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.40 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 32 / X /
OPPENHEIMER HIGH YIELD FUND
- --------------------------------------------------------------------------(Exact
Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
- --------------------------------------------------------------------------
Address
of Principal Executive Offices)
1-303-671-3200
- --------------------------------------------------------------------------
(Registrant's
Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc. - Suite 3400
Two World Trade Center, New York, New York 10048-0203
- --------------------------------------------------------------------------(Names
and Addresses of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On October 27, 1998, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On ________________, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On __________________, pursuant to paragraph (a)(2) of
Rule 485
<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; A 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 Objective and Policies - Portfolio Turnover 7 Shareholder
Account Rules and Policies; How to Buy Shares; How to Exchange Shares; Service
Plan for Class A Shares; Distribution and Service Plans for Class B and Class C
Shares; Special Investor Services; 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 Policies and Strategies; Other Investment
Techniques and Strategies; Other
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 - The Manager and Its Affiliates; Distribution and Service Plans 17
Brokerage Policies of the Fund 18 How To Buy Shares; Dividends, Capital Gains
and Taxes 19 Your Investment Account - How to Buy Shares; How to Sell Shares;
How to Exchange Shares 20 Dividends, Capital Gains and Taxes 21 How the Fund is
Managed; Brokerage Policies of the Fund 22 Performance of the Fund 23 Financial
Statements
- ----------------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER HIGH YIELD FUND
Prospectus dated October 27, 1998
Oppenheimer High Yield Fund is a mutual fund with the investment objective
of seeking a high level of current income by investing mainly 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 high-yield, lower-rated, fixed-income
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
27, 1998 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, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
-59-
Contents
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objectives and Policies
Investment Risks
Investment Techniques and Strategies
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
Class Y 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
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will expect to bear indirectly.
|X| Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
__ for an explanation of how and when these charges apply.
Class A Class B Class C
Class Y
Shares Shares Shares
Shares
------- ------- --------
- -------
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None None
- -------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(as a % of the lower of the
original offering price or
redemption proceeds) None(1) 5% in the 1% if None
first year, shares
are
declining redeemed
to 1% in within 12
the sixth months of
year and
purchase(2)
eliminated
thereafter(2)
- -------------------------------------------------------------------------------
Maximum Sales Charge on
Reinvested Dividends None None None None
- -------------------------------------------------------------------------------
Exchange Fee None None None None
- -------------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3) None
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans", as defined in "Class A Contingent Deferred Sales Charge" on
page __) 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.
<PAGE>
(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.
<PAGE>
(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").
|X| 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.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
Class A Class B Class C Class Y
Shares Shares Shares Shares
- -----------------------------------------------------------------------------
Management Fees 0.60% 0.60% 0.60% 0.60%
- -----------------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.21% 1.00% 1.00% 0.00%
- -----------------------------------------------------------------------------
Other Expenses 0.19% 0.19% 0.18% 0.21%
- -----------------------------------------------------------------------------
Total Fund Operating Expenses 1.00% 1.79% 1.78% 0.81%
The numbers in the chart above are based upon the Fund's expenses in its
last fiscal year ended June 30, 1998. 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. For Class B and
Class C shares, the 12b-1 Distribution Plan Fees are the service fees (the
maximum fee is 0.25% of average annual net assets of the respective class) and
the asset-based sales charge of 0.75% of the average annual net assets of the
class. These plans are described in greater detail in "How to Buy Shares."
<PAGE>
The actual expenses for each class of shares in the Fund's current or
future years may be more or less than the numbers in the chart, depending on a
number of factors, including changes in the actual value of the Fund's assets
represented by each class of shares.
|X| 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, 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:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Class A Shares $57 $78 $100 $164
Class B Shares $68 $86 $117 $171
Class C Shares $28 $56 $ 96 $209
Class Y Shares $ 8 $26 $ 45 $100
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
------ ------- ------- --------
Class A Shares $57 $78 $100 $164
Class B Shares $18 $56 $ 97 $171
Class C Shares $18 $56 $ 96 $209
Class Y Shares $ 8 $26 $ 45 $100
- ---------------
* In the first example, expenses include the Class A initial sales charge
and the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge but Class B
and Class C expenses do not include contingent deferred sales charges. 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.
<PAGE>
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.
<PAGE>
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.
|X| What Are the Fund's Investment Objectives? The Fund's primary
investment objective is to seek a high level of current income by investing
mainly 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.
|X| What Does the Fund Invest In? To seek high current income, the Fund
anticipates that under normal conditions at least 80% of its total assets will
be invested in fixed-income securities, and at least 65% of its total assets
will be invested in high-yield, lower-rated fixed-income securities (commonly
referred to as "junk bonds"). Fixed-income securities include debt securities,
such as bonds, notes and debentures, preferred stock, asset-backed securities
and mortgage-backed securities (including collateralized mortgage-backed
obligations). 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 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 ___.
|X| Who Manages the Fund? The Fund's investment advisor is
OppenheimerFunds, Inc., which (including subsidiaries) manages investment
companies having over $85 billion in assets at June 30, 1998. The Manager is
paid an advisory fee by the Fund, based on its assets. The Fund's portfolio
managers are Ralph W. Stellmacher, David Negri and Thomas Reedy. Each 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.
<PAGE>
|X| 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. All fixed-income securities are
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. However, the
securities in which the Fund invests 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. 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 Risks" starting on page ___ for a more complete discussion of the
Fund's investment risks.
|X| How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" beginning on page
___ for more details.
|X| Will I Pay a Sales Charge to Buy Shares? The Fund has four classes of
shares. Each class of shares has the same investment portfolio but different
expenses. Class A shares are offered with a front-end sales charge, starting at
4.75%, and reduced for larger purchases. Class B shares 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 respectively, of
purchase. There is also an annual asset-based sales charge on Class B shares and
Class C shares. Class Y Shares are offered ar net asset value without slaes
charge only to certain institutional investors. 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.
<PAGE>
|X| 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 that are not subject to a contingent deferred sales charge). 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 ___.
|X| How Has the Fund Performed? The Fund measures its performance by
quoting its yield and average annual 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 broad-based market indices, which we have done on pages ___. Please
remember that past performance does not guarantee future results.
<PAGE>
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, 1998 is included in the
Statement of Additional Information. Class Y shares were first on October 15,
1997.
<PAGE>
Financial Highlights Class A
-------------------------
<TABLE>
<CAPTION>
Year Ended
June 30,
1998 1997 1996
==============================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.98 $13.51 $13.22
- ----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.24 1.27 1.29
Net realized and unrealized gain (loss) .43 .43 .27
------ ------ ------
Total income from investment operations 1.67 1.70 1.56
- ----------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.21) (1.23) (1.27)
Tax return of capital distribution -- -- --
------ ------ ------
Total dividends and distributions to shareholders (1.21) (1.23) (1.27)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $14.44 $13.98 $13.51
====== ====== ======
==============================================================================================
Total Return, at Net Asset Value(4) 12.34% 13.10% 12.25%
==============================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,257 $1,167 $1,084
- ----------------------------------------------------------------------------------------------
Average net assets (in millions) $1,227 $1,128 $1,092
- ----------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.64% 9.22% 9.59%
Expenses 1.00% 1.00% 1.03%
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 116.8% 125.8% 104.9%
</TABLE>
1. For the period from October 15, 1997 (inception of offering) to June 30,
1998.
2. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
3. For the period from May 3, 1993 (inception of offering) to June 30, 1993.
4. 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.
8
<PAGE>
Financial Highlights
---------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.63 $14.16 $13.76 $13.08 $13.60 $15.42 $16.00
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.30 1.42 1.60 1.79 1.91 1.89 2.02
Net realized and unrealized gain (loss) (.40) (.54) .36 .68 (.51) (1.79) (.68)
------ ------ ------ ------ ------ ------ ------
Total income from investment operations .90 .88 1.96 2.47 1.40 .10 1.34
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.30) (1.41) (1.56) (1.79) (1.92) (1.92) (1.92)
Tax return of capital distribution (.01) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (1.31) (1.41) (1.56) (1.79) (1.92) (1.92) (1.92)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.22 $13.63 $14.16 $13.76 $13.08 $13.60 $15.42
====== ====== ====== ====== ====== ====== ======
================================================================================================================================
Total Return, at Net Asset Value(4) 7.09% 6.27% 15.31% 20.06% 11.90% 0.85% 8.97%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,061 $1,049 $1,119 $903 $657 $651 $861
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,006 $1,111 $ 979 $768 $602 $735 $863
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.81% 10.10% 11.59% 13.15% 14.94% 13.00% 12.88%
Expenses 1.03% 0.96% 0.97% 0.92% 0.96% 0.93% 0.88%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 93.7% 96.7% 87.2% 64.0% 90.4% 63.2% 57.0%
</TABLE>
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1998 were $2,037,376,437 and $1,860,877,727, respectively.
9
<PAGE>
Financial Highlights Class B
--------------------------
<TABLE>
<CAPTION>
Year Ended
June 30,
1998 1997 1996
=============================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.88 $13.43 $13.15
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.11 1.15 1.18
Net realized and unrealized gain (loss) .44 .43 .27
------ ------ ------
Total income from investment operations 1.55 1.58 1.45
- ---------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.10) (1.13) (1.17)
Tax return of capital distribution -- -- --
------ ------ ------
Total dividends and distributions to shareholders (1.10) (1.13) (1.17)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $14.33 $13.88 $13.43
====== ====== ======
=============================================================================================
Total Return, at Net Asset Value(4) 11.50% 12.18% 11.40%
=============================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $528 $397 $280
- ---------------------------------------------------------------------------------------------
Average net assets (in millions) $464 $335 $236
- ---------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.86% 8.41% 8.75%
Expenses 1.79% 1.80% 1.84%
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 116.8% 125.8% 104.9%
</TABLE>
1. For the period from October 15, 1997 (inception of offering) to June 30,
1998.
2. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
3. For the period from May 3, 1993 (inception of offering) to June 30, 1993.
4. 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.
