since shareholders will be taxed on the dividends and
capital gains they receive than the Fund. One of the tests for such
qualification is that less than 30% of its gross income must be derived
from gains realized on the sale of securities held for less than three
months. To comply with that 30% cap, the Fund will limit the extent to
which it engages in the following activities, but will not be precluded
from them: (i) selling investments, including Futures, held for less than
three months, whether or not they were purchased on the exercise of a call
held by the Fund; (ii) purchasing calls or puts which expire in less than
three months; (iii) effecting closing transactions with respect to calls
or puts purchased less than three months previously; (iv) exercising puts
or calls held by the Fund for less than three months; and (v) writing
calls on investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a
position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to attempt to
protect against declines in the value of the Fund's portfolio securities
(due to an increase in interest rates) that the prices of such Futures
will correlate imperfectly with the behavior of the cash (i.e., market
value) prices of the Fund's portfolio securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions
due to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets 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 the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the debt securities being hedged and movements in the price of
the Hedging Instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of the debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of the debt securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses Hedging Instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls
on such Futures or on debt securities, it is possible that the market may
decline; if the Fund then concludes not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the Hedging Instruments
that is not offset by a reduction in the price of the debt securities
purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objectives cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (1) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (2) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot:
- invest in real estate, or commodities or commodity contracts;
however, the Fund may invest in debt securities secured by real estate or
interests therein or issued by companies, including real estate investment
trusts, which invest in real estate or interests therein, and the Fund may
buy and sell any of the Hedging Instruments which it may use, whether or
not such Hedging Instrument is considered to be a commodity or a commodity
contract;
- buy securities on margin or engage in short sales, except that the
Fund may make margin deposits in connection with any of the Hedging
Instruments which it may use;
- pledge, hypothecate, mortgage or otherwise encumber its assets;
however, escrow or other collateral arrangements in connection with
Hedging Instruments are not prohibited hereby;
- underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under Federal securities laws;
- buy and retain securities of any issuer if those officers, Trustees
or Directors of the Fund or the Manager who beneficially own more than
0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer;
- invest in mineral-related programs or leases;
- buy the securities of any company for the purpose of exercising
management control; or
- buy securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
In connection with the qualification of its shares in certain states,
the Fund has undertaken that in addition to the above, as a non-
fundamental policy, it will not (1) invest in oil, gas or other mineral
leases, or (2) invest in real property, including real estate limited
partnership interests; however, this does not prevent the Fund from
investing in real estate investment trusts or readily marketable
securities of companies that invest in real estate.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers
and their principal occupations and business affiliations and occupations
during the past five years are listed below. All of the Trustees are also
trustees, directors or managing general partners of Oppenheimer Total
Return Fund, Inc., Oppenheimer Equity Income Fund, Oppenheimer Cash
Reserves, Oppenheimer Strategic Income Fund, Centennial America Fund,
L.P., The New York Tax-Exempt Income Fund, Inc., Oppenheimer Variable
Account Funds, Oppenheimer Champion Income Fund, Oppenheimer International
Bond Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic
Income & Growth Fund, Oppenheimer Integrity Funds, Oppenheimer Limited-
Term Government Fund, Oppenheimer Municipal Fund, Panorama Series Fund,
Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt
Trust, Daily Cash Accumulation Fund, Inc. and Centennial Tax Exempt Trust
(all of the foregoing funds are collectively referred to as the "Denver-
based Oppenheimer funds") except for Mr. Fossel and Ms. Macaskill, who are
Trustees, Directors or Managing General Partners of all the Denver-based
Oppenheimer funds except Oppenheimer Integrity Funds, Panorama Series
Fund, Inc. and Oppenheimer Strategic Income Fund. Messrs. Bishop, Bowen,
Donohue, Farrar and Zack hold similar positions as officers of all such
funds. Ms. Macaskill is President and Mr. Swain is Chairman of the
Denver-based Oppenheimer funds. As of September 6, 1996, the Trustees and
officers of the Fund as a group owned less than 1% of its outstanding
shares, not including shares held of record by an employee benefit plan
of the Manager (for which two of the officers listed below, Ms. Macaskill
and Mr. Donohue, are trustees) other than shares beneficially owned under
that plan by the officers of the Fund listed above.
Robert G. Avis, Trustee*; Age 65
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 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 66
19411 Merion Circle, Huntington Beach, California 92648
Chairman and Chief Executive Officer 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.
Jon S. Fossel, Trustee*; Age 54
Two World Trade Center, New York, New York 10048-0203
Chairman of OppenheimerFunds, Inc. (the "Manager"), President and a
Director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent
holding company, Shareholder Services, Inc. ("SSI"), transfer agent
subsidiary of the Manager; formerly President of the Manager.
Sam Freedman, Director; Age: 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of Shareholder
Services, Inc., Chairman, Chief Executive and Officer and director of
Shareholder Financial Services, Inc., Vice President and director of
Oppenheimer Acquisition Corporation and a director of OppenheimerFunds,
Inc.
Raymond J. Kalinowski, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International Inc. (a computer products
training company); formerly Vice Chairman and a Director of A.G. Edwards,
Inc., parent holding company of A.G. Edwards & Sons, Inc. (a broker-
dealer), of which he was a Senior Vice President.
C. Howard Kast, Trustee; Age 74
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
_____________________
* A Trustee who is an "interested person" as defined in the Investment
Company Act.
Bridget A. Macaskill, President and Trustee; Age: 48
President, Chief Executive Officer and a Director of the Manager and
HarbourView Asset Management Corporation ("HarbourView"), a subsidiary of
the Manager; Chairman and a director of SSI and Shareholder Financial
Services, Inc.; President and a director of OAC and Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of the Manager;
a director of Oppenheimer Real Asset Management, Inc.; formerly an
Executive Vice President of the Manager.
Ned M. Steel, Trustee; Age 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a Director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age 62
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Ralph W. Stellmacher, Vice President and Portfolio Manager; Age 36
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other Oppenheimer
funds.
Andrew J. Donohue, Vice President; Age 46
Two World Trade Center, New York, New York 10048
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"); President and a
director of Centennial; Executive Vice President, General Counsel and a
director of HarbourView, SFSI, SSI and Oppenheimer Partnership Holdings
Inc.; President and a director of Oppenheimer Real Asset Management, Inc.;
General Counsel of OAC; Executive Vice President, ChiefLegal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an officer of
other Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; Partner in Kraft &
McManimon (a law firm); an officer of First Investors Corporation (a
broker-dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser); director and an officer of First Investors Family
of Funds and First Investors Life Insurance Company.
_____________________
* A Trustee who is an "interested person" as defined in the Investment
Company Act.
George C. Bowen, Vice President, Secretary and Treasurer; Age 60
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; Treasurer of OAC; Vice
President and Treasurer of Oppenheimer Real Asset Management, Inc., Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc.;
an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 37
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to
which he was an Accountant for Yale & Seffinger, P.C., an accounting firm,
and previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to
which he was an International Mutual Fund Supervisor for Brown Brothers
Harriman & Co., a bank, and previously a Senior Fund Accountant for State
Street Bank & Trust Company.
Robert G. Zack, Assistant Secretary; Age 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI, SFSI; an officer of other Oppenheimer funds.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Ms. Macaskill and Mr. Swain, who are both
officers and Trustees and Mr. Fossel) receive no salary or fee from the
Fund. The remaining Trustees of the Fund (excluding Mr. Freedman, who did
not become a Trustee until June 27, 1996) received the compensation shown
below (i) from the Fund, during its fiscal year ended June 30, 1996, and
(ii) from all the Denver-based Oppenheimer funds (including the Fund) for
which they served as Trustee, Director or Managing Partner. Compensation
is paid for services in positions below their names:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
<S> <C> <C>
Robert G. Avis $7,187 $53,000
Trustee
William A. Baker $9,934 $73,254
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr. $8,721 $64,309
Audit and Review
Committee Member
and Trustee
Raymond J. Kalinowski $8,814 $65,000
Trustee, Risk Management
Oversight Committee Member
C. Howard Kast $8,814 $65,000
Trustee, Risk Management
Oversight Committee Member
Robert M. Kirchner $9,261 $68,292
Audit and Review
Committee Member
and Trustee
Ned M. Steel $7,187 $53,000
Trustee
</TABLE>
______________________
1 For the 1995 calendar year during which the Denver-based funds listed
in the first paragraph of this section, included Oppenheimer Strategic
Investment Grade Bond Fund and Oppenheimer Strategic Short-Term Income
Fund (which ceased operations following the acquisition of their assets
by the other Oppenheimer funds) and Panorama Series Fund, Inc. which
became an Oppenheimer fund in June of 1996.
- Major Shareholders. As of September 6, 1996 no person owned
of record or was known by the Fund to own beneficially 5% or more of the
Fund as a whole or the Fund's outstanding Class A, Class B or Class C
shares, except Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake
Drive East, Floor 3, Jacksonville, Florida 32246, who owned 1,322,632
Class B shares and 110,793 Class C shares (5.96% and 14.61% of the Class
B and Class C shares, respectively, then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom may also
serve as officers of the Fund, and three of whom (Ms. Macaskill and
Messrs. Fossel and Swain) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed
to detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended June 30, 1994, 1995
and 1996, the management fees paid by the Fund to the Manager were
$7,655,008, $7,542,307 and $8,502,884, respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of ave
rage annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
- The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal underwriter
in the continuous public offering of the Fund's Class A, Class B and Class
C shares but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid under the
Distribution and Service Plans, but including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders) are borne by the Distributor. During the Fund's fiscal
years ended June 30, 1994, 1995 and 1996, the aggregate amount of sales
charge on sales of the Fund's Class A shares were $4,185,629, $2,629,870
and $2,823,797, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $1,023,367, $624,955 and $688,648
in those respective years. The contingent deferred sales charges
collected by the Distributor on the redemption of Class B shares for the
fiscal year ended June 30, 1996 totalled $765,717. During the fiscal
period from November 1, 1995 through June 30, 1996, contingent deferred
sales charges collected on the Fund's Class C shares totalled $733, all
of which the Distributor retained. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
- The Transfer Agent. OppenheimerFunds Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ such broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement and the procedures and rules
described above, allocations of brokerage generally are made by the
Manager's portfolio traders 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. As most purchases made by the Fund are principal
transactions at net prices, the Fund does not incur substantial brokerage
costs. The Fund usually deals directly with the selling or purchasing
principal or market maker without incurring charges for the services of
a broker on its behalf unless it is determined that a better price or
execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and purchases from
dealers include a spread between the bid and asked price. The Fund seeks
to obtain prompt execution of orders at the most favorable net prices.
When the Fund engages in an option transaction, ordinarily the same broker
will be used for the purchase or sale of the option and any transaction
in the securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or its affiliates are combined. The
transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted 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 broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Manager
provides information as to the commissions paid to brokers furnishing such
services, together with the Manager's representation that the amount of
such commissions was reasonably related to the value or benefit of such
services.
During the Fund's fiscal years ended June 30, 1994, 1995 and 1996,
total brokerage commissions paid by the Fund (not including any spreads
or concessions on principal transactions on a net trade basis) amounted
to $70,384, $73,086 and $37,308, respectively. During the fiscal year
ended June 30, 1996, $6,414 was paid to brokers as commissions in return
for research services; the aggregate dollar amount of these transactions
was $1,869,885. The transactions giving rise to those commissions were
allocated in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus,
from time to time the "standardized yield," "dividend yield," "average
annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An
explanation of how these total returns are calculated for each class and
the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each advertised class of shares of the
Fund for the 1, 5, and 10-year periods (or the life of the class, if less)
ending as of the most recently-ended calendar quarter prior to the
publication of the advertisement. This enables an investor to compare the
Fund's performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices are
not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class C shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the Securities
and Exchange Commission that apply to all funds that quote yields:
Standardized Yield = 2 [(a-b + 1)6 - 1]
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended June 30, 1996, the standardized yields for the
Fund's Class A, Class B and Class shares were 8.88%, 8.51% and 8.49%,
respectively.
- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a class
from dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income
and from realized capital gains declared during a stated period. Under
those calculations, the dividends and/or distributions for that class
declared during a stated period of one year or less (for example, 30 days)
are added together, and the sum is divided by the maximum offering price
per share of that class on the last day of the period. When the result
is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class = Dividends of the Class
----------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B or Class C shares, the maximum
offering price is the net asset value per share, without considering the
effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period. The dividend
yields on Class A shares for the 30-day period ended June 30, 1996, were
8.55% and 8.97% when calculated at maximum offering price and at net asset
value, respectively. The dividend yield on Class B shares for the 30-day
period ended June 30, 1996, was 8.33% when calculated at net asset value.
The dividend yield on Class C shares for the 30-day period ended June 30,
1996 was 8.25%, when calculated at net asset value.
- - Total Return Information
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
ERV 1/n
___ -1 = Average Annual Total Return
P
- Cumulative Total Returns. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, payment of contingent
deferred sales charge of 5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth year, 2.0% in the fifth year, 1.0% in
the sixth year and none thereafter is applied, as described in the
Prospectus. For Class C shares, the payment of the 1% contingent deferred
sales charge for the first 12 months is applied, as described in the
prospectus. Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional shares
at net asset value per share, and that the investment is redeemed at the
end of the period. The "average annual total returns" on an investment
in Class A shares of the Fund for the one, five and ten year periods ended
June 30, 1996 were 6.92%, 10.99% and 9.36%, respectively. The "average
annual total returns" on an investment in Class B shares of the Fund for
the one-year period ended June 30, 1996 and for the period from May 3,
1993 (inception of the Class) through June 30, 1996 were 6.40% and 7.88%,
respectively. The cumulative "total return" on Class A shares for the ten
year period ended June 30, 1996 was 144.63%. During a portion of the
periods for which total returns are shown for Class A shares, the Fund's
maximum initial sales charge rate was higher; as a result, performance
returns on actual investments during those periods may be lower than the
results shown. The cumulative total return on Class B shares for the
fiscal year ended June 30, 1996 and for the period from May 3, 1993
through June 30, 1996 were 6.40% and 27.07%, respectively. The
"cumulative total return" on Class C shares for the period from November
1, 1995 to June 30, 1996 was 6.36%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The cumulative total return
at net asset value of the Fund's Class A shares for the ten-year period
ended June 30, 1996 was 156.82%. The average annual total returns at net
asset value for the one, five and ten-year periods ended June 30, 1996,
for Class A shares were 12.25%, 12.08% and 9.89%, respectively. The
average annual total return at net asset value for Class B shares for the
fiscal year ended June 30, 1996 and for the period from May 3, 1993
through June 30, 1996 was 11.40% and 8.40%, respectively. For Class B
shares, the "cumulative total return" at net asset value for the period
from May 3, 1993 through June 30, 1996 was 29.01%. For Class C shares,
the "cumulative total return" at net asset value for the period from
November 1, 1995 through June 30, 1996 was 7.36%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However,
when comparing total return of an investment in Class A or Class B shares
of the Fund with that of other alternatives, investors should understand
that as the Fund invests in high yield securities, its shares are subject
to greater market risks and volatility than shares of funds having other
investment objectives and that the Fund is designed for investors who are
willing to accept greater risk of loss in the hopes of realizing greater
gains.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes are ranked against (i) all other
funds (excluding money market funds), (ii) all other high current yield
or fixed income funds and (iii) all other such funds in a specific size
category. The Lipper performance rankings are based on total returns that
include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
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%). Morningstar ranks the
Class A, Class B and Class C shares of the Fund in relation to other rated
high yield funds. Rankings are subject to change. From time to time, the
Fund may include in its advertisements and sales literature performance
information about the Fund cited in newspapers and other periodicals, such
as The New York Times, which may include performance quotations from other
sources, including Lipper.