10
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights Class C Class Y
------------------------------------------------------------------------------
Period
Year Ended Ended
June 30, June 30,
1995 1994 1993(3) 1998 1997 1996(2) 1998(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.57 $14.12 $13.87 $13.97 $13.50 $13.30 $14.48
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.20 1.35 .23 1.22 1.14 .77 .90
Net realized and unrealized gain (loss) (.42) (.60) .27 .33 .45 .19 (.08)
------ ------ ------ ------ ------ ------ ------
Total income from investment operations .78 .75 .50 1.55 1.59 .96 .82
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.19) (1.30) (.25) (1.10) (1.12) (.76) (.88)
Tax return of capital distribution (.01) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (1.20) (1.30) (.25) (1.10) (1.12) (.76) (.88)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.15 $13.57 $14.12 $14.42 $13.97 $13.50 $14.42
====== ====== ====== ====== ====== ====== ======
================================================================================================================================
Total Return, at Net Asset Value(4) 6.21% 5.31% 3.54% 11.42% 12.23% 7.36% 5.81%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $192 $88 $10 $66 $30 $8 $11
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $135 $52 $ 4 $48 $18 $3 $6
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.95% 8.98% 10.84%(5) 7.87% 8.40% 8.41%(5) 9.14%(5)
Expenses 1.84% 1.88% 2.28%(5) 1.78% 1.82% 1.90%(5) 0.81%(5)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 93.7% 96.7% 87.2% 116.8% 125.8% 104.9% 116.8%
</TABLE>
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1998 were $2,037,376,437 and $1,860,877,727, respectively.
<PAGE>
Investment Objectives and Policies
Objectives. The Fund's primary objective is to seek a high level of current
income by investing mainly 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.
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 securities rating services ("rating services") such as
the Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"). Consistent with its primary investment objective, the Fund
anticipates that under normal market conditions at least 80% of the value of its
total assets will be invested in fixed income securities, and at least 65% of
its total assets will be invested in high-yield, lower-rated fixed-income
securities commonly known as "junk bonds". Fixed-income securities include debt
securities, such as bonds, notes and debentures, preferred stock, asset-backed
securities and mortgage-backed securities (including collateralized mortgage
obligations). 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.
The Fund may try to hedge against losses in the value of its portfolio
securities by using hedging strategies and derivative investments described
below. The Fund's portfolio manager may employ special investment techniques in
selecting securities for the Fund. These are all described below. More detailed
information may be found about them under the same headings in the Statement of
Additional Information.
Since the Fund may invest in lower-rated securities without limit, the
Fund's investments should be considered speculative. Further, 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. See "Investment Risks" below.
|X| Can the Fund's Investment Objectives and Policies Change? The Fund has
investment ojectives, 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 these 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.
<PAGE>
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 of 1940 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.
|_| 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. The Fund may purchase securities
of companies in any country, developed or underdeveloped. Foreign currency will
be held by the Fund only in connection with the purchase or sale of foreign
securities.
|_| 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. As to the current fiscal year, any short-term
trading could affect the Fund's tax status.
|X| How the Fund's Portfolio Securities Are Rated. As of June 30, 1998,
the percentages of the Fund's total assets represented by fixed-income
securities that were rated by a rating service in each of the S&P rating
categories were as follows (securities rated by any rating service are included
in the equivalent S&P rating category): AAA, 0.44%; AA, 0.00%, A, 0.16%; BBB,
0.68%; BB, 8.45%; B, 56.05%; CCC, 5.43%; CC, 0.72%__%; C, 0.00%; and D, 0.00%.
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. As of June 30, 1998, 17.98% of the Fund's total assets were
represented by unrated fixed-income securities.
Investment Risks
<PAGE>
All investments carry risks to some degree, whether they are risks that
market prices of the investment will fluctuate (this is known as "market risk")
or that the underlying issuer will experience financial difficulties and may
default on its obligations under a fixed-income investment to pay interest and
repay principal (this is referred to as "credit risk"). These general investment
risks and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assumed income or
preservation of capital. While the Manager tries to reduce risks by diversifying
investments by carefully researching securities before they are purchased, and
in some cases by using hedging techniques, changes in overall market prices can
occur at any time, and there is no assurance that the Fund will achieve its
investment objectives. When you redeem your shares, they may be worth more or
less than what you paid for them.
|X| 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.
|X| 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 holds) 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 a
rating service, such as S&P 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.
<PAGE>
|X| Special Risks of Lower-Rated Securities. Under normal market
conditions, the Fund will invest at least 65% of its total assets in high-yield,
lower-rated fixed-income securities, commonly known as "junk bonds". These types
of securities are those rated below "investment grade," which means that they
have a rating lower than "Baa" by Moody's or lower than "BBB" by S&P or similar
ratings by other rating services. 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. See
"How the Fund's Portfolio Securities are Rated" above for information on the
ratings of the Fund's fixed-income investments. 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 a rating service 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 and 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. 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.
|X| Special Risks of Hedging Instruments. The Fund can invest in certain
hedging instruments, as described below. 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 are not correlated with its
other investments or if it could not close out a position because the market for
the future or option was illiquid.
<PAGE>
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price and will not be able to realize any profit if the investment has
increased in value above the call price. In writing puts, there is a risk that
the Fund may be required to buy the underlying security at a disadvantageous
price. The use of forward contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a foreign
currency. Interest rate swaps are subject to 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.
|X| Special Risks of Derivative Investments. The Fund can invest in a
number of different kinds of derivative investments, as described below. There
are special risks in investing in derivative investments. The company issuing
the instrument may fail to pay the amount due on the maturity of the instrument.
Also, the underlying investment or security on which the derivative is based,
and the derivative itself, might not perform the way the Manager expected it to
perform. The 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 may realize less principal or income from the investment than
expected. Certain derivative investments held by the Fund may trade in the
over-the-counter market and may be illiquid. Please refer to "Illiquid and
Restricted Securities."
|X| Foreign Securities Risks. Investing in foreign securities generally
involves 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.
<PAGE>
|_| Special Risks of Emerging Market Countries. Investments in emerging
market countries may involve further risks in addition to those identified above
for investments in foreign securities. Securities issued by emerging market
countries and companies located in those countries may be subject to extended
settlement periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There may be a lack
of liquidity for emerging market securities; interest rates and foreign currency
exchange rates may be more volatile; sovereign limitations on foreign investment
may be more likely to be imposed; there may be significant balance of payment
deficits; and their economies and markets may respond in a more volatile manner
to economic changes than those of developed countries.
|X| Stock Investment Risks. The Fund may also invest a limited portion of
its assets in common stock and other equity securities. At times, the stock
markets can be volatile and stock prices can change substantially. This market
risk could affect the Fund's net asset value per share, which will fluctuate as
the values of the Fund's equity portfolio securities change. Not all stock
prices change uniformly or at the same time, and other factors, not all of which
can be predicted, can affect a particular stock's price.
|X| Year 2000 Risks. Because many computer software systems in use today
cannot distinguish the year 2000 from the year 1900, the markets for securities
in which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failures of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. Data processing errors by corporate and government issuers of
securities could result in production problems and economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Fund?s investments and
returns.
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.
|X| Hedging. As described below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options and forward contracts, 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 their use, described below. The types of hedging
instruments the Fund may use are described 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.
<PAGE>
|_| Futures. The Fund may buy and sell futures contracts that relate to
(1) broadly-based securities indices (these are referred to as Stock Index
Futures and Bond Index Futures), (2) interest rates (these are referred to as
Interest Rate Futures), (3)foreign currencies and (4) commodities (these are
referred to as commodity 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 exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
|_| 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.
<PAGE>
|X| 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.
|X| 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; should the Fund do so, the amount
loaned would not exceed 5% of the value of the Fund's net assets in the coming
year.
<PAGE>
|X| 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 Board may increase that limit to 15%). The Fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional purchasers.
Illiquid securities include repurchase agreements maturing in more than seven
days, or certain participation interests other than those with puts exercisable
within seven days. The Manager monitors holdings of illiquid securities on an
ongoing basis and at times the Fund may be required to sell some holdings to
maintain adequate liquidity.
|X| 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. Repurchase agreements having a
maturity beyond seven days are considered illiquid; accordingly, no more than
10% of the Fund's net assets may be subject to such repurchase agreements. There
is no limit on the amount of the Fund's net assets that may be subject to
repurchase agreements of seven days or less.
|X| 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 Statement of Additional Information under "Investment Objectives and
Policies."
<PAGE>
|X| 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 S&P or "P-1" or better by Moody's or similar ratings by other
rating services. The yield on securities selected for defensive purposes
generally will be lower than the yield on lower-rated, fixed-income securities.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these
restrictions, the Fund cannot do any of the following:
|_| buy securities issued or guaranteed by any one issuer (except the U.S.
Government or any of its agencies or instrumentalities) if with respect to 75%
of its total assets, more than 5% of 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, 25% or more 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 utilities, electric utilities, 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
<PAGE>
|_| 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.
Unless the Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed 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 of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the 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 four classes of shares, Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Only certain
institutional investors may elect to purchase Class Y shares. Each class has its
own dividends and distributions and pays certain expenses which may be different
for the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote 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 handling 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 that 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.
<PAGE>
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages assets of more than $85 billion as of
June 30, 1998, and with more than 4 million shareholder accounts. The Manager is
owned by Oppenheimer Acquisition Corp., a holding company that is owned in part
by senior officers of the Manager and controlled by Massachusetts Mutual Life
Insurance Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success. Additionally, because the
services they provide depend on the interaction of their computer systems with
the computer systems of brokers, information services and other parties, any
failure on the part of the computer systems of those third parties to deal with
the year 2000 may also have a negative effect on the services provided to the
Fund.
|X| Portfolio Manager. The Portfolio Managers of the Fund
are Ralph W. Stellmacher, David Negri and Thomas Reedy. Mr.
Stellmacher was the person principally responsible for the
day-to-day management of the Fund's portfolio from January, 1988
to October, 1998. Mr. Stellmacher is a Senior Vice President of
the Manager and Messrs. Negri and Reedy are Vice Presidents of
the Manager, and each is a Vice President of the Fund. They also
serve as an officer of other Oppenheimer funds. During the past
five years, Messrs. Stellmacher, Negri and Reedy have also served
as portfolio managers of other Oppenheimer funds.
|X| 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, 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 0.62% of average annual net assets for its Class A, Class B, Class C and
Class Y shares, which may be higher than the rate paid by some other mutual
funds.
The Fund pays expenses related to its daily operations, such as custodian
fees, Trustees' fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, the Manager
is permitted by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment adviser.
<PAGE>
|X| 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" managed by the Manager and is sub-distributor for funds
managed by a subsidiary of the Manager.
|X| The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager. It also acts as the shareholder servicing
agent for the Fund and 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, if any,
are received in cash, or shares are purchased or sold). The Fund's performance
data 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.
|X| 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.
<PAGE>
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.
However, total returns may also be quoted "at net asset value," without
considering the effect of either the front-end or the appropriate contingent
deferred sales charge, as applicable, and those returns would be less if sales
charges were deducted.
|_| Yield. Different types of yield may be quoted to show performance.
Each class of shares calculates its standardized 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 paid for
a stated period by the maximum offering price on the last day of the period and
annualizing the result. Yields for Class A shares normally reflect the deduction
of the maximum initial sales charge, but may also be shown without deducting the
sales charge. 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, 1998, followed by a
graphical comparison of the Fund's performance to appropriate broad-based market
indices.
Management's Discussion of Performance. During the Fund's fiscal year
ended June 30, 1998, U.S. economic growth remained strong and inflation remained
low. At the same time corporate profitThese influences were good for the U.S.
bond market in general and especially so for high-yield corporate bonds. The
Fund generated strong relative performance due, in part, to the Manager's
decisions to reduce the Fund's average credit quality, and increase the Fund's
exposure during the first quarter of 1998 to debt securities issued by companies
and governments in emerging markets of Latin America, Eastern Europe and Asia.
In response to recessionary conditions in Asia, the Manager increased the Fund's
holding of bonds issued by companies in growing U.S. industries, such as
wireless technology, information technology, Internet providers and
telecommunications, as well as domestic service companies. In turn, the Manager
reduced the Fund's exposure to producers of international commodities, including
paper, chemical and steel companies, because of their inability to raise prices
in a low-inflation environment. The Manager also purchased commercial
mortgage-backed securities which provided an income advantage over similarly
rated corporate bonds. The Fund's portfolio holdings, allocations and strategies
are subject to change.
|X| 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, 1998. Performance is measured 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, and in the case of Class Y
shares, from the inception of the class on October 15, 1997 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 and the Lehman Brothers Corporate Bond Index. The
Merrill Lynch High Yield Bond Master Index is an index of below investment grade
(ratings are generally comparable to below BBB of S&P) U.S. corporate issuers.
It is widely recognized as a measure of the U.S. corporate high yield bond
market. 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.
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 Investments
in:
Oppenheimer High Yield Fund (Class A), the Merrill Lynch High
Yield Bond Master Index and the Lehman Brothers Corporate Bond
Index
[Graph]
Average Annual Total Return of Class A Shares of the Fund at
6/30/981
1 Year 5 Year 10 Year
- ------ ------ --------
<PAGE>
7.01% 9.10% 10.16%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer High Yield Fund (Class B), the Merrill Lynch High
Yield Bond Master Index and the Lehman Brothers Corporate Bond
Index
[Graph]
Average Annual Total Return of Class B Shares of the Fund at
6/30/982
5 Year Life
- ------ ------ ----
6.50 % 9.00% 9.59
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer High Yield Fund (Class C), the Merrill Lynch High
Yield Bond Master Index and the Lehman Brothers Corporate Bond
Index
[Graph]
Average Annual Total Return of Class C Shares of the Fund at
6/30/983
1 Year Life
- ------
10.42% 11.69%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer High Yield Fund (Class Y), the Merrill Lynch High
Yield Bond Master Index and the Lehman Brothers Corporate Bond
Index
[Graph]
Cumulative Total Return of Class Y Shares of the Fund at
6/30/98(4)
Life of the Class
5.81%
- --------------
The total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions.
(1) Class A returns and the ending account value in the graph are shown
net of the applicable 4.75% maximum initial sales charge.
(2) Class B shares were first publicly offered on May 3, 1993. Returns are
shown net of the applicable 5% and 1% 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 1% contingent deferred sales charge.
(3) Class C Shares of the Fund were first publicly offered on November 1,
1995. Returns and the ending account value in the graph are shown net of the 1%
contingent deferred sales charge for the period.
(4) Class Y shares of the Fund were first publicly offered on October 15,
1997.
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 four different classes of shares.
Three classes, Class A, Class B and Class C, are available to non-institutional
investors. The fourth class, Class Y, is offered only to certain institutional
investors. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices.
|X| Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge" on
page ___). If you purchase Class A shares as part of an investment of at least
$1 million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 18 months of buying them, you may pay a contingent deferred sales
charge, as described below. 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.
|X| 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 sales
charge varies depending on how long you own your shares as described in "Buying
Class B Shares" below.
|X| 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.
|X| Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements with the Distributor.
<PAGE>
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 assumed you are an
individual investor, and therefore ineligible to purchase Class Y shares. We
used the maximum sales charge rates that apply to each class, considering the
effect of the annual asset-based sales charge on Class B and Class C shares
(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.
|X| 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 6 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.
<PAGE>
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 shares might be more advantageous than Class C (as well as Class B
shares 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.
For investors who invest $1 million or more, in most cases Class A shares
will be the most advantageous choice, no matter how long you intend to hold your
shares. For that reason, the Distributor normally will not accept purchase
orders of $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.
<PAGE>
|X| 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, or other features (such as Automatic Withdrawal Plans) might not
be advisable (because of the effect of the contingent deferred sales charge) for
Class B or Class C shareholders, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges
Information. 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.
|X| 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: that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund held by the dealer or financial institution for its own account or
for its customers.
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 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.
|X| 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, 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 the
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.
<PAGE>
|X| Buying Shares Through Your Dealer. Your dealer will
place your order with the Distributor on your behalf.
|X| 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, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
|X| Payments by Federal Funds Wire. Shares may be
purchased by Federal Funds wire. The minimum investment is
$2,500. You must first call the Distributor's Wire Department at
1-800-525-7041 to notify the Distributor of the wire and receive
further instructions.
|X| Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to 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. See "AccountLink" below for more details.
|X| 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 in the Statement of Additional Information.
<PAGE>
|X| At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange, on a regular business day and normally
your order must be transmitted to the Distributor so that it is received before
the Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares, 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:
Commission
Front-End Front-End as
Sales Charge as Sales Charge
asPercentage
Percentage of Percentage of
of Offering
Amount of Purchase Offering Price Amount Invested Price
- ----------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ---------------------------------------------------------------------------
$50,000 or more
but less than $100,000 4.50% 4.71%
3.75%
- -----------------------------------------------------------------------------
$100,000 or more
but less than $250,000 3.50% 3.63%
2.75%
- ----------------------------------------------------------------------------
$250,000 or more
but less than $500,000 2.50% 2.56%
2.00%
- -----------------------------------------------------------------------------
$500,000 or more but less
than $1 million 2.00% 2.04% 1.60%
- -----------------------------------------------------------------------------
$1 million or more None None None
<PAGE>
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.
|X| 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.
|_| Purchases by a retirement plan qualified under Section 401(a) or
401(k) of the Internal Revenue Code if the retirment plan has total plan assets
of $500,000 or more.
|_| Purchases by a retirement plan qualified under Sections 401(a) or
401(k) of the Internal Revenue Code, by a non-qualified deferred compensation
plan, employee benefit plan, group retirement plan, (see "How to Buy
Shares-Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"); 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.
|_| Purchases by an OppenheimerFunds Rollover IRA if the purchases are
made (1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for these purchases, or (2)
by a direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a Retirement Plan in which Oppenheimer
funds are also offered as investment options under a special arrangement with
the Distributor if the purchase occurs more than 30 days after the addition of
the Oppenheimer funds as an investment option to the Retirement Plan.
<PAGE>
If you redeem any Class A shares subject to the contingent deferred sales
charge described above, 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") may be deducted from the redemption proceeds.
(A different holding period may apply to shares purchased prior to June 1,
1998). That sales charge may be equal to 1.0% of the lesser of (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
offering price (which is the original net asset value) of the redeemed shares.
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
ales apply. (A differnet holding period may apply to shares
purchased prior to June 1, 1998.)
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:
|X| 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.
<PAGE>
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 include Class
A and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. 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.
|X| 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.
|X| 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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent of which conditions apply.
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;
<PAGE>
|_| employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
|_| dealers, brokers, or registered investment advisors that have entered
into an agreement with the Distributor providing specifically for the use of
shares of the Fund in particular investment products or employee investment
plans made available to their clients (those clients may be charged a
transaction fee by their dealer, broker or advisor for the purchase or sale of
fund shares);
|_| (1) investment advisors and financial planners who have entered into
an agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under Sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of investment advisors or financial
planners who have entered into an agreement for this purpose with the
Distributor and who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
|_| 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 advisor (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;
<PAGE>
|_| 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 Class 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 commenced 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;
|_| shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days 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; or
|_| shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
<PAGE>
|_| to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
|_| involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
|_| for distributions from a TRAC-2000 401(k) plans
sponsored by the Distributor due to the termination of the
TRAC-2000 program;
|_| for distributions from Retirement Plans, deferred compensation plans
or other employee benefit plans for any of the following 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) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
|_| for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
<PAGE>
|_| for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
|X| 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
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by an
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to compensate the Distributor for 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.
<PAGE>
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Beginning of Contingent Deferred Sales Charge
Month in which Purchase On Redemptions in That Year
Order was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------
0-1 5.0%
- -----------------------------------------------------------------
1-2 4.0%
- -----------------------------------------------------------------
2-3 3.0%
- -----------------------------------------------------------------
3-4 3.0%
- -----------------------------------------------------------------
4-5 2.0%
- -----------------------------------------------------------------
5-6 1.0%
- -----------------------------------------------------------------
6 and following None
- -----------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
|X| Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). 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 compensate 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.
|X| Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted a Distribution and Service Plans for Class B shares to
reimburse, and has adopted a Distribution and Service Plan for 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 an annual service fee of 0.25% per year under each
Plan.