The total return on an investment in the Fund's Class A, Class B or
Class C shares may be compared with performance for the same period of the
Lehman Brothers Corporate Bond Index and the Salomon Brothers High Yield
Market Index. The Lehman Brothers Corporate Bond Index is an unmanaged
index of publicly-issued nonconvertible investment grade corporate debt
of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate
corporate bond market. The Salomon Brothers High Yield Market Index is
an unmanaged index of below-investment grade (but rated at least BB+/Ba1
by Standard & Poor's or Moody's) U.S. corporate debt obligations, widely
recognized as a measure of the performance of the high-yield corporate
bond market, the market in which the Fund principally invests. Each Index
includes a factor for the reinvestment of interest but does not reflect
expenses or taxes.
The performance of the Fund's Class A, Class B or Class C shares may
also be compared in publications to (i) the performance of various market
indices or to other investments for which reliable performance data is
available, and (ii) to averages, performance rankings or other benchmarks
prepared by recognized mutual fund statistical services.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However,
when comparing total return of an investment in Class A, Class B and Class
C shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments.
For example, investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments available
from banks and thrift institutions, such as certificates of deposit,
ordinary interest-paying checking and savings accounts, and other forms
of fixed or variable time deposits, and various other instruments such as
Treasury bills. However, the Fund's returns and share price are not
guaranteed or insured by the FDIC or any other agency and will fluctuate
daily, while bank depository obligations may be insured by the FDIC and
may provide fixed rates of return, and Treasury bills are guaranteed as
to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or Transfer Agent) or the investor services provided by
them to shareholders of the Oppenheimer funds, other than performance
rankings of the Oppenheimer funds themselves. Those ratings or rankings
of shareholder/investor services by third parties may compare the
OppenheimerFunds' services to those of other mutual fund families selected
by the rating or ranking services and may be based upon the opinions of
the rating or ranking service itself, based on its research or judgment,
or based upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares of the Fund
under Rule 12b-1 of the Investment Company Act pursuant to which the Fund
makes payments to the Distributor in connection with the distribution
and/or servicing of the shares of that class, as described in the
Prospectus. Each Plan has been approved by a vote of (i) the Board of
Trustees of the Fund, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on that Plan,
and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of each class. For the Distribution and Service Plan
for Class B and Class C shares, the vote was cast by the Manager as the
sole initial holder of Class B and Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform at
no cost to the Fund. The Distributor and the Manager may, in their sole
discretion, increase or decrease the amount of payments they make from
their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Each 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 Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A after six years, the Fund is required to obtain the
approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under that Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by Class. All material
amendments must be approved by the Board and the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly for its review, describing the amount of all payments and the
purpose of the payments. The report for the Class B Plan shall also
include the Distributor's distribution costs for that quarter, and such
costs for previous fiscal periods that have been carried forward, as
explained in the Prospectus and below. The Class A and Class B reports
must also identify each Recipient that received payments. Those reports
will be subject to the review and approval of the Independent Trustees in
the exercise of their fiduciary duty. Each Plan further provides that
while it is in effect, the selection or replacement and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision as to any such selection or nomination is approved by a
majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares, held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. The Board of Trustees has set the fee at the
maximum rate (except for assets representing Class A shares acquired prior
to April 1, 1991, for which the rate is 0.15% for the current fiscal year)
and set no minimum amount. For the fiscal year ended June 30, 1996,
payments under the Class A Plan totalled $2,226,304, all of which was paid
by the Distributor to Recipients, including $30,542 paid to MML Investor
Services, Inc. ("MMLISI"), an affiliate of the Distributor. Payments made
under the Class B Plan during that fiscal period totalled $2,363,575, of
which $2,017,065 was retained by the Distributor and $4,093 was paid to
MMLISI. Payments made under the Class C Plan during the period from
November 1, 1995 through June 30, 1996 totalled $22,282, of which $20,826
was retained by the Distributor.
Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent
years. Payments received by the Distributor under the Plan for Class A
shares will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payment to be
paid by the Distributor to Recipients in advance for the first year such
shares are outstanding, and thereafter on a quarterly basis, as described
in the Prospectus. The advance payment is based on the net asset value
of the shares sold. An exchange of shares does not entitle the Recipient
to an advance service fee payment. In the event Class B or Class C shares
are redeemed during the first year such shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of such advance
payment to the Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on Class
B and Class C shares, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently intends to
pay the service fee to Recipients in the manner described above. A
minimum holding period may be established from time to time under the
Class B and Class C Plans by the Board. The Board has set no minimum
holding period. All payments under the Class B and Class C Plans are
subject to the limitations imposed by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. on payments of asset-
based sales charges and service fees. The Distributor anticipates that it
will take a number of years for it to recoup (from the Fund's payments to
the Distributor under the Class B Plan and recoveries of the contingent
deferred sales charge) the sales commissions paid to authorized brokers
or dealers for selling Class B shares.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of
$4,000,000 in a given fiscal year, of which $2,000,000 was recovered in
the form of contingent deferred sales charges paid by investors and
$1,600,000 were reimbursed in the form of payments made by the Fund to the
Distributor under the Class B Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as above and described in the Prospectus. The asset-based
sales charge paid to the Distributor by the Fund under the Class B Plan
is intended to allow the Distributor to recoup the cost of sales
commissions paid to authorized brokers and dealers at the time of sale,
plus financing costs, as described in the Prospectus. Such payments may
also be used to pay for the following expenses in connection with the
distribution of Class B shares: (i) financing the advance of the service
fee payment to Recipients under the Class B Plan, (ii) compensation and
expenses of personnel employed by the Distributor to support distribution
of Class B shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and
state "blue sky" registration fees.
The Class C Plan provides for the Distributor to be compensated at
a flat rate, whether the Distributor's distribution expenses are more or
less than the amount paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions
to authorized brokers and dealers at the time of sale and pays service
fees as described in the Prospectus, (ii) may finance such commissions
and/or the advance of the service fee payment to Recipients under those
Plans or may provide such financing from its own resources, or from an
affiliate, (iii) employs personnel to support distribution of shares, and
(iv) may bear the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares.
The availability of three classes of shares permits an investor to choose
the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
(i) any order for $500,000 or more of Class B shares or $1 million or more
of Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund
instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on such Class B and Class
C shares will be reduced by incremental expenses borne solely by that
class, including the asset-based sales charge to which Class B and Class
C shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (a) Distribution and/or
Service Plan fees, (b) transfer and shareholder servicing agent fees and
expenses, (c) registration fees and (d) shareholder meeting expenses, to
the extent that such expenses pertain to a specific class rather than to
the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day
that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that Class by the number of shares of that class
outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some other days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that it
will close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. Because the Fund's net asset value will not be
calculated on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not purchase or
redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sale prices of
the preceding trading day, or closing bid and asked prices that day); (ii)
securities traded on a foreign securities exchange are generally valued
at the last sale 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 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)
long-term debt securities having a remaining maturity in excess of 60 days
are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments that
had a maturity of more than 397 days when issued, and non-money market
type instruments having a maturity of 397 days or less when issued, which
have a remaining maturity of 60 days or less are valued as in (iii) above;
(v) money market debt securities that had a maturity of less than 397 days
when issued that have a remaining maturity of 60 days or less are valued
at cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) 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), (iii) and (iv) above, the security may
be priced at the mean between the "bid" and "asked" prices provided by a
single active market maker.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the Exchange.
Events affecting the values of foreign securities traded in such
securities markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the
Manager, under procedures established by the Board of Trustees, determines
that the particular event would cause a material change in the Fund's net
asset value, in which case an adjustment would be made. Foreign currency,
including forward contracts, will be valued at the closing price in the
London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in
foreign currency will be converted to U.S. dollars at 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 sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable,
as determined by a pricing service approved by the Board of Trustees or
by the Manager. If there were no sales that day, value shall be the last
sale price on the preceding trading day if it is within the spread of the
closing bid and asked prices on the principal exchange or on NASDAQ on the
valuation date, 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 asked prices obtained by the Manager from two
active market makers (which in certain cases may be the bid price if no
asked price is available).
When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is adjusted "marked-to-market"
to reflect the current market value of the option. In determining the
Fund's gain on investments, if a call written by the Fund is exercised,
the proceeds are increased by the premium received. If a call or put
written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will
have a gain or loss depending on whether the premium was more or less
than the cost of the closing transaction. If the Fund exercises a put it
holds, the amount the Fund receives on its sale of the underlying
investment is reduced by the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of sales
efforts and reduction in expenses realized by the Distributor, dealers and
brokers making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor or
dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, aunts, uncles, nieces, nephews, a sibling's spouse and
a spouse's siblings.
- The Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Bond Fund for Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term New York Municipal Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
__________________
* Shares of the Fund are not presently exchangeable for shares of these
funds.
There is an initial sales charge on the purchase of Class A shares
of each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is an investor's
statement in writing to the Distributor of the intention to purchase Class
A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to
make the aggregate amount of purchases of shares, which when added to the
investor's holdings of shares of those funds, will equal or exceed the
amount specified in the Letter. Purchases made by reinvestment of
dividends or distributions of capital gains and purchases made at net
asset value without sales charge do not count toward satisfying the amount
of the Letter. A Letter enables an investor to count the Class A and
Class B shares purchased under the Letter to obtain the reduced sales
charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the
Letter will be made at the public offering price (including the sales
charge) that applies to a single lump-sum purchase of shares in the amount
intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the Letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual total purchases. If total eligible
purchases during the Letter of Intent period exceed the intended purchase
amount and exceed the amount needed to qualify for the next sales charge
rate reduction set forth in the applicable prospectus, the sales charges
paid will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
up to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares of other Oppenheimer
funds acquired subject to a contingent deferred sales charge, and (c)
Class A or Class B shares acquired in exchange for either (i) Class A
shares of one of the other Oppenheimer funds that were acquired subject
to a Class A initial or contingent deferred sales charge or (ii) Class B
shares of one of the other Oppenheimer funds that were acquired subject
to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "How to Exchange Shares," and
the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Checkwriting. When a check is presented to the Bank for clearance,
the Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for the Shareholder to increase the investment, and set other
terms and conditions so that the shares would not be involuntarily
redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares
that you purchase subject to an initial sales charge or Class A contingent
deferred sales charge, which was paid or (ii) Class B shares that were
subject to the Class B contingent deferred sales charge when redeemed.
This privilege does not apply to Class C shares. The reinvestment may be
made without sales charge only in Class A shares of the Fund or any of the
other Oppenheimer funds into which shares of the Fund are exchangeable as
described in "How to Exchange Shares" below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds
within 90 days of payment of the sales charge, the shareholder's basis in
the shares of the Fund that were redeemed may not include the amount of
the sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of transfer to
the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B or Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans,
or pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How To Sell Shares" in the Prospectus or on the back cover of
the Statement of Additional Information. The request must: (i) state the
reason for the distribution; (ii) state the owner's awareness of tax
penalties if the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption requirements.
Participants (other than self-employed persons maintaining a plan account
in their own name) in OppenheimerFunds-sponsored prototype pension,
profit-sharing or 401(k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension plans or
401(k) profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers on behalf of their customers. The
shareholder should contact the broker or dealer to arrange this type of
redemption. The repurchase price per share will be the net asset value
next computed after the Distributor receives the order placed by the
dealer or broker, except that if the Distributor receives a repurchase
order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net
asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00
P.M., but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that day
(normally 5:00 P.M.). Ordinarily, for accounts redeemed by a broker-
dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt
of the required redemption documents, in proper form with the signature(s)
of the registered owners guaranteed on the redemption document as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans, because of the imposition of the contingent deferred
sales charge on such withdrawals (except where the contingent deferred
sales charge is waived as described in the Prospectus under "Waivers of
Class B and Class C Sales Charges".
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under such plans should not be
considered as a yield or income on your investment. It may not be
desirable to purchase additional shares of Class A shares while
maintaining automatic withdrawals because of the sales charges that apply
to purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. Neither the Fund nor the Transfer Agent shall incur any
liability to the Planholder for any action taken or omitted by the
Transfer Agent in good faith to administer the Plan. Certificates will
not be issued for shares of the Fund purchased for and held under the
Plan, but the Transfer Agent will credit all such shares to the account
of the Planholder on the records of the Fund. Any share certificates held
by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
the Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class A, B
and C shares except Oppenheimer Money Market Fund, Inc., Centennial Money
Market Trust, Centennial Tax-Exempt Trust, Centennial Government Trust,
Centennial New York Tax-Exempt Trust, Centennial California Tax-Exempt
Trust, Centennial America Fund, L.P., and Daily Cash Accumulation Fund,
Inc., which only offer Class A shares and Oppenheimer Main Street
California Tax-Exempt Fund which only offers Class A and Class B shares,
(Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds sponsored 401(k) plans).
A current list showing which funds offer which class can be obtained by
calling the distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be
exchanged only for Class A shares of other Oppenheimer funds, including
Rochester Fund Municipals and Limited Term New York Municipal Fund. Class
A shares of Rochester Fund Municipals or Limited Term New York Municipal
Fund acquired on the exchange of Class M shares of Oppenheimer Bond Fund
for Growth may be exchanged for Class M shares of that fund. For accounts
of Oppenheimer Bond Fund for Growth established after March 8, 1996, Class
M shares may be exchanged for Class A shares of other Oppenheimer funds
except Rochester Fund Municipals and Limited-Term New York Municipals.
Exchanges to Class M shares of Oppenheimer Bond Fund for Growth are
permitted from Class A shares of Oppenheimer Money Market Fund, Inc. or
Oppenheimer Cash Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into
Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds subject to a contingent deferred sales charge). However, shares of
Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds
of shares of other mutual funds (other than funds managed by the Manager
or its subsidiaries) redeemed within the 12 months prior to that purchase
may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or
the investor's dealer must notify the Distributor of eligibility for this
privilege at the time the shares of Oppenheimer Money Market Fund, Inc.
are purchased, and, if requested, must supply proof of entitlement to this
privilege.
Shares of the Fund acquired by reinvestment of dividends of
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the Oppenheimer funds. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange
of Class A shares of other Oppenheimer funds purchased subject to a Class
A contingent deferred sales charge are redeemed within 18 months of the
end of the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within six years
of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are deemed within 12 months of the initial purchase of
the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or the Class C contingent deferred sales charge
will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account.
The Fund may accept requests for exchanges of up to 50 accounts per day
from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or would
include shares covered by a share certificate that is not tendered with
the request. In those cases, only the shares available for exchange
without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held
of record at the time of the previous determination of net asset value or
as otherwise described in "How to Buy Shares." Daily dividends will not
be declared or paid on newly purchased shares until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid
together with the redemption proceeds. Shares purchased through dealers
or brokers normally are paid for by the third business day following the
placement of the purchase order. Shares redeemed through the regular
redemption procedures will be paid dividends through and including the day
on which the redemption request is received by the Transfer Agent in
proper form. Dividends will be paid with respect to shares repurchased
by a dealer or broker for three business days following the trade date
(i.e., to and including the day prior to settlement repurchase).