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 and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class per year.
<PAGE>
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 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 Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. As to Class B shares, those asset-based sales charge payments
reimburse the Distributor for its services rendered in distributing Class B
shares. As to Class C shares, those payments are at a fixed rate that is not
related to the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service fees and
other costs of distributing and selling Class B and Class C shares.
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 Distributor retains the Class B asset-based sales charge.
The Distributor may pay the Class B service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
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. 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 may pay the Class C service fee and
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
<PAGE>
The Distributor's actual expenses in selling Class C shares may be more or
less 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 C shares. If the Fund terminates either of its Plans,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge and/or service fee to the Distributor for certain expenses it
incurred before the Plan was terminated. At June 30, 1998, the end of the Class
C Plan year, the Distributor had incurred unreimbursed expenses under the Plan
of $825,815 (equal to 1.26% of the Fund's net assets represented by Class C
shares on that date).
|X| 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 discussed in "Reduced Sales Charges" in the Statement of
AdditiInformation. In order to receive a waiver of the Class B or Class C
contingent deferred sales charge, you must notify the Transfer agent of which
conditions apply.
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:
|_| 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;
|_| distributions from retirement plans to make "substantially equal
periodic payments" as permitted under Section 72(t) of the Internal Revenue Code
that 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";
<PAGE>
|_| distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company 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; (5) for separation from service; or (6) for loans to participants or
beneficiaries; or
|_| distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
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; or
|_| shares issued in plans of reorganization to which the
Fund is a party.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds (as well as Class Y shares of funds advised by Mass Mutual)for asset
allocation programs, investment companies or separate investment accounts it
sponsors and offers to its customers. Individual investors are not able to
invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent
deferred sales charges or asset-based sales charges, an institutional investor
buying the shares for its customers' accounts may impose charges on those
accounts. The procedures for purchasing, redeeming, exchanging, or transferring
the Fund's other classes of shares (other than the time those orders must be
received by the Distributor or Transfer Agent in Denver), and the special
account features available to purchasers of those other classes of shares
described elsewhere in this Prospectus do not apply to Class Y shares.
Instructions for purchasing, redeeming, exchanging or transferring Class Y
shares must be submitted by the institutional investor, not by its customers for
whose benefit the shares are held.
Special Investor Services
<PAGE>
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 call the Transfer
Agent for more information.
AccountLink privileges should be requested 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.
|X| 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.
|X| 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.
<PAGE>
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site, at the following
Internet address: http://www.oppenheimerfunds.com. Additionally, certain account
transactions may be requested by any shareholder listed in the registration on
an account as well as by the dealer representative of record through a special
section of that Web Site. To access that section of the Web Site you must first
obtain a personal identification number ("PIN") by calling OppenheimerFunds
PhoneLink at 1-800-533-3310. If you do not wish to have Internet account
transactions capability for your account, please call our customer service
representatives at 1-800-525-7048. To find out more information about Internet
transactions and procedures, please visit the Web Site.
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:
|X| 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 Statement of Additional Information for more
details.
|X| 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 Class 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 and SIMPLE IRAs offered by employers
<PAGE>
|_| 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.
|X| 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.
|X| 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
<PAGE>
|_| 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)
|X| 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
<PAGE>
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 sent to that bank account.
|X| 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.
|X| 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.
<PAGE>
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 10
days.
|_| Don't use your checks if you changed your Fund account
number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. 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
<PAGE>
|_| 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:
|X| 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."
|X| 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 seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
<PAGE>
|_| 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.
Shareholder Account Rules and Policies
|X| 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.
|X| 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.
<PAGE>
|X| 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.
|X| 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.
|X| 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.
|X| 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.
|X| 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, Class C and Class Y shares. Therefore, the redemption value of
your shares may be more or less than their original cost.
<PAGE>
|X| 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 seven 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 federal funds wire, certified
check or arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.
|X| 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.
|X| 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.
|X| "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 correct and property certified
Social Security or employer identification number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
|X| 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.
|X| 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
<PAGE>
Dividends. The Fund declares dividends separately for Class A, Class B, Class C
and Class Y 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 and Class Y 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, 1998, 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 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 the end of its fiscal
year. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the year. Short-term capital
gains are treated as dividends for tax purposes. There can be no assurance that
the Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on
your application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
|X| 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.
|X| 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.
|X| Receive All Distributions in Cash. You can elect to
receive a check for all dividends and long-term capital gains
distributions or sent to your bank on AccountLink.
<PAGE>
|X| Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in the same class of
shares of 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 held your shares. Dividends paid
from short-term capital gains and net investment income are taxable as ordinary
income. These dividends and distributions are subject to federal income tax and
may be subject to state or local taxes. Your distributions are taxable 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 all
taxable distributions you received in the previous year. So that the Fund will
not have to pay taxes on the amounts it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
|X| "Buying a Dividend." If you buy shares on 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 capital gain.
|X| 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.
|X| 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. In addition, you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
<PAGE>
A-2
Appendix A
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.
<PAGE>
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.
<PAGE>
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>
B-1
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)
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Growth & Income Value
Fund, Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap
Value Fund and Oppenheimer Quest Global Value Fund, Inc. on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those funds, and
(ii) Quest for Value U.S. Government Income Fund, Quest for Value Investment
Quality Income Fund, Quest for Value Global Income Fund, Quest for Value New
York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and Quest for
Value California Tax-Exempt Fund when those funds merged into various
Oppenheimer funds on November 24, 1995. The funds listed above are referred to
in this Prospectus as the "Former Quest for Value Funds." The waivers of initial
and contingent deferred sales charges described in this Appendix apply to shares
of the Fund (i) acquired by such shareholder pursuant to an exchange of shares
of one of the Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) purchased by such shareholder by exchange of shares of other Oppenheimer
funds that were acquired 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
|X| 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.
<PAGE>
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
- -------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- -----------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described beginning on page ____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.
|X| 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.
|X| 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
|X| 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
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.
|X| 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
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.
<PAGE>
Oppenheimer High Yield Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OppenheimerFunds Internet Website:
http://www.OppenheimerFunds.com
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the 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.________ * Printed on recycled paper
<PAGE>
APPENDIX 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 and
Lehman Brothers Corporate Bond 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 6/30/88 through 6/30/98, in the case of the Fund's Class B
shares, will cover the period from inception of the class (5/3/93) through
6/30/98 and in the case of the Fund's Class C shares, will cover the period from
inception of the class (11/1/95) through 6/30/98, in the case of class Y shares,
will cover the period from inception (10/15/97) through 6/30/98. 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 and Lehman Brothers Corporate Bond
Index is set forth in the Prospectus under "Fund Information - Management's
Discussion of Performance."
Fiscal Oppenheimer Merrill Lynch Lehman Brothers
Year High Yield High Yield Bond Corporate Bond
Ended Fund A Master Index Index
06/30/88 9,525 10,000 10,000
06/30/89 10,380 11,087 11,296
06/30/90 10,468 11,157 12,153
06/30/91 11,714 12,599 13,431
06/30/92 14,064 15,673 15,507
06/30/93 16,217 18,357 17,662
06/30/94 17,234 19,240 17,330
06/30/95 18,455 21,706 19,951
06/30/96 20,716 23,740 20,971
06/30/97 23,429 27,134 22,851
06/30/98 26,322 30,228 25,411
Fiscal Oppenheimer Merrill Lynch Lehman Brothers
Year High Yield High Yield Bond Corporate Bond
Ended Fund B Master Index Index
05/03/93 10,000 10,000 10,000
06/30/93 10,355 10,325 10,255
<PAGE>
C-3
06/30/94 10,904 10,822 10,062
06/30/95 11,581 12,208 11,584
06/30/96 12,901 13,352 12,176
06/30/97 14,272 15,262 13,247
06/30/98 16,037 17,002 14,754
Fiscal Oppenheimer Merrill Lynch Lehman Brothers
Year High Yield High Yield Bond Corporate Bond
Ended Fund C Master Index Index
11/01/95 10,000 10,000 10,000
06/30/96 10,736 10,547 10,137
06/30/97 12,048 12,055 11,028
06/30/98 13,424 13,430 12,283
Fiscal Oppenheimer Merrill Lynch Lehman Brothers
Year High Yield High Yield Bond Corporate Bond
Ended Fund Y Master Index Index
10/15/97 10,000 10,000 10,000
06/30/98 10,582 10,721 10,718
<PAGE>
Oppenheimer High Yield Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated October 27, 1998
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 27, 1998. 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
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>
-46-
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. Certain capitalized terms used in this Statement of Additional
Information are defined 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.
......|X| Investment Risks of Fixed-Income Securities. All
fixed-income securities are subject to two types of risk: credit
risk and interest rate risk (these are in addition to other
investment risks that may affect a particular security).
|_| Credit Risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Generally, higher
yielding lower-grade bonds are subject to credit risk to a greater extent than
lower-yielding, investment grade bonds.
|_| Interest Rate Risk. 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 capital appreciation and depreciation than obligations with shorter
maturities. Fluctuations in the market value of fixed-income securities after
the Fund buys them will not affect the interest payable on those securities, 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.
|X| 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 S&P. 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.
<PAGE>
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.
|X| 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.
|X| 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.
<PAGE>
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.
<PAGE>
|_| Risks of Conversion to Euro. On January 1, 1999, eleven countries in
the European Monetary Union will adopt the euro as their official currency.
However, their current currencies (for example, the franc, the mark, and the
lire) will also continue in use until January 1, 2002. After that date, it is
expected that only the euro will be used in those countries. A common currency
is expected to confer some benefits in those markets, by consolidating the
government debt market for those countries and reducing some currency risks and
costs. But the conversion to the new currency will affect the Fund operationally
and also has potential risks, some of which are listed below. Among other
things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the competitive
environment from a consolidated currency market and greater operational costs
from converting to the new currency.
This might depress stock values.
o vendors the Fund depends on to carry out its business, such as its Custodian
(which holds the foreign securities the Fund buys), the Manager (which must
price the Fund's investments to deal with the conversion to the euro) and
brokers, foreign markets and securities depositories. If they are not prepared,
there could be delays in settlements and additional costs to the Fund. o
exchange contracts and derivatives that are outstanding during the transition to
the euro. The lack of currency rate calculations between the affected currencies
and the need to update the Fund's contracts could pose extra costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio manager will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
|X| Asset-Backed Securities. The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if 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. As a purchaser of
an asset-backed security, the Fund would generally have no recourse to the
entity that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments which shorten the weighted average
life of asset-backed securities and may lower their return, in the same manner
as described below for prepayments of a pool of mortgage loans underlying
mortgage-backed securities.
|X| U.S. Government Securities. U.S. Government Securities
are debt obligations issued or guaranteed by the U.S. Government
or one of its agencies or instrumentalities.
|_| 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.
<PAGE>
|_| 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 ("GNMA Certificates"). The
GNMA Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to the "issuer"
and GNMA, regardless of whether the mortgagor actually makes the payments when
due.
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.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
Government.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
<PAGE>
|X| 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
|X| 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. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of delay
in recovery of securities, or loss of rights in the collateral should the
borrower fail financially. 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.
|X| 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 not to exceed 120
days), no payment is made for the securities purchased by the purchaser, and no
interest accrues to the purchaser from the transaction. Such securities are
subject to market fluctuation; the value at delivery may be less than the
purchase price. The Fund will segregate or identify with its Custodian, liquid
assets of any type, including equity and debt securities of any grade, at least
equal to the value of purchase commitments until payment is made.
<PAGE>
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.
|X| 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 liquid assets
of any type including equity and debt securities with its Custodian in an amount
equal to its obligation under the roll.
|X| 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.
<PAGE>
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.
|X| 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.
|X| 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
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.
<PAGE>
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" unless subject
to a buy-back agreement with the executing broker. 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.
<PAGE>
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. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to procedures
and regulations applicable to other futures.
The Fund may also enter into a forward contract to sell a foreign currency
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
|_| 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 the underlying Futures Contract,
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 contracts it owns, provided that
at the time the call is written, the Fund covers the call by securities or other
liquid assets the Fund owns and segregates to enable it to satisfy its
obligations if the call is exercised. 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 investments any transaction costs
incurred minus the sum of the exercise price and the premium received.
<PAGE>
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. 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.
<PAGE>
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.
<PAGE>
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 may 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 crosshedging 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 total assets.
<PAGE>
|_| 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 Commodity Futures Trading
Commission ("CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
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. Under the Rule, the Fund
must also use short futures and Futures options solely for bonafide hedging
purposes within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by 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 identify as segregated on its records liquid assets of any type,
including equity and debt securities of any grade 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
(althrough it reserves the right not to qualify). 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 normally will be taxed on the
dividends and capital gains they receive from the Fund (unless the fund's shares
are held in a retirement account or the shareholder is otherwise exempt from
tax).
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.
<PAGE>
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position(s)
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset against market gains and losses 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.
<PAGE>
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.
<PAGE>
|_| issue "senior securities", but this does not prohibit it from
borrowing money or entering into margin, collateral or escrow arrangements, in
each case as permitted by its other investment policies.
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.
<PAGE>
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 Real Asset Fund, 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 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, Inc. and Centennial
Tax Exempt Trust (all of the foregoing funds are collectively referred to as the
"Denver-based Oppenheimer funds") except for (i) Mr. Fossel who is not a Trustee
of Centennial New York Tax Exempt Trust nor a Managing General Partner of
Centennial America Fund, L.P., (ii) Ms. Macaskill and Mr. Bowen who are
notTrustees or Directors of Oppenheimer Integrity Funds, Panorama Series Fund,
Inc., Oppenheimer Strategic Income Fund and Oppenheimer Variable Account Funds
and Centennial New York Tax-Exempt Fund; nor are they Managing General Partners
of Centennial America Fund, L.P.. Messrs. Bishop, Bowen, Donohue, Farrar and
Zack hold similar positions as officers of all such funds. As of October 1,
1998, 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 for employeesof the Manager (for which two of the officers listed below,
Ms. Macaskill and Mr. Donohue, are trustees) other than the shares beneficially
owned under that plan by the officers of the Fund listed below.
Robert G. Avis, Trustee(1); Age 67
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of
A.G.E. Asset Management and A.G. Edwards Trust Company (its
affiliated investment adviser and trust company, respectively).
William A. Baker, Trustee; Age 83
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen(1) (2), Vice President, Treasurer, Assistant Secretary and
Trustee; Age: 62 6803 South Tuscon Way, Englewood, Colorado 80112 Senior Vice
President (since September, 1987) and Treasurer (since March, 1985) of the
Manager; Vice President (since June, 1983) of OppenheimerFunds Distributor, Inc.
(the "Distributor"); Vice President (since October, 1989) and Treasurer (since
April, 1986) of HarbourView; Senior Vice President (since February, 1992),
Treasurer (since July, 1991) and a director (since December, 1991) of Centennial
Asset Management Corporation ("Centennial"); President, Treasurer and a director
of Centennial Capital Corporation (Since June, 1989); Vice President and
Treasurer (since August, 1978) and Secretary (since April, 1981) of Shareholder
Services, Inc. ("SSI"); Vice President, Treasurer and Secretary of Shareholder
Financial Services, Inc. ("SFSI") (since November, 1989), Assistant Treasurer or
Oppenheimer Acquisition Corp. ("OAC") (since March, 1998); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November, 1989); Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc. (since July, 1996);
Chief Executive Officer, Treasurer; Treasurer of OFIL and Oppenheimer Millenium
Funds plc (since October, 1997); an officer of other Oppenheimer funds; formerly
Treasurer of OAC (June 1990 - March 1998).
Charles Conrad, Jr., Trustee; Age 68
1501 Quail Street, Newport Beach, California 92660
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 (3); Age 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a Director of
OAC, the Manager's parent holding company, SSI and SFSI, transfer agent
subsidiaries of the Manager.
Sam Freedman, Trustee; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive Officer and director of SFSI, Vice President and director of OAC and a
director of the Manager.
Raymond J. Kalinowski, Trustee; Age 69
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International Inc. (a computer
products training company).
C. Howard Kast, Trustee; Age 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Trustee(1) (4); Age: 50 President (since
June, 1991), Chief Executive Officer (since September, 1995) and a Director
(since December, 1994) of the Manager; President and Director (since June, 1991)
of HarbourView Asset Management Corporation ("HarbourView"), a subsidiary of the
Manager; Chairman and a director of SSI (since August, 1994) and SFSI (since
September, 1995); President (since September, 1995) and a director (since
October, 1990) of OAC; President (since September, 1995) and a Director (since
November, 1989) of Oppenheimer Partnership Holdings, Inc., a holding company
subsidiary of the Manager; a director (since July, 1996) of Oppenheimer Real
Asset Management, Inc.; President and a Director (since October, 1997) of
OppenheimerFunds International Ltd; and offshore fund manager subsidiary of the
Manager ("OFIL"); Chairman, President and a director (since October, 1997) of
OppenheimerFunds Millennium Funds, plc; President and a Director of other
Oppenheimer Funds; Member, Board of Governors, NASD, Inc. a Director of
Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Manager and a Director of NASDQ Stock Market, Inc.
Ned M. Steel, Trustee; Age 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Trustee (1); Age 63 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September, 1998); formerly 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
39
Two World Trade Center, New York, New York 10048-0203Senior Vice
President of the Manager (since March, 1993; an officer of other
Oppenheimer funds.
Andrew J. Donohue, Vice President and Secretary; Age 48 Two World Trade Center,
New York, New York 10048 Executive Vice President (since January, 1993), General
Counsel (since October, 1991) and a Director (since September, 1995) of the
Manager; executive Vice President and General Counsel (since September, 1993)
and Director (since January, 1992) of the Distributor, Executive Vice President,
Genral Counsel and a Director of Harbourview, SSI, SFSI and Oppenheimer
Partnership Holdings, Inc. (since September, 1995) of Centennial; and a Director
of Oppenheimer Real Asset Management, Inc. (since July, 1996); General Councel
(since May, 1996) and Secretary (since April, 1997) of OAC; Vice President and a
Director of OFIL and Oppenheimer Mllennium Funds plc (since October, 1997); an
officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May, 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (april, 1994-May, 1996)and a Fund Controller for
the Manager.
Scott Farrar, Assistant Treasurer; Age 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May, 1996);
Assistant Vice President of Oppneheimer Millennium Funds plc (since October,
1997); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Manager/Mutual Fund Accounting (april, 1994-May, 1996), and a
Fund Controller for the Manager.
Robert G. Zack, Assistant Secretary; Age 50 Two World Trade Center, New York,
New York 10048-0203 Senior Vice President (since may, 1985) and Associate
General Counsel (since May, 1981) of the Manager, Assistant Secretary of SSI
(since May, 1985) and SFSI (since November, 1989); Assistant Secretary of OFIL
and Oppenheimer Millennium Funds plc (since October, 1997); an officer of other
Oppenheimer funds.
- --------------------
(1)A Trustee who is an "interested person" as defined in the Investment Company
Act.
(2)Not a Trustee of Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Integrity Funds, Centennial New York Tax-Exempt
Trust, or a Director of Panorama Series Fund, Inc., or a Managing General
Partner of Centennial America Fund, L.P.
(3)Not a Trustee of Centennial New York Tax-Exempt Trust nor a Managing General
Partner of Centennial America Fund, L.P.
(4)Not a Trustee of Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Integrity Funds, or a Director of Panorama Series
Fund, Inc.