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends (generally dividends from domestic
corporations) which the Fund derives from its portfolio investments that
the Fund has held for a minimum period, usually 46 days. A corporate
shareholder will not be eligible for the deduction on dividends paid on
shares held by the shareholder for 45 days or less. To the extent that
the Fund derives a substantial portion of its gross income from option
premiums, interest income or short-term gains from the sale of securities
or dividends from foreign corporations, its dividends will not qualify for
the deduction.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year, and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests relating to
qualification which the Fund might not meet in any particular year. For
example, if the Fund derives 30% or more of its gross income from the sale
of securities held less than three months, it may fail to qualify. If it
did not so qualify, the Fund would be treated for tax purposes as an
ordinary corporation and receive no tax deduction for payments made to
shareholders.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other Oppenheimer funds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. To elect
this option, the shareholder must notify the Transfer Agent in writing
and either must have an existing account in the fund selected for
reinvestment or must obtain a prospectus for that fund and an application
from the Transfer Agent to establish an account. The investment will be
made at the net asset value per share in effect at the close of business
on the payable date of the dividend or distribution. Dividends and/or
distributions from certain of the Oppenheimer funds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates. The Fund's cash
balances with the custodian in excess of $100,000 are not protected by
Federal deposit insurance. Those uninsured balances at times may be
substantial.
Independent Auditors. The independent auditors of the Fund audit the
Manager's and the Fund's financial statements and perform other related
audit services. They also act as auditors for certain other funds advised
by the Manager and its affiliates.
<PAGE>
Independent Auditors' Report
==========================================================
======================
The Board of Trustees and Shareholders of Oppenheimer High Yield Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer High Yield Fund as of June 30,
1996, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended June 30, 1996 and 1995,
and the financial highlights for the period July 1, 1991 to June 30, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1996 by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer High
Yield Fund at June 30, 1996, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 22, 1996
<PAGE>
Statement of Investments June 30, 1996
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
==========================================================
==========================================================
===============
Mortgage-Backed Obligations--3.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 240, Cl. 2, 10.969%--12.91%, 9/1/23(2) $ 66,947,903 $ 23,055,183
Trust 257, Cl. 2, 15.381%, 2/1/24(2) 5,996,280 2,072,464
---------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6%, 7/15/26(3) 9,000,000 8,926,875
---------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. E, 7.51%, 2/1/28(4)(5) 5,362,000 4,192,414
---------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily Mortgage Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(3)(5) 3,750,000 2,803,125
---------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C2, Cl. E, 8%, 4/25/25 2,721,837 2,596,378
Series 1995-C1, Cl. F, 6.90%, 2/25/27 2,672,907 2,187,608
---------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII,
Series 1996-C1, Cl. E, 9.18%, 1/20/06 2,496,000 2,130,960
---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.863%, 6/25/26(4)(5) 2,835,676 2,304,873
---------------------------------------------------------------------------------------------------------------
Total Mortgage-Backed Obligations (Cost $47,829,156) 50,269,880
==========================================================
==========================================================
===============
Foreign Government Obligations--9.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Unsub. Unsec. Bonds, 10.25%, 2/6/03 DEM 8,700,000 5,772,797
---------------------------------------------------------------------------------------------------------------
Banco Estado Minas Gerais, 8.25%, 2/10/00 5,000,000 4,575,000
---------------------------------------------------------------------------------------------------------------
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,10.625%, 3/29/99(5) 1,000,000
1,012,500
---------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Capitalization Bonds, 8%, 4/15/14 2,435,467 1,506,946
Nts., Banco Estado Minas Gerais, 7.875%, 2/10/99 3,600,000 3,334,500
---------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, 10%, 3/5/01 DEM 2,520,000 1,688,676
---------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2%, 7/28/12(4) 17,960,000 5,988,537
Interest Arrears Bonds, 6.25%, 7/28/11(4) 11,165,000 5,303,375
---------------------------------------------------------------------------------------------------------------
Canada (Government of) Real Return Debs., 4.517%, 12/1/21(6) CAD 5,580,000
4,021,496
---------------------------------------------------------------------------------------------------------------
Central Bank of Costa Rica Interest Claim Bonds, Series B, 6.328%, 5/21/05(4) 524,246 484,928
---------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 5/15/03 DKK 44,150,000 7,967,673
---------------------------------------------------------------------------------------------------------------
Ecuador (Republic of):
Disc. Bonds, 6.063%, 2/28/25(4) 3,400,000 1,929,500
Interest Equalization Registered Bonds, 6.625%, 12/21/04(4) 1,850,000 1,355,125
---------------------------------------------------------------------------------------------------------------
Germany (Republic of) Bonds, 7.375%, 12/2/02(7) DEM 4,860,000 3,403,924
---------------------------------------------------------------------------------------------------------------
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23(4) 3,500,000 2,458,750
Interest Arrears Bonds, 6.625%, 12/23/05(4) 2,080,000 1,679,600
---------------------------------------------------------------------------------------------------------------
Italy (Republic of) Certificati di Credito del Tesoro Nts.,
11.20%, 8/1/00(4)ITL 4,390,000,000 2,932,488
---------------------------------------------------------------------------------------------------------------
National Treasury Management Agency (Irish Government)
Bonds, 8%, 10/18/00 IEP 2,560,000 4,269,741
---------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD 9,000,000
8,047,187
---------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds, 8%, 2/15/01(7) NZD 15,545,000 10,238,003
---------------------------------------------------------------------------------------------------------------
Panama (Republic of):
Debs., 6.629%, 5/10/02(4) 4,993,846 4,694,215
Interest Reduction Bonds, 3.50%, 7/17/14(3)(8) 1,500,000 831,094
</TABLE>
6 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Government
Obligations (continued)
Poland (Republic of) Treasury Bills, Zero Coupon:
21.656%, 10/2/96(9) PLZ 4,320,000 $ 1,508,006
21.635%, 11/20/96(9) PLZ 8,360,000 2,849,869
21.641%, 8/7/96(9) PLZ 4,000,000 1,440,834
---------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Gtd. Bonds,
Obrigicion do tes Medio Prazo, 11.875%, 2/23/00(7) PTE 720,000,000 5,141,708
---------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,12.25%, 3/25/00 ESP 367,000,000
3,244,611
---------------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Debs., Series 1030, 13%, 6/15/01 SEK 44,200,000 8,144,942
---------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA, 13% Bonds, 2/5/99 ITL 2,250,000,000 1,511,790
---------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00(7) GBP 7,410,000 13,823,596
---------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM 2,300,000 1,543,519
---------------------------------------------------------------------------------------------------------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 11,250,000 7,959,375
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4) 1,490,000 1,078,387
New Money Bonds, Series A, 6.75%, 12/18/05(4) 2,000,000 1,428,750
New Money Bonds, Series B, 6.625%, 12/18/05(4) 500,000 357,188
---------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations (Cost $130,729,320) 133,528,630
==========================================================
==========================================================
===============
Loan Participations--0.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A, 6.812%, 9/4/06(4)(10) 5,071,232 3,026,892
---------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989-1990 Integrated Loan Facility Bonds,
6.563%, 7/1/01(4)(10) 785,799 732,758
---------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.,
Tranche B, 6.312%, 11/15/04(4)(10) 450,000 352,125
---------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4)(7) 7,450,000 5,366,328
---------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.772%, 9/30/00(4)(10) JPY 31,990,250 249,373
Tranche B, 1.772%, 9/30/00(4)(10) JPY 344,884,749 2,688,480
---------------------------------------------------------------------------------------------------------------
Total Loan Participations (Cost $12,218,932) 12,415,956
==========================================================
==========================================================
===============
Municipal Bonds and Notes--0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor Agency
Toll Road Capital Appreciation Revenue Bonds, Jr Lien:
Zero Coupon, 8.75%, 1/1/12(9) 15,000,000 4,838,805
Zero Coupon, 9%, 1/1/28(9)(11) 74,000,000 6,886,291
---------------------------------------------------------------------------------------------------------------
Total Municipal Bonds and Notes (Cost $8,601,927) 11,725,096
==========================================================
==========================================================
===============
Corporate Bonds and Notes--76.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Basic Industry--12.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals--1.6% Acetex Corp., 9.75% Sr. Sec. Nts., 10/1/03 10,330,000 10,226,700
---------------------------------------------------------------------------------------------------------------
Arcadian Partner LP, 10.75% Sr. Nts., Series B, 5/1/05 3,120,000 3,389,100
---------------------------------------------------------------------------------------------------------------
NL Industries, Inc.:
0%/13% Sr. Sec. Disc. Nts., 10/15/05(12) 1,680,000 1,318,800
11.75% Sr. Sec. Nts., 10/15/03 2,400,000 2,460,000
---------------------------------------------------------------------------------------------------------------
Terra Industries, Inc., 10.50% Sr. Nts., Series B, 6/15/05 3,120,000 3,276,000
---------------------------------------------------------------------------------------------------------------
Texas Petrochemicals Corp., 11.125% Sr. Sub. Nts., 7/1/06(3)(5) 1,570,000 1,601,891
------------
22,272,491
</TABLE>
7 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Containers--2.1% Container Corp., 9.75% Gtd. Sr. Nts., 4/1/03 $1,500,000 $1,477,500
---------------------------------------------------------------------------------------------------------------
U.S. Can Co., 13.50% Sr. Sub. Nts., 1/15/02 25,450,000 27,358,750
------------
28,836,250
- -----------------------------------------------------------------------------------------------------------------------------------
Metals/Mining--1.2%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 7,271,000 7,907,212
---------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02 6,350,000 6,286,500
---------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 1,890,000 2,154,600
------------
16,348,312
- -----------------------------------------------------------------------------------------------------------------------------------
Paper--4.5% Asia Pulp & Paper International Finance Co.,
Zero Coupon Currency Nts., 16.551%, 5/15/97(9) IDR 1,500,000,000 560,414
---------------------------------------------------------------------------------------------------------------
Buckeye Cellulose Corp.:
8.50% Sr. Sub. Nts., 12/15/05 1,930,000 1,843,150
9.25% Sr. Sub. Nts., 9/15/08(3) 3,000,000 3,003,750
---------------------------------------------------------------------------------------------------------------
Domtar, Inc.:
11.25% Debs., 9/15/17 1,060,000 1,131,550
12% Nts., 4/15/01 1,060,000 1,226,950
---------------------------------------------------------------------------------------------------------------
Florida Coast Paper Co. LLC/Florida Coast Paper Finance Corp.,
12.75% First Mtg. Nts., 6/1/03(5) 480,000 499,200
---------------------------------------------------------------------------------------------------------------
Gaylord Container Corp.:
11.50% Sr. Nts., 5/15/01 2,500,000 2,575,000
12.75% Sr. Sub. Disc. Debs., 5/15/05 2,500,000 2,643,750
---------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV,
12.50% Sr. Sec. Gtd. Nts., Series C, 6/15/06 9,860,000 10,525,550
---------------------------------------------------------------------------------------------------------------
QUNO Corp., 9.125% Sr. Nts., 5/15/05 8,340,000 8,194,050
---------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02 3,890,000 3,685,775
---------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.25% Sr. Nts., 4/1/06 5,495,000 5,481,262
10.875% Sr. Sub. Nts., 4/1/08 3,665,000 3,628,350
---------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04 8,300,000 8,839,500
---------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
10.75% First Mtg. Nts., 10/1/02 2,840,000 2,882,600
10.75% Sr. Sub. Nts., 6/15/97 1,000,000 1,025,000
---------------------------------------------------------------------------------------------------------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05 4,150,000 3,880,250
------------
61,626,101
- -----------------------------------------------------------------------------------------------------------------------------------
Steel--2.8% Armco, Inc., 8.50% Sinking Fund Debs., 9/1/01 27,317,000 27,043,830
---------------------------------------------------------------------------------------------------------------
Republic Engineered Steels, Inc., 9.875% First Mtg. Nts., 12/15/01 4,515,000 4,232,812
---------------------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10.50% Sr. Gtd. Nts., Series B, 3/1/02 6,520,000 6,634,100
------------
37,910,742
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Related--17.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Products--3.4%
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 11.681%, 5/27/98(9) 15,520,000 13,075,600
---------------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 12,000,000 13,140,000
---------------------------------------------------------------------------------------------------------------
International Semi-Tech Microelectronics, Inc.,
0%/11.50% Sr. Sec. Disc. Nts., 8/15/03(12) 17,100,000 10,174,500
---------------------------------------------------------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 3,840,000 3,974,400
---------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 5,990,000 6,274,525
------------
46,639,025
</TABLE>
8 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Food/Beverages/Tobacco--1.6%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03 $ 2,000,000 $ 2,100,000
---------------------------------------------------------------------------------------------------------------
Cott Corp., 9.375% Sr. Nts., 7/1/05 11,515,000 11,068,794
---------------------------------------------------------------------------------------------------------------
Curtice-Burns Foods, Inc., 12.25% Sr. Sub. Nts., 2/1/05 4,500,000 4,387,500
---------------------------------------------------------------------------------------------------------------
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06 2,900,000 2,929,000
---------------------------------------------------------------------------------------------------------------
Unilever CR spol. s.r.o., guaranteed by Unilever NV, Rotterdam,
The Netherlands, Zero Coupon Promissory Nts., 11.184%, 10/11/96(9) CZK 40,000,000
1,409,365
------------
21,894,659
- -----------------------------------------------------------------------------------------------------------------------------------
Healthcare--3.9% Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 600,000 765,000
---------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 13,630,000 14,720,400
---------------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02 7,977,000 8,914,297
---------------------------------------------------------------------------------------------------------------
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02 4,745,000 5,272,881
---------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05 14,250,000 15,105,000
---------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts. 8/15/04(12) 9,203,000 9,018,940
------------
53,796,518
- -----------------------------------------------------------------------------------------------------------------------------------
Hotel/Gaming--4.5%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00(10) 2,750,000 1,787,500
---------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 10.75% Sr. Sub. Nts., Series B, 9/1/03 6,000,000 6,330,000
---------------------------------------------------------------------------------------------------------------
California Hotel Finance Corp., 11% Sr. Sub. Nts., 12/1/02 1,700,000 1,802,000
---------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00(10)(13) 1,000,000 700,000
---------------------------------------------------------------------------------------------------------------
Empress River Casino Finance Corp., 10.75% Sr. Gtd. Nts., 4/1/02 6,170,000 6,478,500
---------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 2,250,000 2,328,750
---------------------------------------------------------------------------------------------------------------
Griffin Gaming & Entertainment, Inc., 7.97% First Mtg.