- -------------------------------------------------------------------
- -------------------------------------------------------------------
|X| Remuneration of Trustees. The officers of the Fund and
two Trustees of the Fund (Ms. Macaskill and Mr. Swain) who are
affiliated with the Manager receives no salary or fee from the
Fund. The remaining Trustees of the Fund received the
compensation shown below. The compensation from the Fund was
paid during its fiscal year ended June 30, 1998. The
compensation from all of the Denver-based Oppenheimer funds
includes the Fund and is compensation received as a director,
trustee, managing general partner or member of a committee of the
Board during calendar year 1997. Mr. Bowen did not receive any
fess salary or compensation from the Fund during the calendar year ended
December 31, 1997.
- -------------------------------------------------------------------
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $7,421 $63,501
Trustee
William A. Baker $9,057 $77,502
Audit and Review Committee
Ex-officio Member2 and Trustee
Charles Conrad, Jr. $8,415 $72,000
Trustee3
Jon S. Fossel $7,395 $63,277
Trustee
Sam Freedman $7,772 $66,501
Audit and Review Committee
Member2 and Trustee
Raymond J. Kalinowski $8,363 $71,561
Audit and Review Committee
Member2 and Trustee
C. Howard Kast $8,941 $76,503
Audit and Review Committee
Chairman2 and Trustee
Robert M. Kirchner $8,415 $72,000
Trustee3
Ned M. Steel $7,421 $63,501
Trustee
- ----------------------
(1) For the 1997 calendar year. (2) Committee positions effective July 1, 1997.
(3) Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. None of the Trustees have elected to participate in this plan at this
time. Under the Plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the Plan will be determined based upon the performance of the selected
funds. Deferral of Trustee's fees under the Plan will not materially affect the
Fund's assets, liabilities or net income per share. The Plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
|X| Major Shareholders. As of October 1, 1998 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, Class C or Class Y shares except:
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive, E., Floor 3,
Attention: Fund Admin.# 98BJ2, Jacksonville, Florida 32246, who owned
2,891,723.225 Class B shares (representing approximately 7.58%) of the Fund's
outstanding Class B shares; and Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive, E., Floor 3, Attention: Fund Admin.# 97HW2, Jacksonville, Florida
32246, who owned 910,332.253 Class C shares (representing approximately 17.33%)
of the Fund's outstanding Class C shares. No one was known by the Fund to own
more than 5% of the Fund's outstanding Class A or Class Y shares on that date.
The Portfolio Manager of the Fund is Ralph W. Stellmacher, who is
principally responsible for the day-to-day management of the Fund's portfolio.
Mr. Stellmacher's background is described in the Prospectus under "Portfolio
Manager." Other members of the Manager's fixed income portfolio department
provide the portfolio manager with support in managing the Fund's portfolio.
<PAGE>
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 two of whom (Ms. Macaskill and Mr. 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.
|X| The Investment Advisory Agreement. The Investment Advisory Agreement
(the "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, 1996, 1997 and 1998, the management fees paid by the Fund to the
Manager were, $8,502,884, $9,226,623 and $10,551,830, respectively.
The Advisory Agreement contains no expense limitation. However, because of
state regulations limiting fund expenses that previously applied, the Manager
had voluntarily undertaken that the Fund's total expenses in any fiscal year
(including the investment advisory fee but excluding taxes, interest, brokerage
commissions, distribution plan payments and any extraordinary nonrecurring
expenses, including litigation costs) would not exceed the most stringent state
regulatory limitation applicable to the Fund. Due to changes in federal
securities laws, such state regulations no longer apply and the Manager's
undertaking is therefore inapplicable and has been withdrawn. During the Fund's
last fiscal year, the Fund's expenses did not exceed the most stringent state
regulatory limit and the voluntary undertaking was not invoked.
<PAGE>
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 Advisory Agreement is subject to annual approval by the
Board of Trustees, who may terminate the Advisory Agreement on sixty-day's
notice approved by a majority if the Trustees.
|X| 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, Class C and Class Y 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, 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, 1996, 1997 and 1998,
the aggregate amount of sales charges on sales of the Fund's Class A shares were
$2,823,797, $2,724,041 and $3,002,481, respectively, of which the Distributor
and an affiliated broker-dealer retained in the aggregate $688,648, $719,342 and
$771,821 in those respective years. The contingent deferred sales charges
collected by the Distributor on the redemption of Class B shares for the fiscal
years ended June 30, 1996, 1997 and 1998 totaled $765,717, $975,794 and
$1,047,304, respectively. The contingent deferred sales charges collected on the
Fund's Class C shares for the fiscal period November 1, 1995 through June 30,
1996 and the fiscal years ended June 30, 1997 and 1998 totaled $733, $18,172 and
$40,452, respectively, all of which the Distributor retained. For additional
information about distribution of the Fund's shares and the expenses connected
with such activities, please refer to "Distribution and Service Plans," below.
|X| The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer
Agent, an operating division of the Manager which is 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. 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 or base its selection on
"posted" rates, but is expected to be aware of the current rates of eligible
brokers and to minimize the commissions paid to the extent consistent with the
provisions of the Advisory Agreement and the interests and policies of the Fund
as established by its Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a between the bid and asked
price.
<PAGE>
Under the Advisory Agreement, the Manager is authorized to select brokers
and dealers 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. Most purchases made by the Fund are principal transactions at net
prices, and the Fund incurs little or no brokerage costs.
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. Transactions in securities,
other than those for which an exchange is the primary market, are generally done
with principals or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed-income agency
trades in the secondary market, and are otherwise paid only if it appears likely
that a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transaction in the securities to which the option
relates. When possible, concurrent orders to purchase or sell the same security
by more than one of the accounts managed by the Manager or its affiliates are
combined. The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase or sale
orders actually placed for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless it determines that a better price or exectuion
can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Most purchases from dealers include a spread between the bid and
asked prices. The Fund seeks to obtain prompt execution of these orders at the
most favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the 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.
<PAGE>
During the Fund's fiscal years ended June 30, 1996, 1997 and 1998, total
brokerage commissions paid by the Fund (not including any spreads or concessions
on principal transactions on a net trade basis) amounted to $37,308, $141,722
and $131,140, respectively. During the fiscal year ended June 30, 1998, $6,463
was paid to brokers as commissions in return for research services; the
aggregate dollar amount of these transactions was $1,883,291. 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," "total return" "average annual
total return," "cumulative total return," "total return at net asset value" and
"cumulative total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those calculations
is set forth below.
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, Class C and
Class Y shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to a particular
class.
|X| Yields
|_| Standardized Yield. The standardized yield
(referred to as "yield") is shown for a class of shares for a stated 30-day
period. It 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 for that period.
It may therefore differ from the "dividend yield" for the same class of
shares, described below. It is calculated using the following formula set
forth in rules adopted by the Securities and Exchange Commission designed to
assure uniformity in the way that all funds calculate their 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 the class on the last day
of the period, using the current maximum sales charge rate
adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from the yield for other periods. 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.
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 any 30-day period. For the 30-day period ended June 30,
1998, the standardized yields for the Fund's classes of shares were as
follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 8.10% 8.52%
Class B: 7.71% N/A
Class C: 7.71% N/A
Class Y: 8.68% N/A
|_| Dividend Yield. The Fund may quote a "dividend yield" for
each class of its shares. Dividend yield is based on the dividends paid on
shares of a class during the actual dividend period from net investment
income during a stated period. To calculate dividend yield, the dividends of
a class declared during a stated 30-day period are added together and the sum
is multiplied by 12 (to annualize the yield) and divided by the maximum
offering price on the last day of the dividend period. The formula is shown
below:
Dividend Yield = Dividends paid x 12
--------------------
Maximum Offering Price (payment date)
The maximum offering price for Class A shares includes the current
maximum initial sales charge. The maximum offering price for Class B shares
and Class C shares is the net asset value per share, without considering the
effect of contingent deferred sales charges. The Class A dividend yield may
also be quoted without deducting the maximum initial sales charge.
The dividend yields for the 30-day dividend period ended June 30, 1998
were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 8.63% 8.22%
Class B: 7.91% N/A
Class C: 7.86% N/A
Class Y: 8.95% N/A
|X| 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
------- = Cumulative 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. Class Y
shares are not subject to a sales charge. 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, 1998 were
7.01%, 9.10% and 10.16%, respectively. 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
average annual total returns on an investment in Class B shares of the Fund
for the one and five-year period ended June 30, 1998 and for the period from
May 3, 1993 (inception of the Class) through June 30, 1998 were 6.50%, 9.00%,
and 9.59%, respectively. The average annual total returns on an investment
in Class C shares of the Fund for the one-year period ended June 30, 1998 and
for the period from November 1, 1995 to June 30, 1998 were 10.42% and 11.69%,
respectively.
<PAGE>
The cumulative total return on Class A shares for the ten year period
ended June 30, 1998 was 163.22%. The cumulative total return on Class B
shares for the period from May 3, 1993 (inception of the Class) through June
30, 1998 was 60.37%. The cumulative total return on Class C shares for the
period from November 1, 1995 (inception of the class) to June 30, 1998 was
34.24%. The cumulative total return on Class Y shares for the period from
October 15, 1997 (inception of the Class) to June 30, 1998 was 5.81%.
|X| 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, Class C or
Class Y 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 average annual total returns at net asset value for the one, five
and ten-year periods ended June 30, 1998 for Class A shares were 12.34%,
10.17% and 10.70%, respectively. The cumulative total return at net asset
value of the Fund's Class A shares for the ten-year period ended June 30,
1998 was 176.35%. The average annual total returns at net asset value for
Class B shares for the one-year period and the five-year period ended June
30, 1998 and for the period from May 3, 1993 (inception of the class) through
June 30, 1998 were 11.50%, 9.28% and 9.72%, respectively. For Class B shares,
the cumulative total return at net asset value for the period from May 3,
1993 through June 30, 1998 were 61.37%. The average annual total returns at
net asset value for Class C shares for the fiscal year ended June 30, 1998
and for the period from November 1, 1995 to June 30, 1998 were 11.42% and
11.69%, respectively. For Class C shares, the cumulative total return at net
asset value for the period from November 1, 1995 through June 30, 1998 was
34.24%. The cumulative total return at net asset value for the period
October 15, 1997 to June 30, 1998 for Class Y shares was 5.81%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B, Class C or Class Y shares.