Non-Recourse Pass-Through Nts., 6/30/00(4) 6,785,000 6,547,525
---------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07 4,290,000 3,957,525
---------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 3,930,000 3,753,150
---------------------------------------------------------------------------------------------------------------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts., 5/15/03(5) 2,340,000 2,538,900
---------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., 11/15/02(5) 3,160,000 3,981,600
---------------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05 3,300,000 3,357,750
---------------------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 1,900,000 1,985,500
---------------------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina Finance Corp.,
13.50% First Mtg. Nts., 3/15/03(5) 2,100,000 2,268,000
---------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 6,200,000 6,107,000
---------------------------------------------------------------------------------------------------------------
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 7,915,000 7,994,150
---------------------------------------------------------------------------------------------------------------
Trump's Castle Funding, Inc., 13.875% Sub. Nts., 11/15/05(17) 30 30
------------
61,917,880
- -----------------------------------------------------------------------------------------------------------------------------------
Leisure--0.4% Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(10) 5,019,737 5,289,548
</TABLE>
9 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Restaurants--1.4%
Apple South, Inc., 9.75% Sr. Nts., 6/1/06 $ 5,772,000 $ 5,699,850
---------------------------------------------------------------------------------------------------------------
Carrols Corp., 11.50% Sr. Nts., 8/15/03 6,840,000 6,976,800
---------------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 4,600,000 4,542,500
9.75% Sr. Sub. Nts., 6/1/02 2,500,000 2,412,500
---------------------------------------------------------------------------------------------------------------
19,631,650
- -----------------------------------------------------------------------------------------------------------------------------------
Textile/Apparel--2.6
Consoltex Group, Inc., 11% Sr. Sub. Gtd. Nts., Series B, 10/1/03 5,600,000 5,124,000
---------------------------------------------------------------------------------------------------------------
Polysindo International Finance Co. BV, 11.375% Bonds, 6/15/06 1,200,000 1,227,000
---------------------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc., 7% Sr. Nts., 5/15/98(10)(13)(14) 5,955,189 37,220
---------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa:
13% Sr. Nts., 6/15/01 7,150,000 7,847,125
Zero Coupon Promissory Nts., 17.90%, 10/23/96(9) IDR 9,000,000,000 3,643,636
Zero Coupon Promissory Nts., 19.111%, 2/28/97(9) IDR 4,500,000,000 1,705,185
---------------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 10,000,000 10,625,000
---------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 6,105,000 5,952,375
------------
36,161,541
- -----------------------------------------------------------------------------------------------------------------------------------
Energy--7.3% Chesapeake Energy Corp., 9.125% Sr. Nts., 4/15/06 2,185,000 2,163,150
---------------------------------------------------------------------------------------------------------------
Crown Central Petroleum Corp., 10.875% Sr. Nts., 2/1/05 250,000 253,125
---------------------------------------------------------------------------------------------------------------
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00 5,995,000 5,965,025
---------------------------------------------------------------------------------------------------------------
Ferrellgas LP/Ferrellgas Finance Corp., 10% Sr. Nts., 8/1/01 9,700,000 10,063,750
---------------------------------------------------------------------------------------------------------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., 6/15/06(5) 2,310,000 2,240,700
---------------------------------------------------------------------------------------------------------------
Gerrity Oil & Gas Corp., 11.75% Sr. Sub. Nts., 7/15/04 3,000,000 3,180,000
---------------------------------------------------------------------------------------------------------------
Giant Industries, Inc., 9.75% Sr. Sub. Nts., 11/15/03 250,000 245,625
---------------------------------------------------------------------------------------------------------------
Kelley Oil & Gas Corp., 13.50% Sr. Nts., 6/15/99 5,380,000 5,716,250
---------------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15 5,700,000 5,970,750
---------------------------------------------------------------------------------------------------------------
Mesa Operating Co., 0%/11.625% Gtd. Sr. Sub. Disc Nts., 7/1/06(3)(12) 9,000,000 5,276,250
---------------------------------------------------------------------------------------------------------------
Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06(3) 3,700,000 3,757,812
---------------------------------------------------------------------------------------------------------------
Nuevo Energy Co., 12.50% Sr. Sub. Nts., 6/15/02 7,240,000 7,837,300
---------------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02 11,765,000 13,059,150
---------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05 4,709,000 5,203,445
9.375% Sub. Debs., 2/1/06 3,830,000 3,619,350
---------------------------------------------------------------------------------------------------------------
Santa Fe Energy Resources, Inc., 11% Sr. Sub. Debs., 5/15/04 8,090,000 8,737,200
---------------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 6,300,000 6,315,750
---------------------------------------------------------------------------------------------------------------
Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 9.486%, 11/1/97(9) 7,000,000 6,335,000
---------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 4,465,000 4,219,425
------------
100,159,057
</TABLE>
10 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Financial Services--4.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Banks & Thrifts--0.6%
Banco Bamerindus do Brasil SA, 11% Unsub. Unsec. Nts., 11/24/97 $ 1,775,000 $ 1,717,312
---------------------------------------------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 1,650,000 1,501,500
---------------------------------------------------------------------------------------------------------------
First Nationwide (Parent) Holdings, Inc., 12.50% Sr. Nts., 4/15/03 3,120,000 3,268,200
---------------------------------------------------------------------------------------------------------------
Hutama Karya, Zero Coupon Medium-Term Nts., 17.668%, 3/26/97(9) IDR 4,000,000,000
1,527,689
------------
8,014,701
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial--1.3%
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02(10) 1,624,837 1,787,321
---------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 5,590,000 5,590,000
---------------------------------------------------------------------------------------------------------------
GPA Holland BV, 8.94% Medium-Term Nts., Series C, 2/16/99 7,300,000 7,263,500
---------------------------------------------------------------------------------------------------------------
GPA Investment BV, 6.40% Nts., 11/19/98 2,000,000 1,910,000
---------------------------------------------------------------------------------------------------------------
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03(10)(13) 8,802,000 1,804,410
------------
18,355,231
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance--2.3%
American Life Holding Co., 11.25% Sr. Sub. Nts., 9/15/04 11,980,000 12,549,050
---------------------------------------------------------------------------------------------------------------
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 10,170,000 11,136,150
---------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 8,250,000 8,229,375
------------
31,914,575
- -----------------------------------------------------------------------------------------------------------------------------------
Housing Related--2.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Building Materials--0.5%
Building Materials Corp., 0%/11.75% Sr. Deferred Coupon Nts.,
Series B, 7/1/04(12) 3,000,000 2,227,500
---------------------------------------------------------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 5,165,000 5,048,787
------------
7,276,287
- -----------------------------------------------------------------------------------------------------------------------------------
Homebuilders/
Real Estate--1.6%
First Place Tower, Inc.:
9.22% First Mtg. Bonds, 12/15/05 CAD 1,464,450 1,091,137
Units (each unit consists of one $10 principal amount of 8.50%
cv. sub. debs., 12/15/15 and 40 common shares)(15) CAD 880,730 1,160,875
---------------------------------------------------------------------------------------------------------------
NVR, Inc., 11% Sr. Gtd. Nts., 4/15/03 7,100,000 7,135,500
---------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 8,900,000 6,764,000
---------------------------------------------------------------------------------------------------------------
U.S. Home Corp., 9.75% Sr. Nts., 6/15/03 6,100,000 5,947,500
------------
22,099,012
- -----------------------------------------------------------------------------------------------------------------------------------
Manufacturing--2.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Aerospace/Electronics/
Computers--1.1%
Businessland, Inc., 5.50% Sub. Debs., 3/1/07(10) 3,850,000 2,117,500
---------------------------------------------------------------------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 10,730,000 11,481,100
---------------------------------------------------------------------------------------------------------------
UNC, Inc., 11% Sr. Sub. Nts., 6/1/06(5) 2,000,000 2,035,000
------------
15,633,600
- -----------------------------------------------------------------------------------------------------------------------------------
Automotive--1.5% Aftermarket Technology Corp.:
12% Sr. Sub. Nts., Series B, 8/1/04 3,530,000 3,830,050
12% Sr. Sub. Nts., Series D, 8/1/04 970,000 1,052,450
---------------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 4,650,000 4,743,000
---------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp.:
11.25% Sr. Nts., 10/1/02 1,325,000 1,371,375
9.50% Sr. Sec. Nts., 6/1/00 800,000 800,000
</TABLE>
11 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Automotive
(continued)
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06(3) $6,000,000 $ 6,082,500
---------------------------------------------------------------------------------------------------------------
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01 2,000,000 2,055,000
---------------------------------------------------------------------------------------------------------------
19,934,375
- -----------------------------------------------------------------------------------------------------------------------------------
Media--10.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Broadcasting--2.3%
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 915,000 862,387
---------------------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.375% Sr. Sub. Nts., Series A, 12/1/05(5) 3,700,000 3,404,000
---------------------------------------------------------------------------------------------------------------
New World Communications Group Holding Corp.,
Zero Coupon Sr. Disc. Nts., Series B, 11.689%, 6/15/99(9) 4,220,000 3,085,875
---------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts. 10/1/02 9,950,000 10,397,750
---------------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., 5/15/06(5) 2,730,000 2,730,000
---------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 7,320,000 7,137,000
---------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., 1/15/06 4,500,000 4,027,500
------------
31,644,512
- -----------------------------------------------------------------------------------------------------------------------------------
Cable Television--6.2%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(12) 11,388,688 7,972,082
---------------------------------------------------------------------------------------------------------------
Australis Media Ltd., Units (each unit consists of $1,000 principal
amount of 0%/14% sr. sub. disc. nts., 5/15/03 and one warrant to
purchase 57.721 ordinary shares)(12)(15) 14,610,000 8,766,000
---------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC:
0%/11.875% Sr. Disc. Nts., 9/15/05(12) 9,370,000 5,762,550
0%/11.95% Sr. Disc. Nts., 7/15/04(12) 2,900,000 2,044,500
---------------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 1,600,000 1,620,000
---------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 10.75% Sr. Sub. Debs., 4/1/04 7,800,000 8,073,000
---------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 11% Sr. Sub. Debs., 6/1/07 2,430,000 2,753,639
---------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(12) 8,980,000
6,555,400
---------------------------------------------------------------------------------------------------------------
EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec. Disc. Nts., 3/15/04(5) 3,250,000 2,031,250
---------------------------------------------------------------------------------------------------------------
International CableTel, Inc.:
0%/10.875% Sr. Deferred Coupon Nts., 10/15/03(12) 640,000 467,200
0%/12.75% Sr. Deferred Coupon Nts., 4/15/05(12) 14,595,000 9,413,775
---------------------------------------------------------------------------------------------------------------
Marcus Cable Operating Co. LP/Marcus Cable Capital Corp.,
0%/13.50% Sr. Sub. Gtd. Disc. Nts., Series II, 8/1/04(12) 3,385,000 2,437,200
---------------------------------------------------------------------------------------------------------------
People's Choice TV Corp., 0%/13.125% Sr. Disc. Nts., 6/1/04(12) 8,580,000 4,933,500
---------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 11% Sr. Sub. Gtd. Debs., 12/1/15 1,650,000 1,703,625
---------------------------------------------------------------------------------------------------------------
TeleWest PLC, 0%/11% Sr. Disc. Debs., 10/1/07(12) 6,070,000 3,611,650
---------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 5,000,000 5,566,740
---------------------------------------------------------------------------------------------------------------
United International Holdings, Inc.:
0%/14% Sr. Disc. Nts., 5/15/06(5)(12) 1,925,000 1,015,438
Zero Coupon Sr. Sec. Disc. Nts., Series B, 13.239%, 11/15/99(9) 7,690,000 5,075,400
Zero Coupon Sr. Sec. Disc. Nts., 12.23%, 11/15/99(9) 1,675,000 1,105,500
---------------------------------------------------------------------------------------------------------------
Videotron Holdings PLC, 0%/11% Sr. Disc. Nts., 8/15/05(12) 6,200,000 4,061,000
------------
84,969,449
</TABLE>
12 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Media--2.2%
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03 $ 6,950,000 $ 7,236,688
---------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03 7,550,000 7,757,625
---------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 10.125% Sr. Gtd. Debs., 10/15/12 2,000,000 2,264,488
---------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.:
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(12) 10,670,000 9,336,250
9.75% Sr. Sec. Nts., 8/1/00 3,025,000 3,146,000
------------
29,741,051
- -----------------------------------------------------------------------------------------------------------------------------------
Publishing/Printing--0.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs , Series B, 3/1/05(12) 3,130,000
2,151,875
- -----------------------------------------------------------------------------------------------------------------------------------
Other--1.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Environmental--0.4%
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 6,100,000 5,612,000
---------------------------------------------------------------------------------------------------------------
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts., 2/15/03(10)(13) 800,000 524,000
------------
6,136,000
- -----------------------------------------------------------------------------------------------------------------------------------
Services--1.2% Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03 1,550,000 1,453,125
---------------------------------------------------------------------------------------------------------------
Protection One, Inc., 0%/13.625% Sr. Disc. Nts., 6/30/05(12) 15,350,000 13,124,250
---------------------------------------------------------------------------------------------------------------
Sociedad Comercial del Plata SA, 11.50% Medium-Term Nts., 5/9/00 1,340,000 1,353,400
------------
15,930,775
- -----------------------------------------------------------------------------------------------------------------------------------
Retail--4.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Specialty Retailing--1.8%
Brylane LP/Brylane Capital Corp., 10% Sr. Sub. Nts., Series B, 9/1/03 11,100,000 10,489,500
---------------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 7,270,000 7,306,350
---------------------------------------------------------------------------------------------------------------
Matahari International Finance Co. BV, 11.25% Gtd Nts., 3/15/01(5) 3,500,000 3,657,500
---------------------------------------------------------------------------------------------------------------
United Stationers Supply Co., 12.75% Sr. Sub. Nts. 5/1/05 2,500,000 2,693,750
------------
24,147,100
- -----------------------------------------------------------------------------------------------------------------------------------
Supermarkets--3.0%
Grand Union Co., 12% Sr. Nts., 9/1/04 22,426,000 21,052,408
---------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03 7,618,658 7,675,798
---------------------------------------------------------------------------------------------------------------
Penn Traffic Co.:
11.50% Sr. Nts., 4/15/06 1,835,000 1,711,138
9.625% Sr. Sub. Nts., 4/15/05 8,710,000 6,292,975
---------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04 4,590,000 4,417,875
------------
41,150,194
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation--2.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Air Transportation--0.5%
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 6,000,000 6,555,000
- -----------------------------------------------------------------------------------------------------------------------------------
Railroads--1.1% Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(12) 21,515,000 14,845,350
- -----------------------------------------------------------------------------------------------------------------------------------
Shipping--1.1% Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04 9,150,000 9,653,250
---------------------------------------------------------------------------------------------------------------
Sea Containers Ltd., 12.50% Sr. Sub. Debs., Series A, 12/1/04 260,000 289,900
---------------------------------------------------------------------------------------------------------------
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04 5,370,000 5,557,950
------------
15,501,100
</TABLE>
13 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities--10.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities--0.9%
California Energy Co., 0%/10.25% Sr. Disc. Nts., 1/15/04(12) $ 2,060,000 $ 2,018,800
---------------------------------------------------------------------------------------------------------------
Calpine Corp., 10.50% Sr. Nts., 5/15/06(5) 3,200,000 3,216,000
---------------------------------------------------------------------------------------------------------------
Centragas Natural Gas Transmission System, 10.65% Sec. Sr. Bonds, 12/1/10(5) 1,158,321
1,195,967
---------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 3,250,000 3,241,875
---------------------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec. Nts., 12/28/08(5) 2,586,206 2,237,069
------------
11,909,711
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications--9.1%
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 9,660,000 10,046,400
---------------------------------------------------------------------------------------------------------------
American Communications Services, Inc.:
0%/12.75% Sr. Disc. Nts., 4/1/06(12) 5,850,000 3,071,250
0%/13% Sr. Disc. Nts., 11/1/05(12) 2,575,000 1,442,000
---------------------------------------------------------------------------------------------------------------
Arch Communications Group, Inc., 0%/10.875% Sr. Disc. Nts., 3/15/08(12) 5,170,000
2,688,400
---------------------------------------------------------------------------------------------------------------
Brooks Fiber Properties, Inc., 0%/10.875% Sr. Disc. Nts., 3/1/06(5)(12) 3,700,000 1,988,750
---------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05(5)(12) 2,000,000 1,430,000
---------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.192%, 8/15/00(9) 17,365,000 10,853,125
---------------------------------------------------------------------------------------------------------------
Comcast Cellular Corp., Zero Coupon Nts., Series B, 6.23%, 3/5/00(9) 7,400,000 5,106,000
---------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12) 5,000,000
3,225,000
---------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(5)(12) 1,400,000
1,387,750
---------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05(12) 11,200,000 6,496,000
---------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(12) 13,788,000 12,995,190
---------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc., Units (each unit consists of
$1,000 principal amount of 0%/13% sr. disc. nts.,
4/15/03 and one warrant to purchase 1.8645 common stock)(5)(12)(15) 4,745,000 2,680,925
---------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp., 0%/14% Sr. Disc. Nts., 5/15/02(12) 2,950,000 1,054,625
---------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(5)(12) 8,090,000 4,429,275
0%/13.50% Sr. Disc. Nts., 9/15/05(12) 13,840,000 8,338,600
---------------------------------------------------------------------------------------------------------------
InterCel, Inc., 0%/12% Sr. Disc. Nts., 5/1/06(12) 7,200,000 3,960,000
---------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc.:
0%/8.875% Sr. Disc. Nts., 1/15/06(12) 2,975,000 1,807,313
0%/9.375% Sr. Disc. Nts., 1/15/04(12) 8,520,000 6,475,200
---------------------------------------------------------------------------------------------------------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06(5) 630,000 743,400
Units (each unit consists of $1,000 principal amount of 0%/14% sr. disc. nts.,
6/1/04 and one warrant to purchase 34 ordinary shares)(5)(12)(15) 4,350,000 3,436,500
---------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(12) 11,050,000 8,784,750
0%/14% Sr. Sub. Disc. Nts., 11/15/01(12) 4,773,000 4,343,430
---------------------------------------------------------------------------------------------------------------
Rogers Cantel, Inc., 9.375% Sr. Sec. Debs., 6/1/08 3,000,000 2,917,500
---------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(3)(12) 9,450,000
5,504,625
---------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II:
14% Sr. Nts., 11/1/04 2,000,000 2,310,000
9.50% Sr. Nts., 2/1/04 312,000 290,160
---------------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06 6,610,000 6,618,263
-------------
124,424,431
-------------
Total Corporate Bonds and Notes (Cost $1,046,534,731) 1,044,818,103
</TABLE>
14 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
<S> <C> <C>
==========================================================
==========================================================
===============
Common Stocks--1.1%
- -----------------------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc.(16) 9,500 $ 123,500
---------------------------------------------------------------------------------------------------------------
American Telecasting, Inc.(16) 14,000 185,500
---------------------------------------------------------------------------------------------------------------
Digicon, Inc.(16) 4,930 82,577
---------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A(16) 23,105 652,716
---------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.(10) 1,350 1,350,000
---------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc.(10)(16) 39,357 98,392
---------------------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc.(16) 4,266 58,658
---------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., Cl. A(16) 96,000 750,000
---------------------------------------------------------------------------------------------------------------
Grand Union Co.(16) 144,928 942,032
---------------------------------------------------------------------------------------------------------------
Great Bay Power Corp.(16) 46,533 343,181
---------------------------------------------------------------------------------------------------------------
Griffin Gaming & Entertainment, Inc.(16) 56,538 876,339
---------------------------------------------------------------------------------------------------------------
Gulfstream Housing Corp.(16) 844,536 --
---------------------------------------------------------------------------------------------------------------
Hollywood Casino Corp.(16) 90,836 624,497
---------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc.(16) 33,200 830,000
---------------------------------------------------------------------------------------------------------------
LTV Corp. 958 10,897
---------------------------------------------------------------------------------------------------------------
New World Communications Group, Inc., Cl. B(16) 18,225 266,541
---------------------------------------------------------------------------------------------------------------
Omnipoint Corp. (10)(16) 200,000 4,940,000
---------------------------------------------------------------------------------------------------------------
People's Choice TV Corp.(16) 7,800 142,350
---------------------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc.(10)(14)(16) 1,688,400 52,763
---------------------------------------------------------------------------------------------------------------
Resorts International, Inc.(16) 187,187 --
---------------------------------------------------------------------------------------------------------------
Southland Corp.(16) 5,800 17,581
---------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc., Cl. A(16) 12,900 246,713
---------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc.(10)(16) 370,500 370,500
---------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., Cl. A(16) 45,400 624,250
---------------------------------------------------------------------------------------------------------------
Walter Industries, Inc.(16) 153,716 2,171,239
---------------------------------------------------------------------------------------------------------------
Zale Corp.(16) 10,113 170,657
------------
Total Common Stocks (Cost $17,608,196) 15,930,883
==========================================================
==========================================================
===============
Preferred Stocks--2.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 8.50% Cum. Cv., Series I 176,000 4,576,000
---------------------------------------------------------------------------------------------------------------
California Federal Bank, 10.625% Non-Cum., Series B 21,040 2,303,880
---------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C(5)(17) 390,000 4,036,500
---------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 11.40% Series A Preferred Stock(17) 14,500 1,522,500
---------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. 108,300 11,858,850
---------------------------------------------------------------------------------------------------------------
K-III Communications Corp., $11.625 Exchangeable, Series B(17) 15,907 1,602,699
---------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred Stock(5)(16) 61,880
1,949,220
---------------------------------------------------------------------------------------------------------------
Unisys Corp., $3.75 Cv., Series A 29,400 896,700
---------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $27,000,425) 28,746,349
</TABLE>
15 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Market Value
Units See Note 1
<S> <C> <C>
==========================================================
==========================================================
===============
Rights, Warrants and Certificates--0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc. Wts., Exp 11/05(5) 2,575 $ 257,500
---------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 40,000 240,000
---------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A(10) 326,800 3,268
Litigation Trust(10) 1,045,990 10,460
---------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00(10) 125,000 31,250
---------------------------------------------------------------------------------------------------------------
Casino America, Inc. Wts., Exp. 11/96 13,052 --
---------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts., Exp. 8/03 12,305 184,575
---------------------------------------------------------------------------------------------------------------
Communication Cellular SA Wts., Exp. 11/03(5) 5,000 25,000
---------------------------------------------------------------------------------------------------------------
Digicon, Inc. Wts., Exp. 7/96 1,657 52
---------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.:
Cl. C Wts., Exp. 12/99 69,654 957,742
Cl. D Wts., Exp. 12/01 69,654 957,742
---------------------------------------------------------------------------------------------------------------
Furniture Brands International, Inc., Series 1 Wts., Exp. 8/99 32,716 102,238
---------------------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 7/96 163,894 1,280,422
---------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 6,000 --
---------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(5) 50,820 978,285
---------------------------------------------------------------------------------------------------------------
Jewel Recovery LP, Participation Units of Limited Partners' Interest 10,113 --
---------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00 32,000 790,400
---------------------------------------------------------------------------------------------------------------
People's Choice TV Corp. Wts., Exp. 6/00 8,580 8,580
---------------------------------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03 182,000 2,707,250
Exp. 6/05 49,120 626,280
---------------------------------------------------------------------------------------------------------------
Republic Health Corp. Wts., Exp. 4/00 3,763 --
---------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., Cl. B Wts., Exp. 12/06(5) 6,188 80,444
---------------------------------------------------------------------------------------------------------------
Terex Corp. Rts., Exp. 7/96(5) 534 27
---------------------------------------------------------------------------------------------------------------
Trizec Corp. Wts., Exp. 7/99 16,277 13,707
---------------------------------------------------------------------------------------------------------------
UGI Corp. Wts., Exp. 3/98 63,583 3,179
---------------------------------------------------------------------------------------------------------------
Total Rights, Warrants and Certificates (Cost $2,242,708) 9,258,401
Face
Amount(1)
==========================================================
==========================================================
===============
Structured Instruments--2.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch,
14% CD Linked Nts., 12/17/96 (indexed to the cross
currency rates of Greek Drachma and European Currency Unit) $ 3,500,000 3,505,600
---------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch, 5.60%
CD Linked Nts., 1/30/97 (indexed to the closing Nikkei 225 Index on
1/23/97, 10 yr. Japanese Yen swap rate & New Zealand Dollar on 1/28/97) NZD 1,508,523
1,119,690
---------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, New York Branch, 14%
CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) 7,000,000 6,869,100
---------------------------------------------------------------------------------------------------------------
Internationale Nederlanden Bank NV, Prague Branch, Zero Coupon
Promissory Nts., 10.516%, 4/28/97(9) CZK 92,000,000 3,074,451
---------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts., 12.638%,
1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(9) 1,600,000 1,508,320
</TABLE>
16 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Structured Instruments
(continued)
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts., 12.886%,
1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(9) $ 1,500,000 $ 1,414,050
---------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts., 12.61%,
1/3/97 (indexed to the Brazilian National Treasury Nts., Zero Coupon, 1/2/97)(9) 1,500,000 1,414,050
---------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97
(indexed to the closing Nikkei 225 Index on 1/23/97 5 yr. & 3 mos.
Japanese Yen Swap rate & New Zealand Dollar) 4,300,000 4,343,645
---------------------------------------------------------------------------------------------------------------
United Mexican States Linked Nts. (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 3,300,000
3,828,000
------------
Total Structured Instruments (Cost $26,487,249) 27,076,906
==========================================================
==========================================================
===============
Repurchase Agreement--3.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Canadian Imperial Bank of Commerce,
5.45%, dated 6/28/96, to be repurchased at $47,721,664 on 7/1/96,
collateralized by U.S. Treasury Bonds, 9.125%--11 25%, 2/15/15--5/11/18,
with a value of $16,861,371, and U.S. Treasury Nts., 5.25%--8.50%,
1/11/97--11/15/04, with a value of $31,865,741 (Cost $47,700,000) 47,700,000 47,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,366,952,644) 100.7% 1,381,470,204
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.7) (10,120,075)
------- ---------------
Net Assets 100.0% $ 1,371,350,129
=======
===============
1. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies:
AUD--Australian Dollar ESP--Spanish Peseta JPY--Japanese Yen
CAD--Canadian Dollar GBP--British Pound Sterling NZD--New Zealand Dollar
CZK--Czech Koruna IDR--Indonesian Rupiah PLZ--Polish Zloty
DEM--German Deutsche Mark IEP--Irish Punt PTE--Portuguese Escudo
DKK--Danish Krone ITL--Italian Lira SEK--Swedish Krona
2. Interest-Only Strips represent the right to receive the monthly interest payments on an
underlying pool of mortgage loans. These securities typically decline in price as interest rates
decline. Most other fixed-income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on which current interest
is calculated. The price of these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest
rates disclosed represent current yields based upon the current cost basis and estimated timing
and amount of future cash flows.
3. When-issued security to be delivered and settled after June 30, 1996.
4. Represents the current interest rate for a variable rate security.
5. Represents a security sold under Rule 144A, which is exempt from registration under the
Securities Act of 1933, as amended. This security has been determined to be liquid under
guidelines established by the Board of Trustees. These securities amount to $81,427,528 or 5.94%
of the Fund's net assets at June 30, 1996.
6. Indexed instrument for which the principal amount and/or interest due at maturity is affected
by the relative value of a foreign index.
</TABLE>
17 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
7. A sufficient amount of liquid assets has been designated to cover outstanding written call
options, as follows:
Face Expiration Exercise Premium Market Value
Subject to Call Date Price Received See Note 1
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTC Australian Dollar Call Option 1,840,000 7/3/96 $ 1.25 $ 13,984 $ 1,472
--------------------------------------------------------------------------------------------------------------
OTC Czech Koruna/U.S
Dollar Call Option 4,380,000 9/6/96 28.357 58,692 107,879
--------------------------------------------------------------------------------------------------------------
OTC Mexican Peso Call Option 2,960,000 8/5/96 8.03 79,624 105,365
--------------------------------------------------------------------------------------------------------------
OTC Morocco (Kingdom of) Loan
Participation Agreement Call Option 3,500,000 7/12/96 71.25 33,250 43,050
------- --------
$185,550 $257,766
======== ========
8. Represents the current interest rate for an increasing rate security.
9. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase.
10. Identifies issues considered to be illiquid--See Note 8 of Notes to Financial Statements.
11. Securities with an aggregate market value of $6,886,291 are held in collateralized accounts
to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to
Financial Statements.
12. Denotes a step bond: a zero coupon bond that converts to a fixed rate of interest at a
designated future date.
13. Non-income producing--issuer is in default of interest payment.
14. Affiliated company. Represents ownership of at least 5% of the voting securities of the
issuer and is or was an affiliate, as defined in the investment Company Act of 1940, at or during
the period ended June 30, 1996. The aggregate fair value of all securities of affiliated
companies as of June 30, 1996 amounted to $89,983. Transactions during the period in which the
issuer was an affiliate are as follows:
Balance June 30, 1995 Gross Additions Gross Reductions Balance June 30, 1996 Dividend/
---------------------- ------------------ ------------------ --------------------- Interest
Stocks Shares/Face Cost Shares/Face Cost Shares/Face Cost Shares/Face Cost Income
- ------------------------------------------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc. 1,688,400 $1,114,384 -- $ -- -- $ -- 1,688,400 $1,114,384 $ --
Bonds and Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc.,
7% Sr. Nts., 5/15/98 5,955,189 4,662,420 -- -- -- -- 5,955,189 4,662,420 --
---------- ---------- ---------- ---------- ---------
$5,776,804 $ -- $ -- $5,776,804 $ --
========== ========== ==========
========== =========
15. Units may be comprised of several components, such as debt and equity and/or warrants to
purchase equity at some point in the future. For units which represent debt securities, face
amount disclosed represents total underlying principal.
16. Non-income producing security.
17. Interest or dividend is paid in kind.
See accompanying Notes to Financial Statements.