However, when comparing total return of an investment in Class A, Class B or
Class C Shares if the Fund, a number if factors should be considered before
using such information as a basis for comparison with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y 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 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 include in its advertisements and sales
literature performance information about the Fund cited in other newspapers
and periodicals, such as The New York Times, which may include performance
quotations from other sources including Lipper.
<PAGE>
From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B, Class C or Class Y shares by
Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond
funds, based on risk-adjusted total investment return. The Fund is ranked
among the taxable bond funds. Investment return measures a fund's or class's
one, three, five and ten-year average annual total returns (depending on the
inception of the fund a class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk measures a
fund's or class's performance below 90-day U.S. Treasury bill returns. Risk
and investment 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%). The current star ranking is
the fund's or class's 3-year ranking or its combined 3- and 5-year ranking
(weighted 60%/40% respectively, or its combined 3-, 5- and 10-year ranking
(weighted 40%, 30% and 30%, respectively), depending on the inception of the
fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than
how a fund defines its investment objective. Morningstar's four broad
categories (domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparisons by Morningstar are
based on the same risk and return measurements as its star rankings but do
not consider the effect of sales charges.
The total return on an investment in the Fund's Class A, Class B, Class
C or Class Y shares may be compared with performance for the same period of
the Merrill Lynch High Yield Bond Master Index as described in the
Prospectus. The Index includes a factor for the investment of interest but
does not reflect expenses or taxes.
The performance of the Fund's Class A, Class B, Class C or Class Y
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 benchmark
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, Class C or Class Y shares.
However, when comparing total return of an investment in Class A, Class B,
Class C and Class Y 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, Class C or Class Y shares 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.
<PAGE>
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. No such Plan has been
adopted for Class Y shares. 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) at no cost to the Fund to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under the
Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. A 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. None of the Plans 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 shares after six years, the Fund is required by a Securities and Exchange
Commission rule 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.
<PAGE>
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
stating generally the amounts of all payments made pursuant to each Plan and
the purpose for which the payments were made. The Class A and Class B
reports include the identity of each Recipient that received any such
payment. Those reports, including the allocations on which they are based,
will be subject to the review and approval of the Independent Trustees in the
exercise of their fiduciary duty. Each Plan further provides that while it
is in effect, the selection 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, 1998, payments under the Class A
Plan totaled $2,557,141, all of which was paid by the Distributor to
Recipients, including $47,665 paid to MML Investor Services, Inc. ("MMLISI"),
an affiliate of the Distributor. Payments made under the Class B Plan during
that fiscal period totaled $4,641,344, of which $3,815,695 was retained by
the Distributor and $9,654 was paid to MMLISI. Payments made under the Class
C Plan during that period totaled $479,818, of which $319,384 was retained by
the Distributor and $1,436 was paid to MMLISI.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in subsequent fiscal
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.
<PAGE>
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. If a dealer has a
special arrangement with the Distributor, the Distributor will pay the
asset-based sales charge and service fee on Class B and C shares to the
dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase. 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 Conduct Rules 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 and Class C shares of the Fund. Such
payments are made in recognition that the Distributor (i) pays sales
commissions to authorized brokers and dealers at the time of sale as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, (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.
The Class B and Class Plans allow 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 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.
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 normally accept (i) any order for $500,000
or more of Class B shares or (ii) any order for $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. A fourth class of
shares may be purchased only by certain institutional investors at net asset
value per share (the "Class Y shares").
The four 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 additional expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
<PAGE>
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, Class C and Class Y 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 Value Per Share. The net asset values per share
for Class A, Class B, Class C, and Class Y shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the "NYSE") on
each day that the NYSE is open, by dividing the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The NYSE normally closes at 4:00 P.M., but may close earlier on
some other days (for example, in case of weather emergencies or days falling
before a holiday). The NYSE's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. The Fund may invest a portion of its assets in foreign securities
primarily listed on foreign exchanges which may trade on Saturdays or
customary U.S. business holidays on which the NYSE is closed. Because the
Fund's price and net asset value will not be calculated on those days, the
Fund's net asset values per share may be significantly affected on such days
when shareholders may not purchase or redeem shares.
The Funds 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
the Automated Quotation System ("NASDAQ") of the Nasdaq Stock
Market, Inc. for which last sale information is regularly reported
are valued at the last reported sale price on the principal exchange
for such security or NASDAQ that day (the "Valuation Date") or, in
the absence of sales that day, at the last reported sale price
preceding the Valuation Date if it is within the spread of the
closing "bid" and "asked" prices on the Valuation Date or, if not,
the closing "bid" price on the Valuation Date;
(ii) equity securities traded on a foreign securities exchange
are valued generally at the last sales price available to the
pricing service approved by the Fund's Board of Trustees or to the
Manager as reported by the principal exchange on which the security
is traded at its last trading session on or immediately preceding
the Valuation Date, or, if unavailable, at the mean between "bid"
and "asked" prices obtained from the principal exchange or two
active market makers in the security on the basis of reasonable
inquiry;
(iii) a non-money market fund will value (x) debt instruments
that had a maturity of more than 397 days when issued, (y) debt
instruments that had a maturity of 397 days or less when issued and
have a remaining maturity in excess of 60 days, and (z) non-money
market type debt instruments that had a maturity of 397 days or less
when issued and have a remaining maturity of sixty days or less, at
the mean between "bid" and "asked" prices determined by a pricing
service approved by the Fund's Board of Trustees or, if unavailable,
obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry;
(iv) money market-type debt securities held by a non-money
market fund that had a maturity of less than 397 days when issued
and have a remaining maturity of 60 days or less, and debt
instruments held by a money market fund that have a remaining
maturity of 397 days or less, shall be valued at cost, adjusted for
amortization of premiums and accretion of discount; and
(v) securities (including restricted securities) not having
readily-available market quotations are valued at fair value
determined under the Board's procedures.
If the Manager is unable to locate two active market makers willing
to give quotes (see (ii) and (iii) above), the security may be priced at the
mean between the "bid" and "asked" prices provided by a single active market
maker (which in certain cases may be the "bid" price if no "asked" price is
available) provided that the Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect the current market value.
The Manager may use pricing services approved by the Board of
Trustees to price U.S. Government securities, corporate debt securities or
mortgage-backed securities for which last sale information is not generally
available. The pricing service, when valuing such securities, may use
"matrix" comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity and other special factors involved. The Manager
will monitor the accuracy of the pricing services, which may include
comparing prices used for portfolio evaluation to actual sales prices of
selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of the New
York Stock Exchange. Events affecting the values of foreign securities
traded in securities markets that occur between the time their prices are
determined and the close of the New York Stock 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 is likely to effect a material
change in the value of such security. Foreign currency, including forward
contracts, will be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing service.
The values of securities denominated in foreign currency will be converted to
U.S. dollars at the closing price in the London foreign exchange market that
day as provided by a reliable bank, dealer or pricing service.
Puts, calls and futures are valued at the last 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 "ask" prices on the principal exchange or on NASDAQ on the valuation
date, or, if not, value shall be the closing "bid" price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or future is
not traded on an exchange or on NASDAQ, it shall be valued at the mean
between "bid" and "ask" prices obtained by the Manager from two active market
makers. If the Manager is unable to locate two active market makers willing
to give quotes, the security may be priced at the mean between the "bid" and
"asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available) provided that
the Manager is satisfied that the firm rendering the quotes is reliable and
that the quotes reflect the current market value.
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
("ACH") 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. Relations by virtue of a
remarriage (step-children, step-parents, etc.) are included.
|X| 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:
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Fund
Oppenheimer Multi-State Municipal Trust
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
<PAGE>
Oppenheimer U.S. Government Trust
Oppenheimer Variable Account Funds
Oppenheimer World Bond Fund
Panorama Series Funds, Inc.
Rochester Fund Municipals
The New York Tax Exempt Income Fund, Inc.
The following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
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).
|X| 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.
<PAGE>
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 intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
<PAGE>
(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. If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited normally four to five
business days prior to the investment dates selected in the Account
Application. Neither the Distributor, the Transfer Agent nor the Fund shall
be responsible for any delays in purchasing shares resulting from delays in
ACH transmission.
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.
<PAGE>
56
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.
Retirement Plans. In describing certain types of employee benefit plans that
may purchase Class A shares without being subject to the Class A contingent
deferred sales charge, the term Aemployee benefit plan@ means any plan or
arrangement, whether or not Aqualified@ under the Internal Revenue Code,
including, medical savings accounts, payroll deduction plans or similar plans
in which Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or of
affiliated employers, if the Fund account is registered in the name of the
fiduciary or other person for the benefit of participants in the plan.
<PAGE>
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation
or a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of which may
include other groups), if the group or association has made special
arrangements with the Distributor and all members of the group or association
participating in or who are eligible to participate in the plan(s) purchase
Class A shares of the Fund through a single investment dealer, broker, or
other financial institution designated by the group. "Group retirement plan"
also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase Class A shares of the Fund through
a single investment dealer, broker, or other financial institution, if that
broker-dealer has made special arrangements with the Distributor enabling
those plans to purchase Class A shares of the Fund at net asset value but
subject to a contingent deferred sales charge.
In addition to the discussion in the Prospectus relating to the ability
of Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A
shares of any one or more of the Oppenheimer funds by a Retirement Plan in
the following cases:
(i) the record keeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") and, on the date the plan sponsor signs the Merrill Lynch record
keeping service agreement, the Retirement Plan has $3 million or more in
assets invested in mutual funds other than those advised or managed by
Merrill Lynch Asset Management, L.P. ("MLAM") that are made available
pursuant to a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor and in funds advised or managed by MLAM
(collectively, the "Applicable Investments"); or
(ii) the record keeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill
Lynch. On the date the plan sponsor signs the Merrill Lynch record keeping
service agreement, the Plan must have $3 million or more is assets, excluding
assets held in Money Market Funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation
basis by Merrill Lynch or an independent record keeper under a contract or
alliance arrangement with Merrill Lynch, and if on the date the plan sponsor
signs the Merrill Lynch record keeping service agreement the Retirement Plan
has less the $3 million in assets, excluding Money Market Funds, invested in
Applicable Investments, then the Retirement Plan may purchase only Class B
shares of one or more of the Oppenheimer funds. Otherwise, the Retirement
Plan will be permitted to purchase Class A shares of one or more of the
Oppenheimer funds. Any of those Retirement Plans that currently invest in
Class B shares of the Fund will have their Class B shares converted to Class
A shares of the Fund once the Plan's Applicable Investments have reached $5
million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are
currently invested in Class B shares of the Fund shall not be subject to the
Class B contingent deferred sales charge.