</TABLE>
18 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilites June 30, 1996
<S> <C>
==========================================================
==========================================================
===============
Assets Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,361,175,840) $1,381,380,221
Affiliated companies (cost $5,776,804) 89,983
---------------------------------------------------------------------------------------------------------------
Cash 339,927
---------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5 455,452
---------------------------------------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns 24,121,863
Shares of beneficial interest sold 8,838,437
Investments sold 7,495,406
Closed forward foreign currency exchange contracts 108,643
---------------------------------------------------------------------------------------------------------------
Other 47,452
-------------
Total assets 1,422,877,384
==========================================================
==========================================================
===============
Liabilities Unrealized depreciation on forward foreign currency exchange contracts--Note 5 85,846
---------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $185,550)--see accompanying statement--Note 7 257,766
---------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $37,306,105 purchased on a when-issued basis)--Note 1 40,612,215
Dividends 4,769,682
Shares of beneficial interest redeemed 4,216,948
Distribution and service plan fees 714,654
Daily variation on futures contracts--Note 6 400,121
Closed forward foreign currency exchange contracts 86,804
Transfer and shareholder servicing agent fees 73,838
Trustees' fees 4,407
Other 304,974
--------------
Total liabilities 51,527,255
==========================================================
==========================================================
===============
Net Assets $1,371,350,129
==============
==========================================================
==========================================================
===============
Composition of
Net Assets
Paid-in capital $1,566,202,269
---------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (2,519,975)
---------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (206,188,005)
---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 13,855,840
--------------
Net assets $1,371,350,129
==============
==========================================================
==========================================================
===============
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $1,083,913,133
and 80,210,953 shares of beneficial interest outstanding) $ 13.51
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $ 14.18
---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $279,789,186 and 20,835,599 shares of beneficial interest outstanding) $ 13.43
---------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $7,647,810 and 566,325 shares of beneficial interest outstanding) $ 13.50
See accompanying Notes to Financial Statements
</TABLE>
19 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations For the Year Ended June 30, 1996
<S> <C>
==========================================================
==========================================================
===============
Investment Income Interest (net of foreign withholding taxes of $13,554) $139,098,481
---------------------------------------------------------------------------------------------------------------
Dividends 2,221,658
------------
Total income 141,320,139
==========================================================
==========================================================
===============
Expenses Management fees--Note 4 8,502,884
---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,226,304
Class B 2,363,575
Class C 22,282
---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,470,988
---------------------------------------------------------------------------------------------------------------
Shareholder reports 514,981
---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 305,724
---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 94,089
---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 59,918
---------------------------------------------------------------------------------------------------------------
Insurance expenses 39,842
---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class B 28,287
Class C 2,472
---------------------------------------------------------------------------------------------------------------
Other 62,416
------------
Total expenses 15,693,762
==========================================================
==========================================================
===============
Net Investment Income 125,626,377
==========================================================
==========================================================
===============
Realized and Unrealized
Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options exercised) 17,382,314
Closing of futures contracts (2,173,241)
Closing and expiration of options written (247,438)
Foreign currency transactions (384,019)
------------
Net realized gain 14,577,616
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 13,483,995
Translation of assets and liabilities denominated in foreign currencies (132,672)
------------
Net change 13,351,323
------------
Net realized and unrealized gain 27,928,939
------------
Net Increase in Net Assets Resulting From Operations $153,555,316
============
See accompanying Notes to Financial Statements.
</TABLE>
20 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended June 30,
1996 1995
==========================================================
==========================================================
===============
<S> <C> <C>
Operations Net investment income $125,626,377 $110,729,752
---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 14,577,616 (57,178,186)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 13,351,323 26,763,120
-------------- --------------
Net increase in net assets resulting from operations 153,555,316 80,314,686
==========================================================
==========================================================
===============
Dividends and
Distributions
To Shareholders
Dividends from net investment income:
Class A (103,496,917) (98,284,579)
Class B (20,649,798) (11,983,690)
Class C (185,655) --
---------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- -- (998,196)
Class B -- -- (181,114)
==========================================================
==========================================================
===============
Beneficial Interest
Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions--Note 2:
Class A (1,432,524) 40,387,389
Class B 82,693,557 107,007,443
Class C 7,649,000 --
==========================================================
==========================================================
===============
Net Assets Total increase 118,132,979 116,261,939
---------------------------------------------------------------------------------------------------------------
Beginning of period 1,253,217,150 1,136,955,211
-------------- --------------
End of period (including overdistributed net investment income
of $2,519,975 and $3,769,638, respectively) $1,371,350,129 $1,253,217,150
==============
==============
See accompanying Notes to Financial Statements.
</TABLE>
21 Oppenheimer High Yield Fund
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
------------------------------------------------------------------------------
Year Ended June 30,
1996 1995 1994 1993 1992
==========================================================
==========================================================
===============
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $13.22 $13.63 $14.16 $13.76 $13.08
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.29 1.30 1.42 1.60 1.79
Net realized and unrealized gain (loss) .27 (.40) (.54) .36 .68
---------- ---------- ---------- ---------- --------
Total income from investment
operations 1.56 .90 .88 1.96 2.47
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.27) (1.30) (1.41) (1.56) (1.79)
Tax return of capital distribution -- (.01) -- -- --
---------- ---------- ---------- ---------- --------
Total dividends and distributions
to shareholders (1.27) (1.31) (1.41) (1.56) (1.79)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.51 $13.22 $13.63 $14.16 $13.76
========== ========== ==========
========== ========
==========================================================
==========================================================
===============
Total Return, at Net Asset Value(3) 12.25% 7.09% 6.27% 15.31% 20.06%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $1,083,913 $1,060,752 $1,049,446 $1,119,056 $902,562
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,092,002 $1,005,746 $1,111,103 $ 978,671 $768,339
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.59% 9.81% 10.10% 11.59% 13.15%
Expenses 1.03% 1.03% 0.96% 0.97% 0.92%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 104.9% 93.7% 96.7% 87.2% 64.0%
<CAPTION>
Class B Class C
---------------------------------------------------------- ----------
Period
Ended
Year Ended June 30, June 30,
1996 1995 1994 1993(2) 1996(1)
<S> <C> <C> <C> <C> <C>
==========================================================
==========================================================
===============
Per Share Operating Data:
Net asset value, beginning of period $13.15 $13.57 $14.12 $13.87 $13.30
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.18 1.20 1.35 .23 .77
Net realized and unrealized gain (loss) .27 (.42) (.60) .27 .19
---------- ---------- ---------- ---------- --------
Total income from investment
operations 1.45 .78 .75 .50 .96
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.17) (1.19) (1.30) (.25) (.76)
Tax return of capital distribution -- (.01) -- -- --
---------- ---------- ---------- ---------- --------
Total dividends and distributions
to shareholders (1.17) (1.20) (1.30) (.25) (.76)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.43 $13.15 $13.57 $14.12 $13.50
========== ========== ==========
========== ========
==========================================================
==========================================================
===============
Total Return, at Net Asset Value(3) 11.40% 6.21% 5.31% 3.54% 7.36%
==========================================================
==========================================================
===============
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $279,789 $192,465 $87,509 $10,493 $7,648
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $236,362 $134,550 $51,816 $ 4,405 $3,378
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.75% 8.95% 8.98% 10.84%(4) 8.41%(4)
Expenses 1.84% 1.84% 1.88% 2.28%(4) 1.90%(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 104.9% 93.7% 96.7% 87.2% 104.9%
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
2. For the period from May 3, 1993 (inception of offering) to June 30, 1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1996 were $1,387,208,016 and $1,318,582,145, respectively.
See accompanying Notes to Financial Statements.
22 Oppenheimer High Yield Fund
<PAGE>
Notes to Financial Statements
==========================================================
======================
1. Significant
Accounting Policies
Oppenheimer High Yield Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment objective is to seek a high level of
current income primarily through investing in a diversified portfolio of
high-yield fixed income securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class
C shares. Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge. All three
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive voting rights
with respect to matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such securities which cannot
be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Forward foreign currency exchange contracts
are valued based on the closing prices of the forward currency contract rates in
the London foreign exchange markets on a daily basis as provided by a reliable
bank or dealer. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior
trading date if it is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread, the closing bid or asked
price closest to the last reported sale price is used.
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. During the
period, such securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of June 30, 1996, the
Fund had entered into outstanding when-issued or forward commitments of
$37,306,105.
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Fund may enter into mortgage "dollar-rolls" in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records each dollar-roll as a sale and a new purchase
transaction.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. At June 30, 1996, securities with an
aggregate market value of $3,065,630, representing 0.22% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
23 Oppenheimer High Yield Fund
<PAGE>
Notes to Financial Statements (Continued)
==========================================================
======================
1. Significant
Accounting Policies
(continued)
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At June 30, 1996, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $193,339,000, which expires between 1997 and 2004.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Fund.
During the year ended June 30, 1996, the Fund changed the classification of
distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. During the year ended June 30, 1996, amounts have been
reclassified to reflect an increase in overdistributed net investment income of
$44,344. Accumulated net realized loss on investments was decreased by the same
amount.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and options written and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes. Dividends in kind are
recognized as income on the ex-dividend date, at the current market value of the
underlying security. Interest on payment-in-kind debt instruments is accrued as
income at the coupon rate and a market adjustment is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
24 Oppenheimer High Yield Fund
<PAGE>
==========================================================
======================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1996(1) Year Ended June 30, 1995
--------------------------------- --------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
==========================================================
==========================================================
================
Class A:
Sold 19,901,989 $ 267,392,441 19,902,935 $ 270,466,315
Dividends reinvested 4,497,586 60,481,931 4,217,534 45,347,591
Redeemed (24,448,371) (329,306,896) (20,862,882) (275,426,517)
----------- ------------ ----------- ------------
Net increase (decrease) (48,796) $ (1,432,524) 3,257,587 $ 40,387,389
=========== ============
=========== ============
Class B:
Sold 11,155,284 $ 149,169,252 10,963,657 $ 143,405,028
Dividends reinvested 730,103 9,766,261 431,770 5,641,548
Redeemed (5,689,226) (76,241,956) (3,205,114) (42,039,133)
----------- ------------ ----------- ------------
Net increase 6,196,161 $ 82,693,557 8,190,313 $ 107,007,443
=========== ============
=========== ============
Class C:
Sold 870,562 $ 11,774,656 -- $ --
Dividends reinvested 8,861 120,139 -- --
Redeemed (313,098) (4,245,795) -- --
----------- ------------ ----------- ------------
Net increase 566,325 $ 7,649,000 -- $ --
=========== ============
=========== ============
</TABLE>
1. For the year ended June 30, 1996 for Class A and Class B shares and for the
period from November 1, 1995 (inception of offering) to June 30, 1996 for Class
C shares.
==========================================================
======================
3. Unrealized Gains
And Losses on
Investments
At June 30, 1996, net unrealized appreciation on investments and options written
of $14,445,344 was composed of gross appreciation of $53,064,831, and gross
depreciation of $38,619,487.
==========================================================
======================
4. Management Fees
And Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% on the first
$200 million of average annual net assets with a reduction of 0.03% on each $200
million thereafter to $800 million, 0.60% on the next $200 million and 0.50% on
net assets in excess of $1 billion. The Manager has agreed to reimburse the Fund
if aggregate expenses (with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
For the year ended June 30, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $2,823,797, of which $688,648 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $4,015,481 and $71,787, of which $54,698 was paid to an
affiliated broker/dealer for Class B shares. During the year ended June 30,
1996, OFDI received contingent deferred sales charges of $765,717 upon
redemption of Class B shares as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and share holder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the year ended June 30, 1996, OFDI paid $30,542 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted a reimbursement type Distribution and Service Plan for
Class B shares to reimburse OFDI for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B shares that are
outstanding for 6 years or less. OFDI also receives a service fee of 0.25% per
year to reimburse dealers for providing personal services for accounts that hold
Class B shares. Both fees are computed on the average annual
25 Oppenheimer High Yield Fund
<PAGE>
Notes to Financial Statements (Continued)
==========================================================
======================
4. Management Fees
And Other Transactions
With Affiliates
(continued)
net assets of Class B shares, determined as of the close of each regular
business day. If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plan was terminated. During the year
ended June 30, 1996, OFDI paid $4,093 to an affiliated broker/dealer as
reimbursement for Class B personal service and maintenance expenses and retained
$2,017,065 as reimbursement for Class B sales commissions and service fee
advances, as well as financing costs. As of June 30, 1996, OFDI had incurred
unreimbursed expenses of $10,766,237 for Class B.
The Fund has adopted a compensation type Distribution and Service Plan for
Class C shares to compensate OFDI for its services and costs in distributing
Class C shares and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C shares. OFDI also
receives a service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class C shares. Both fees are computed
on the average annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the Fund, the Board
of Trustees may allow the Fund to continue payments of the asset-based sales
charge to OFDI for certain expenses it incurred before the Plan was terminated.
During the year ended June 30, 1996, OFDI retained $22,282 as compensation for
Class C sales commissions and service fee advances, as well as financing costs.
As of June 30, 1996, OFDI had incurred unreimbursed expenses of $135,220 for
Class C.
==========================================================
======================
5. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge upon the purchase or sale of
a security denominated in a foreign currency. In addition, the Fund may enter
into such contracts as a hedge against changes in foreign currency exchange
rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily basis
as provided by a reliable bank or dealer. The Fund will realize a gain or loss
upon the closing or settlement of the forward transaction.
Securities are held in segregated accounts to cover net exposure on
outstanding forward contracts. Unrealized appreciation or depreciation on
forward contracts is reported in the Statement of Assets and Liabilities.
Realized gains and losses are reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms
of the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At June 30, 1996, the Fund had outstanding forward contracts to purchase and
sell foreign currencies as follows:
<TABLE>
<CAPTION>
Contract Valuation as of Unrealized Unrealized
Contracts to Purchase Exchange Date Amount (000s) June 30, 1996 Appreciation Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Italian Lira (ITL) 5/9/97 6,166,265 ITL $ 3,945,355 $ 77,225 $ --
Contracts to Sell
- ------------------------------------------------------------------------------------------------------------------------------------
Japanese Yen (JPY) 12/18/96--4/14/97 334,675 JPY $ 3,158,346 $ 194,332 $ --
Swiss Francs (CHF) 7/18/96--5/9/97 32,916 CHF 26,638,266 183,895 85,846
------------ ---------- --------
$ 29,796,612 378,227 85,846
============ ---------- --------
Total Appreciation and Depreciation $ 455,452 $ 85,846
========== ========
</TABLE>
==========================================================
======================
6. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
26 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
6. Futures Contracts
(continued)
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At June 30, 1996, the Fund had outstanding futures contracts to sell debt
securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Contracts to Sell Expiration Date Futures Contracts June 30, 1996 Depreciation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes 9/96 776 $82,062,000 $942,203
</TABLE>
==========================================================
======================
7. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended June 30, 1996 was as follows:
<TABLE>
<CAPTION>
Call Options
-----------------------------------------
Number of Amount of
Options Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1995 -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Options written 26,475,298 660,646
- ------------------------------------------------------------------------------------------------------------------------------------
Options closed or expired (13,674,013) (445,385)
- ------------------------------------------------------------------------------------------------------------------------------------
Options exercised (3,617,785) (29,711)
----------- -----------
Options outstanding at June 30, 1996 9,183,500 $ 185,550
===========
===========
</TABLE>
==========================================================
======================
8. Illiquid and
Restricted Securities
At June 30, 1996, investments in securities included issues that are illiquid or
restricted. The securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if its valuation has not changed for a certain period of time. The Fund
intends to invest no more than 10% of its net assets (determined at the time of
purchase and reviewed from time to time) in illiquid or restricted securities.
The aggregate value of these securities subject to this limitation at June 30,
1996 was $27,953,760, which represents 2.04% of the Fund's net assets.
Information concerning these securities is as follows:
27 Oppenheimer High Yield Fund
<PAGE>
Notes to Financial Statements (Continued)
==========================================================
======================
8. Illiquid and
Restricted Securities
(continued)
<TABLE>
<CAPTION>
Valuation
Per Unit
as of
Security Acquisition Date Cost Per Unit June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Algeria (Republic of) Reprofiled Debt Loan Participation, Tranche A,
6.812%, 9/4/06 3/13/96--3/21/96 $ 54.75 $ 59.69
- ------------------------------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series Ag-7A 12/30/92 -- .01
Litigation Trust 12/30/92 -- .01
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00 11/18/93 100.00 65.00
- ------------------------------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00 11/18/93 2.00 .25
- ------------------------------------------------------------------------------------------------------------------------------------
Businessland, Inc., 5.50% Sub. Debs., 3/1/07 9/20/91--1/13/92 52.17 55.00
- ------------------------------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00 11/18/93--12/15/95 87.50 70.00
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989-1990 Integrated Loan Facility Bonds,
6.563%, 7/1/01 12/5/95 92.00 93.25
- ------------------------------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.:
14% Sub. Nts., 6/10/02 4/14/92--3/3/93 100.00 110.00
Common Stock 4/14/92 1,000.00 1,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc. Common Stock 12/16/94 1.50 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02 8/26/92--12/23/92 102.17 105.37
- ------------------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.,
Tranche B, 6.312%, 11/15/04 3/12/96 71.75 78.25
- ------------------------------------------------------------------------------------------------------------------------------------
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03 2/5/93--10/31/95 92.50 20.50
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts., 2/15/03 4/19/95--3/15/96 102.00 65.50
- ------------------------------------------------------------------------------------------------------------------------------------
OmniPoint Corp. Common Stock 1/26/96 16.00 24.70
- ------------------------------------------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc.:
7% Sr. Nts., 5/15/98 12/8/88--5/22/95 73.92 .63
Common Stock 12/5/88 .66 .03
- ------------------------------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc. Common Stock 5/2/94 9.50 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.772%, 9/30/00 12/13/95--4/1/96 .83 .78
Tranche B, 1.772%, 9/30/00 12/13/95--4/3/96 .81 .78
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, NY 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
<PAGE>
OPPENHEIMER HIGH YIELD FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Highlights - See Parts A and B: Filed herewith
(2) Independent Auditors' Report - See Part B: Filed herewith
(3) Statement of Investments - See Part B: Filed herewith
(4) Statement of Assets and Liabilities - See Part B: Filed
herewith
(5) Statement of Operations - See Part B: Filed herewith
(6) Statement of Changes in Net Assets - See Part B: Filed
herewith
(7) Notes to Financial Statements - See Part B: Filed
herewith
(8) Independent Auditors' Consent: Filed herewith
(b) Exhibits:
Exhibit
Number Description
(1) Amended and Restated Declaration of Trust dated 10/24/95:
Filed with Registrant's Post-Effective Amendment No. 33 (8/30/95), and
incorporated herein by reference.
(2) Amended By-Laws dated 6/26/90: Previously filed with
Registrant's Post-Effective Amendment No. 26 (10/23/91), refiled with
Registrant's Post-Effective Amendment No. 30 (8/25/94) pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 32, 10/24/94, and incorporated
herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 32, 10/24/94, and incorporated
herein by reference.
(iii) Specimen Class C Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 33, (8/30/95), and incorporated
herein by reference.
(5) Investment Advisory Agreement dated 10/22/90: Previously
filed with Post-Effective Amendment No. 23 (10/31/90), refiled with
Registrant's Post-Effective Amendment No. 30 (8/25/94) pursuant to Item
102 of Regulation S-T and incorporated herein by reference.
(6) (a) General Distributor's Agreement dated 10/13/92: Filed
with Registrant's Post-Effective Amendment No. 29 (10/4/93), and
incorporated herein by reference.
(b) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective Amendment No. 14 of
Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and
incorporated herein by reference.
(c) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(d) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 of Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(e) Broker Agreement between Oppenheimer Funds Distributor,
Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed with Post-
Effective Amendment No. 25 to the Registration Statement of Oppenheimer
Special Fund (Reg. No. 2-45272), 11/1/86, refiled with Post-Effective
Amendment No. 45 of Oppenheimer Special Fund (Reg. No. 2-45272), 8/30/94,
pursuant to Item 102 of Regulation S-T and incorporated herein by
reference.
(7) Not applicable.
(8) Custody Agreement dated 10/6/92: Filed with Post-Effective
Amendment No. 27 (10/21/92), refiled with Registrant's Post-Effective
Amendment No. 30 (8/25/94) pursuant to Item 102 of Regulation S-T and
incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel dated 8/3/78: Previously filed
with Registrant's Post-Effective Amendment No. 1 to Registrant's
Registration Statement (9/27/78), refiled with Registrant's Post-Effective
Amendment No. 30, 8/25/94 pursuant to Item 102 of Regulation S-T and
incorporated herein by reference.
(11) Independent Auditors Consent: Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) (i) Form of prototype Standardized and Non-Standardized
Profit-Sharing Plan and Money Purchase Pension Plan for self-employed
persons and corporations: Previously filed with Post-Effective Amendment
No. 15 of Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), January 19,
1995, and incorporated herein by reference.
(ii) Form of Individual Retirement Account Trust Agreement:
Previously filed with Post-Effective Amendment No. 21 of Oppenheimer U.S.
Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by
reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt organizations:
Previously filed with Post-Effective Amendment No. 47 of Oppenheimer
Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated herein by
reference.
(iv) Form of Simplified Employee Pension IRA: Previously filed
with Post-Effective Amendment No. 15 of Oppenheimer Mortgage Income Fund
(Reg. No. 33-6614), 1/19/95, and incorporated herein by reference.
(v) Form SAR-SEP Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 19 to the Registration Statement for
Oppenheimer Integrity Funds (File No. 2-76547), 3/1/94, and incorporated
herein by reference.
(vi) Form of prototype 401(k) plan: Previously filed with Post-
Effective Amendment No. 7 to the Registration Statement of Oppenheimer
Strategic Income & Growth Fund (Reg. No. 33-47378), 9/28/95, and
incorporated herein by reference.
(15) (i) Service Plan and Agreement for Class A shares dated
7/1/94: Filed with Registrant's Post-Effective Amendment No. 30, 8/25/94,
and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class B
shares dated 6/21/94: Filed with Registrant's Post-Effective Amendment No.
30, 8/25/94, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement for Class C
shares dated 11/1/95, under Rule 12b-1 of the Investment Company Act of
1940: Filed with Registrant's Post-Effective Amendment No. 33, (8/30/95)
and incorporated herein by reference.
(16) Performance Data Computation Schedule: Filed herewith.
(17) (i) Financial Data Schedule for Class A Shares: Filed
herewith.
(ii) Financial Data Schedule for Class B Shares: Filed
herewith.
(iii) Financial Data Schedule for Class C Shares: Filed
herewith.
-- Powers of Attorney (including Certified Board resolutions):
Filed herewith (Bridget A. Macaskill and Sam Freedman) and all others
filed with Registrant's Post-Effective Amendment No. 30, 8/25/94, and
incorporated by reference.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 dated
10/24/95: Filed with Post-Effective Amendment No. 12 to the Registration
Statement of Oppenheimer California Tax-Exempt Fund (33-23566), 11/1/95,
and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of September 6, 1996
-------------- ------------------------
Shares of Beneficial Interest,
Class A 57,371
Shares of Beneficial Interest,
Class B 12,725
Shares of Beneficial Interest,
Class C 361
Item 27. Indemnification
---------------
Reference is made to the provisions of Article Seventh of
Registrant's Declaration of Trust filed as Exhibit 24(b)(1) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 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.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Mark J.P. Anson,
Vice President 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;
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.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney,
Inc.
David Bernard,
Vice President Previously a Regional Sales
Director for Retirement Plan
Services at Charles Schwab & Co.,
Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the
Oppenheimer Funds (listed below);
previously a Fund Controller for
OppenheimerFunds, Inc. (the
"Manager").
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President
and Treasurer of the Denver-based
Oppenheimer Funds. Vice President
and Treasurer of OppenheimerFunds
Distributor, Inc. (the
"Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the Manager;
Senior Vice President, Treasurer,
Assistant Secretary and a director
of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of
the Manager; Vice President,
Treasurer and Secretary of
Shareholder Services, Inc. ("SSI")
and Shareholder Financial Services,
Inc. ("SFSI"), transfer agent
subsidiaries of the Manager;
Director and Chief Executive
Officer of Multi-Source Services,
Inc.; President, Treasurer and
Director of Centennial Capital
Corporation; Vice President and
Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of
Educational Services for H.D. Vest
Investment Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or portfolio manager
of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based
Oppenheimer Funds; Vice President
and Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General
Counsel of the Distributor;
President and a Director of
Centennial; formerly Senior Vice
President and Associate General
Counsel of the Manager and the
Distributor.
George Evans,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Scott Farrar,
Vice President Assistant Treasurer of the New
York-based and Denver-based
Oppenheimer funds.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, Main Street
Advisers, Inc. and Centennial Asset
Management Corporation; Secretary,
Vice President and Director of
Centennial Capital Corporation.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division 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.; an officer,
Director and/or portfolio manager
of certain Oppenheimer funds.
John Fortuna,
Assistant Vice President
Jon S. Fossel,
Chairman of the Board Director of OAC, the Manager's
parent holding company; President,
CEO and a director of HarbourView;
a director of SSI and SFSI;
President, Director, Trustee, and
Managing General Partner of the
Denver-based Oppenheimer Funds;
President and Chairman of the Board
of Main Street Advisers, Inc.;
formerly Chief Executive Officer of
the Manager.
Patricia Foster,
Vice President An officer of certain Oppenheimer
funds; Secretary and General
Counsel of Rochester Capital
Advisors, L.P. and Secretary of
Rochester Tax Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions: Vice
President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellerman,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President /
Director of Graphic and Print
Communications for Shearson Lehman
Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
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.
Barbara Hennigar,
Executive Vice President and
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,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
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.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director
of Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
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
Stephen F. Libera,
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 he was the senior bond
portfolio manager for Panorama
Series Fund, Inc., other mutual
funds and pension accounts managed
by G.R. Phelps; was also
responsible for managing the public
fixed-income securities department
at Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of
the New York-based and the Denver-
based Oppenheimer funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of Main
Street Advisers, Inc.; Chairman and
Director of SSI.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co.,
Salomon Brothers, and Kidder
Peabody.
Sally Marzouk,
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 with
Phoenix Securities Group.
Denis R. Molleur,
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.
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 Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President 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 Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President; President:
Rochester Division Formerly Vice President of RFS;
President and Director of RFD; Vice
President and Director of FMC; Vice
President and director of RCAI;
General Partner of RCA; an officer
and/or portfolio manager of certain
Oppenheimer funds.
David Rosenberg,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President and
Portfolio Manager/Security Analyst
for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Vice President and
Senior Portfolio Manager for Dean
Witter InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus Vice Chairman and Trustee of the
New York-based Oppenheimer Funds;
formerly Chairman of the Manager
and the Distributor.
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 he was 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 Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund,
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Jerry A. 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.
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 he was 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.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Arthur J. Zimmer,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Rochester-based Oppenheimer
Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Series Fund, Inc.
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
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
Daily Cash Accumulation Fund, Inc.
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 Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Rochester-based Oppenheimer Funds
- ---------------------------------
Bond Fund Series - Oppenheimer Bond Fund For
Growth
Rochester Fund Municipals
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
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., Oppenheimer Real Asset Management, Inc., and Main Street Advisers,
Inc. is 3410 South Galena Street, Denver, Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the other
registered open-end investment companies for which OppenheimerFunds, Inc.
is the investment adviser, as described in Part A and B of this
Registration Statement and listed in Item 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
Susan P. Bader ++ Assistant Vice President None
Christopher Blunt Vice President None
38954 Plumbrook Drive
Farmington Hills, MI 48331
George Clarence Bowen+ Vice President & Treasurer Vice President
and Treasurer
of the NY-based
Oppenheimer
funds / Vice
President,
Secretary and
Treasurer of
the Denver-
based Oppen-
heimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
Paul Delli-Bovi Vice President None
750 W. Broadway
Apt. 5M
Long Beach, NY 11561
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-
Counsel and Director based Oppen-
heimer funds /
Vice President
of the Denver-
based Oppen-
heimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinatti, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Carla Jiminez Vice President None
111 Rexford Court
Summerville, SC 29485
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4011 Queen Avenue South
Minneapolis, MN 55410
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Wasington, DC 20007
Mark Schon Vice President None
10483 E. Corrine Dr.
Scottsdale, AZ 85259
Michael Sciortino Vice President None
785 Beau Chene Dr.
Mandeville, LA 70448
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
c/o America Building
30 East Central Pkwy
Suite 1008
Cincinnati, OH 45202
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
Gregory K. Wilson Vice President None
2 Side Hill Road
Westport, CT 06880
* Two World Trade Center, New York, NY 10048-0203
+ 3410 South Galena St., Denver, CO 80231
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester
Division")
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation at its offices at 3410 South Galena Street, Denver,
Colorado 80231.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 26th day of September, 1996.
OPPENHEIMER HIGH YIELD FUND
By: /s/ James C. Swain*
------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ James C. Swain* Chairman of the
- ------------------ Board of Trustees
James C. Swain and Chief Executive
Officer September 26, 1996
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting
George C. Bowen Officer and Treasurer September 26, 1996
/s/ Bridget A. Macaskill* President and Trustee September 26, 1996
- ------------------------
Bridget A. Macaskill
/s/ Robert G. Avis* Trustee September 26, 1996
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee September 26, 1996
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee September 26, 1996
- -----------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Trustee September 26, 1996
- -----------------
Jon S. Fossel
/s/ Sam Freedman* Trustee September 26, 1996
- ----------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee September 26, 1996
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee September 26, 1996
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee September 26, 1996
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee September 26, 1996
- ----------------
Ned M. Steel
</TABLE>
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER HIGH YIELD FUND
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Calculations
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
-- Power of Attorney - Bridget A. Macaskill
-- Power of Attorney - Sam Freedman
INDEPENDENT AUDITORS' CONSENT
Oppenheimer High Yield Fund:
We consent to the use in this Post-Effective Amendment No. 36 to
Registration Statement No. 2-62076 of our report dated July 22, 1996 on
the financial statements of Oppenheimer High Yield Fund appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the heading "Financial
Highlights" appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
September 25, 1996
Oppenheimer High Yield Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are
calculated as described below, on the basis of the Fund's
distributions, for the past 10 years which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
07/24/86 0.1800 0.0000 16.830
08/21/86 0.1800 0.0000 16.670
09/18/86 0.1800 0.0000 16.650
10/23/86 0.1800 0.0000 16.690
11/20/86 0.1800 0.0000 16.900
12/18/86 0.1800 0.0000 16.770
01/22/87 0.1800 0.0000 17.010
02/19/87 0.1800 0.0000 17.200
03/19/87 0.1800 0.0000 17.320
04/23/87 0.1800 0.0000 17.210
05/21/87 0.1800 0.0000 16.850
06/18/87 0.1800 0.0000 16.970
07/22/87 0.1800 0.0000 16.960
08/19/87 0.1800 0.0000 17.000
09/17/87 0.1800 0.0000 16.800
10/21/87 0.1800 0.0000 15.880
11/18/87 0.1800 0.0000 15.870
12/22/87 0.1800 0.0000 15.600
01/20/88 0.1800 0.0000 15.890
02/16/88 0.1800 0.0000 15.960
03/16/88 0.1800 0.0000 15.710
04/20/88 0.1800 0.0000 15.770
05/18/88 0.1600 0.0000 15.720
06/15/88 0.1600 0.0000 15.830
07/20/88 0.1600 0.0000 15.810
08/17/88 0.1600 0.0000 15.730
09/21/88 0.1600 0.0000 15.780
10/19/88 0.1600 0.0000 15.750
11/16/88 0.1600 0.0000 15.620
12/21/88 0.1600 0.0000 15.530
01/18/89 0.1600 0.0000 15.470
02/15/89 0.1600 0.0000 15.500
03/15/89 0.1600 0.0000 15.430
04/19/89 0.1600 0.0000 15.310
05/17/89 0.1600 0.0000 15.340
06/21/89 0.1600 0.0000 15.350
07/19/89 0.1600 0.0000 15.310
08/16/89 0.1600 0.0000 15.290
09/20/89 0.1600 0.0000 15.090
10/18/89 0.1600 0.0000 14.810
11/15/89 0.1600 0.0000 14.530
12/20/89 0.1600 0.0000 14.360
01/24/90 0.1600 0.0000 14.070
02/21/90 0.1600 0.0000 13.610
03/21/90 0.1600 0.0000 13.560
04/18/90 0.1600 0.0000 13.600
05/23/90 0.1600 0.0000 13.510
06/20/90 0.1600 0.0000 13.550
07/18/90 0.1600 0.0000 13.540
08/22/90 0.1600 0.0000 13.080
09/19/90 0.1600 0.0000 12.810
10/24/90 0.1600 0.0000 12.200
11/21/90 0.1600 0.0000 12.010
12/19/90 0.1600 0.0000 11.900
01/23/91 0.1600 0.0000 11.900
02/20/91 0.1600 0.0000 12.220
03/20/91 0.1600 0.0000 12.800
04/24/91 0.1600 0.0000 13.080
05/22/91 0.1600 0.0000 12.900
06/26/91 0.1600 0.0000 13.020
07/24/91 0.1600 0.0000 13.260
08/21/91 0.1600 0.0000 13.150
09/18/91 0.1600 0.0000 13.250
10/16/91 0.1600 0.0000 13.260
11/20/91 0.1600 0.0000 13.310
12/18/91 0.1450 0.0000 13.120
01/15/92 0.1450 0.0000 13.410
02/19/92 0.1450 0.0000 13.700
03/18/92 0.1450 0.0000 13.770
04/15/92 0.1450 0.0000 13.690
05/20/92 0.1300 0.0000 13.730
06/17/92 0.1300 0.0000 13.740
07/15/92 0.1300 0.0000 13.680
08/19/92 0.1300 0.0000 13.790
09/16/92 0.1300 0.0000 13.700
10/21/92 0.1300 0.0000 13.410
11/18/92 0.1300 0.0000 13.370
12/16/92 0.1300 0.0000 13.350
01/20/93 0.1300 0.0000 13.430
02/17/93 0.1300 0.0000 13.610
03/17/93 0.1300 0.0000 13.750
04/21/93 0.1300 0.0000 13.820
05/19/93 0.1300 0.0000 13.840
06/16/93 0.1300 0.0000 14.010
07/21/93 0.1300 0.0000 14.210
08/18/93 0.1300 0.0000 14.130
09/30/93 0.1300 0.0000 14.060
10/29/93 0.1130 0.0000 14.300
11/30/93 0.1130 0.0000 14.330
12/31/93 0.1130 0.0000 14.500
01/31/94 0.1130 0.0000 14.760
02/28/94 0.1130 0.0000 14.590
03/31/94 0.1130 0.0000 13.980
04/29/94 0.1130 0.0000 13.720
05/31/94 0.1130 0.0000 13.770
06/30/94 0.1130 0.0000 13.630
07/29/94 0.1130 0.0000 13.530
08/31/94 0.1130 0.0000 13.400
09/30/94 0.1130 0.0000 13.400
10/31/94 0.1130 0.0000 13.260
11/30/94 0.1130 0.0000 13.030
12/30/94 0.1060 0.0000 12.830
01/31/95 0.1060 0.0000 12.800
02/28/95 0.1060 0.0000 13.000
03/31/95 0.1060 0.0000 12.920
04/28/95 0.1060 0.0000 13.090
05/31/95 0.1060 0.0000 13.270
06/30/95 0.1060 0.0000 13.220
07/31/95 0.1060 0.0000 13.320
08/31/95 0.1060 0.0000 13.230
09/29/95 0.1060 0.0000 13.290
10/31/95 0.1060 0.0000 13.300
11/30/95 0.1060 0.0000 13.320
12/29/95 0.1060 0.0000 13.410
01/31/96 0.1060 0.0000 13.600
02/29/96 0.1060 0.0000 13.680
03/29/96 0.1060 0.0000 13.570
04/30/96 0.1060 0.0000 13.570
05/31/96 0.1060 0.0000 13.600
06/28/96 0.1010 0.0000 13.510
Class B Shares
05/19/93 0.1250 0.0000 13.820
06/16/93 0.1220 0.0000 13.990
07/21/93 0.1200 0.0000 14.170
08/18/93 0.1210 0.0000 14.090
09/30/93 0.1170 0.0000 14.020
10/29/93 0.1029 0.0000 14.260
11/30/93 0.1034 0.0000 14.290
12/31/93 0.1055 0.0000 14.460
01/31/94 0.1047 0.0000 14.710
02/28/94 0.1045 0.0000 14.540
03/31/94 0.1023 0.0000 13.920
04/29/94 0.1052 0.0000 13.660
05/31/94 0.1045 0.0000 13.710
06/30/94 0.1042 0.0000 13.570
07/29/94 0.1038 0.0000 13.470
08/31/94 0.1037 0.0000 13.340
09/30/94 0.1040 0.0000 13.340
10/31/94 0.1049 0.0000 13.200
11/30/94 0.1047 0.0000 12.970
12/30/94 0.0975 0.0000 12.770
01/31/95 0.0976 0.0000 12.740
02/28/95 0.0982 0.0000 12.940
03/31/95 0.0969 0.0000 12.860
04/28/95 0.0982 0.0000 13.030
05/31/95 0.0974 0.0000 13.200
06/30/95 0.0971 0.0000 13.150
07/31/95 0.0979 0.0000 13.250
08/31/95 0.0975 0.0000 13.160
09/29/95 0.0972 0.0000 13.210
10/31/95 0.0976 0.0000 13.220
11/30/95 0.0977 0.0000 13.250
12/29/95 0.0974 0.0000 13.330
01/31/96 0.0973 0.0000 13.520
02/29/96 0.0979 0.0000 13.600
03/29/96 0.0974 0.0000 13.490
04/30/96 0.0976 0.0000 13.480
05/31/96 0.0966 0.0000 13.510
06/28/96 0.0932 0.0000 13.430
Class C Shares
11/30/95 0.0962 0.0000 13.320
12/29/95 0.0927 0.0000 13.400
01/31/96 0.0952 0.0000 13.600
02/29/96 0.0967 0.0000 13.670
03/29/96 0.0966 0.0000 13.560
04/30/96 0.0960 0.0000 13.560
05/31/96 0.0951 0.0000 13.590
06/28/96 0.0928 0.0000 13.500
</TABLE>
1. Average Annual Total Returns for the Periods Ended 06/30/96:
The formula for calculating average annual total return is as
follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Oppenheimer High Yield Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 06/30/96
(Continued):
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,069.17 1 $1,684.53 .2
(---------) - 1 = 6.92% (---------) - 1 = 10.99%
$1,000 $1,000
Ten Year
$2,446.30 .1
(---------) - 1 = 9.36%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00%
for the first year, and 2.00% for the inception year:
One Year Inception
$1,063.98 1 $1,270.73 .3166
(---------) - 1 = 6.40% (---------) - 1 = 7.88%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00%
for the inception year:
Inception
$1,063.60 1.5063
(---------) - 1 = 9.73%
$1,000
Oppenheimer High Yield Fund
Page 6
1. Average Annual Total Returns for the Periods Ended 06/30/96
(continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,122.46 1 $1,768.47 .2
(---------) - 1 = 12.25% (---------) - 1 = 12.08%
$1,000 $1,000
Ten Year
$2,568.24 .1
(---------) - 1 = 9.89%
$1,000
Class B Shares
One Year Inception
$1,113.98 1 $1,290.09 .3166
(---------) - 1 = 11.40% (---------) - 1 = 8.40%
$1,000 $1,000
Class C Shares
Inception
$1,073.60 1.5063
(---------) - 1 = 11.29%
$1,000
Oppenheimer High Yield Fund
Page 7
2. Cumulative Total Returns for the Periods Ended 06/30/96:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year
$1,069.17 - $1,000 $1,684.53 - $1,000
------------------ = 6.92% ------------------ = 68.45%
$1,000 $1,000
Ten Year
$2,446.30 - $1,000
------------------ = 144.63%
$1,000
Class B Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00%
for the first year, and 2.00% for the inception year:
One Year Inception
$1,063.98 - $1,000 $1,270.73 - $1,000
------------------ = 6.40% ------------------ = 27.07%
$1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 5.00%
for
the inception year:
Inception
$1,063.60 - $1,000
------------------ = 6.36%
$1,000
Oppenheimer High Yield Fund
Page 8
2. Cumulative Total Returns for the Periods Ended 06/30/96
(Continued):
Examples at NAV:
Class A Shares
One Year Five Year
$1,122.46 - $1,000 $1,768.47 - $1,000
------------------ = 12.25% ------------------ = 76.85%
$1,000 $1,000
Ten Year
$2,568.24 - $1,000
------------------ = 156.82%
$1,000
Class B Shares
One Year Inception
$1,113.98 - $1,000 $1,290.09 - $1,000
------------------ = 11.40% ------------------ = 29.01%
$1,000 $1,000
Class C Shares
Inception
$1,073.60 - $1,000
------------------ = 7.36%
$1,000
Oppenheimer High Yield Fund
Page 9
3. Standardized Yield for the 30-Day Period Ended 06/30/96:
The Fund's standardized yields are calculated using the following
formula set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$9,137,978.03 - $906,194.40 6
2{(--------------------------- + 1) - 1} = 8.88%
79,856,881 x $14.18
Class B Shares
Example at NAV:
$2,303,444.06 - $406,927.44 6
2{(--------------------------- + 1) - 1} = 8.51%
20,253,432 x $13.43
Class C Shares
Example at NAV:
$ 59,529.40 - $ 10,718.29 6
2{(--------------------------- + 1) - 1} = 8.49%
520,266 x $13.50
Oppenheimer High Yield Fund
Page 10
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 06/30/96:
The Fund's dividend yields are calculated using the following
formula:
Dividend Yield = ( a * 12 ) / b or c
The symbols above represent the following factors:
a = The dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share
on the last day of the period.
Examples :
Class A Shares
Dividend Yield ( $0.1010000 * 12 ) / $14.18 = 8.55%
at Maximum Offer:
Dividend Yield ( $0.1010000 * 12 ) / $13.51 = 8.97%
at Net Asset Value:
Class B Shares
Dividend Yield ( $0.0932411 * 12 ) / $13.43 = 8.33%
at Net Asset Value:
Class C Shares
Dividend Yield ( $0.0928403 * 12 ) / $13.50 = 8.25%
at Net Asset Value:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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276195
<NAME> OPPENHEIMER HIGH YIELD CLASS A
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
276195
<NAME> OPPENHEIMER HIGH YIELD CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST>
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<OTHER-ITEMS-LIABILITIES>
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51,527,255
<SENIOR-EQUITY>
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<PAID-IN-CAPITAL-COMMON>
1,566,202,269
<SHARES-COMMON-STOCK>
20,835,599
<SHARES-COMMON-PRIOR>
14,639,438
<ACCUMULATED-NII-CURRENT>
0
<OVERDISTRIBUTION-NII>
2,519,975
<ACCUMULATED-NET-GAINS>
(206,188,005)
<OVERDISTRIBUTION-GAINS>
0
<ACCUM-APPREC-OR-DEPREC>
13,855,840
<NET-ASSETS>
279,789,186
<DIVIDEND-INCOME>
2,221,658
<INTEREST-INCOME>
139,098,481
<OTHER-INCOME>
0
<EXPENSES-NET>
15,693,762
<NET-INVESTMENT-INCOME>
125,626,377
<REALIZED-GAINS-CURRENT>
14,577,616
<APPREC-INCREASE-CURRENT>
13,351,323
<NET-CHANGE-FROM-OPS>
153,555,316
<EQUALIZATION>
0
<DISTRIBUTIONS-OF-INCOME>
20,649,798
<DISTRIBUTIONS-OF-GAINS>
0
<DISTRIBUTIONS-OTHER>
0
<NUMBER-OF-SHARES-SOLD>
11,155,284
<NUMBER-OF-SHARES-REDEEMED>
5,689,226
<SHARES-REINVESTED>
730,103
<NET-CHANGE-IN-ASSETS>
118,132,979
<ACCUMULATED-NII-PRIOR>
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<ACCUMULATED-GAINS-PRIOR>
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<OVERDISTRIB-NII-PRIOR>
3,769,638
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<GROSS-ADVISORY-FEES>
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0
<GROSS-EXPENSE>
15,693,762
<AVERAGE-NET-ASSETS>
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<PER-SHARE-NAV-BEGIN>
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<PER-SHARE-NAV-END>
13.43
<EXPENSE-RATIO>
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<AVG-DEBT-OUTSTANDING>
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<AVG-DEBT-PER-SHARE>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>
276195
<NAME> OPPENHEIMER HIGH YIELD CLASS C
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST>
1,366,952,644
<INVESTMENTS-AT-VALUE>
1,381,470,204
<RECEIVABLES>
40,564,349
<ASSETS-OTHER>
47,452
<OTHER-ITEMS-ASSETS>
795,379
<TOTAL-ASSETS>
1,422,877,384
<PAYABLE-FOR-SECURITIES>
40,612,215
<SENIOR-LONG-TERM-DEBT>
0
<OTHER-ITEMS-LIABILITIES>
10,915,040
<TOTAL-LIABILITIES>
51,527,255
<SENIOR-EQUITY>
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<PAID-IN-CAPITAL-COMMON>
1,566,202,269
<SHARES-COMMON-STOCK>
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<ACCUMULATED-NII-CURRENT>
0
<OVERDISTRIBUTION-NII>
2,519,975
<ACCUMULATED-NET-GAINS>
(206,188,005)
<OVERDISTRIBUTION-GAINS>
0
<ACCUM-APPREC-OR-DEPREC>
13,855,840
<NET-ASSETS>
7,647,810
<DIVIDEND-INCOME>
2,221,658
<INTEREST-INCOME>
139,098,481
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<EXPENSES-NET>
15,693,762
<NET-INVESTMENT-INCOME>
125,626,377
<REALIZED-GAINS-CURRENT>
14,577,616
<APPREC-INCREASE-CURRENT>
13,351,323
<NET-CHANGE-FROM-OPS>
153,555,316
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<DISTRIBUTIONS-OF-GAINS>
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<NUMBER-OF-SHARES-SOLD>
870,562
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313,098
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8,861
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118,132,979
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<ACCUMULATED-GAINS-PRIOR>
(220,809,965)
<OVERDISTRIB-NII-PRIOR>
3,769,638
<OVERDIST-NET-GAINS-PRIOR>
0
<GROSS-ADVISORY-FEES>
8,502,884
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0
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15,693,762
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3,378,000
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</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Andrew J. Donohue or Robert G. Zack, and each
of them, her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for her and in her capacity
as a trustee of OPPENHEIMER HIGH YIELD FUND, a Massachusetts business
trust (the "Fund"), to sign on her behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company
Act of 1940 and any amendments and supplements thereto, and other
documents in connection thereunder, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully as to all intents and purposes as
she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them, may lawfully
do or cause to be done by virtue hereof.
Dated this 24th day of October, 1995.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
PROSP\280POA.BAM
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Andrew J. Donohue or Robert G. Zack, and each
of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his capacity
as a trustee of OPPENHEIMER HIGH YIELD FUND, a Massachusetts business
trust (the "Fund"), to sign on his behalf any and all Registration
Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company
Act of 1940 and any amendments and supplements thereto, and other
documents in connection thereunder, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully as to all intents and purposes as
she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them, may lawfully
do or cause to be done by virtue hereof.
Dated this 27th day of June, 1996.
/s/ Sam Freedman
Sam Freedman
PROSP\280POA.SF