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.
|X| 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.
By choosing the Checkwriting privilege, whether you do so by signing
the Account Application or by completing a Checkwriting card, the individuals
signing (1) represent that they are either the registered owner(s) of the
shares of the Fund, or are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of such
registered owner(s); (2) authorize the Fund, its Transfer Agent and any bank
through which the Fund's drafts ("checks") are payable (the "Bank"), to pay
all checks drawn on the Fund account of such person(s) and to effect a
redemption of sufficient shares in that account to cover payment of such
checks; (3) specifically acknowledge(s) that if you choose to permit a single
signature on checks drawn against joint accounts, or accounts for
corporations, partnerships, trusts or other entities, the signature of any
one signatory on a check will be sufficient to authorize payment of that
check and redemption from an account even if that account is registered in
the names of more than one person or even if more than one authorized
signature appears on the Checkwriting card or the Application, as applicable;
and (4) understand(s) that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Bank and neither shall incur any
liability for such amendment or termination or for effecting redemptions to
pay checks reasonably believed to be genuine, or for returning or not paying
checks which have not been accepted for any reason.
<PAGE>
|X| 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.
|X| 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, when you redeemed them or (ii) Class B shares that
were subject to the Class B contingent deferred sales charge when you
redeemed them, without slaes charges. This privilege does not apply to Class
C shares or Class Y 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.
<PAGE>
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.
<PAGE>
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. Shares are normally redeemed pursuant to
an Automatic Withdrawal Plan three business days before the date you select
in the Account Application. If a contingent deferred sales charge applies to
the redemption, the amount of the check or payment will be reduced
accordingly. 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 Contingent Deferred Sales Charge".
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below
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.
|X| 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.
|X| 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.
<PAGE>
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 Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Share certificates are not issued for Class B, Class C, or Class Y
shares. 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.
<PAGE>
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. 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, and Centennial America Fund, L.P., which only offer Class A
shares and Oppenheimer Main Street California Municipal 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 Convertible Securities Fund, Class M shares can be
exchanged only for Class A shares of other Oppenheimer funds. Exchanges to
Class M shares of Oppenheimer Convertible Securities Fund 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.
<PAGE>
Shares of this Fund acquired by reinvestment of dividends or
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, if you redeem Class A shares of the Fund that were
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge 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). (A different holding period may apply to shares purchased prior
to June 1, 1998.) 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 redeemed 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 open an account in, and obtain an 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).
<PAGE>
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 on newly
purchased shares 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. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the trade
date (i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares of
the same class in the account will be paid together with the redemtion
proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks to
the Transfer Agent, in order 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 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.
<PAGE>
The amount of a class's distributions may vary 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 a class, as described in
"Alternative Sales Arrangements -- Class A, Class B and Class C," above.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B and Class C
shares are expected to be lower as a result of the asset-based sales charge
on Class B and Class C shares, and Class B and Class C dividends will also
differ in amount as a consequence of any difference in net asset value
between Class A, Class B and Class C shares.
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.
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. 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.
If prior distributions must be re-characterized at the end of the
fiscal year as a result of the effect of the Fund=s investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices of shareholders. There is no fixed dividend rate and
there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
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 Distributor to
establish an account. The investment will be made at the net asset value per
share in effect at the close of business on the payable date of the dividend
or distribution. Dividends and/or distributions from shares of other
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, 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 the Manager and certain other funds
advised by the Manager and its affiliates.
<PAGE>
Investment Advisor
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, 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
<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,
1998, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended June 30, 1998 and 1997,
and the financial highlights for the period July 1, 1993 to June 30, 1998. 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, 1998 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, 1998, 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.
/s/ Deloitte & Touche LLP
- --------------------------------
Deloitte & Touche LLP
Denver, Colorado
July 22, 1998
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
====================================================================================================
<S> <C> <C>
Mortgage-Backed Obligations--2.8%
- ----------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I Corp., Multiclass Mtg
Pass-Through Certificates, Series 1997-C1:
Cl. G, 7%, 6/17/29(2) $ 840,000 $ 783,300
Cl. H, 7%, 6/17/29(2) 840,000 758,625
- ----------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates,
Series 1997-D4, Cl. B3, 7.525%, 4/14/29(3) 1,500,000 1,386,094
- ----------------------------------------------------------------------------------------------------
CBA Mortgage Corp., Mtg. Pass-Through Certificates, Series 1993-C1,
Cl. E, 7.76%, 12/25/03(2)(3) 1,452,000 1,474,506
- ----------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates:
Series 1997-C1, Cl. F, 7.50%, 6/20/13(2) 1,400,000 1,383,900
Series 1997-C1, Cl. G, 7.50%, 6/20/14(2) 1,900,000 1,795,500
Series 1997-C1, Cl. H, 7.50%, 8/20/14(2) 1,400,000 1,141,000
Series 1997-C2, Cl. F, 7.46%, 5/17/14 3,500,000 3,360,000
Series 1997-C2, Cl. H, 7.46%, 1/17/35 1,500,000 1,233,750
- ----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 177, Cl. B, 0.233%-2.674%, 7/1/26(4) 29,854,698
6,759,290
- ----------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, 6.929%, 2/25/11(2)(3) 4,500,000 3,964,500
- ----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
Collateralized Mtg. Obligations, Series 1997-C2, Cl. F, 6.75%, 4/16/29 3,000,000
2,593,125
Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1, Cl. X,
8.907%, 7/15/27(4) 76,416,213 7,378,941
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates:
Series 1997-HF1, Cl. F, 6.86%, 2/15/10(2) 1,960,000 1,830,762
Series 1997-RR, Cl. D, 7.671%, 4/30/39(2)(3) 5,000,000 4,882,812
Series 1997-RR, Cl. F, 7.739%, 4/30/39(2)(3) 8,000,000 6,687,500
- ----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(2) 1,400,000 1,358,000
- ----------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1995-C1, Cl. F, 6.90%, 2/25/27 1,684,451 1,598,729
- ----------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-C1,
Cl. E, 9.184%, 1/20/06 2,496,000 2,639,520
-----------
Total Mortgage-Backed Obligations (Cost $54,189,890) 53,009,854
====================================================================================================
Foreign Government Obligations--3.8%
- ----------------------------------------------------------------------------------------------------
Argentina (Republic of) Sr. Unsec. Unsub. Bonds, 11%, 10/9/06 6,800,000
7,174,000
- ----------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon,
19.799%, 4/8/99(9)MXP 25,604,570 2,381,506
- ----------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Bonds, Series RG, 6.688%, 4/15/12(3) 2,040,000 1,426,715
Debt Conversion Bonds, 6.688%, 4/15/12(3) 6,175,000 4,318,610
Multi-Year Discount Facility Agreement Trust Certificates,
Series REGS, 6.563%, 9/15/07(3) 844,516 680,933
</TABLE>
10 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Government Obligations (continued)
Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.563%, 7/28/24(3) $ 2,384,000 $
1,826,740
- -----------------------------------------------------------------------------------------------------
Ecuador (Republic of):
Debs., 6.625%, 2/27/15(3) 373,856 209,360
Disc. Bonds, 6.625%, 2/28/25(3) 5,680,000 3,961,800
Par Bonds, 3.50%, 2/28/25(3) 1,370,000 739,800
Past Due Interest Bonds, 6.625%, 2/27/15(3) 473,996 265,438
- -----------------------------------------------------------------------------------------------------
Hashemite (Kingdom of Jordan):
Bonds, Series DEF, 5%, 12/23/23(7) 500,000 353,125
Disc. Bonds, 6.563%, 12/23/23(3) 1,750,000 1,375,938
- -----------------------------------------------------------------------------------------------------
Ivory Coast (Government of) Past Due Interest Bonds,
2%, 3/29/18(6)(7) 2,465,000 918,213
- -----------------------------------------------------------------------------------------------------
Korea (Republic of) Bonds, 8.875%, 4/15/08 495,000 450,063
- -----------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts., Series RC,
5.092%, 1/5/10 2,234,926 1,554,398
- -----------------------------------------------------------------------------------------------------
Panama (Government of):
Bonds, 8.875%, 9/30/27 785,000 740,844
Past Due Interest Debs., 6.563%, 7/17/16(3) 1,874,644 1,438,790
- -----------------------------------------------------------------------------------------------------
Peru (Republic of) Front-Loaded Interest Reduction Bonds,
3.25%, 3/7/17(3) 3,505,000 1,971,563
- -----------------------------------------------------------------------------------------------------
Perusahaan Listr, 17%, 8/21/01(2)IDR 1,000,000,000 45,270
- -----------------------------------------------------------------------------------------------------
Philippines (Republic of) Bonds, 8.75%, 10/7/16 930,000 865,481
- -----------------------------------------------------------------------------------------------------
Poland (Republic of):
Disc. Bonds, 6.688%, 10/27/24(3) 2,000,000 1,962,500
Par Bonds, 3%, 10/27/24(7) 1,420,000 937,200
- -----------------------------------------------------------------------------------------------------
PT Hutama Karya Medium-Term Nts., Zero Coupon,
3/17/99(2)(5)IDR 4,000,000,000 67,567
- -----------------------------------------------------------------------------------------------------
Russia (Government of):
Debs., 6.719%, 12/15/15(3) 1,183,570 658,361
Debs., Series 19 yr., 6.625%, 12/15/15(3) 3,929,254 2,184,429
Principal Loan Debs., 3.3125%, 12/15/20(2)(6) 15,750,000 7,459,121
- -----------------------------------------------------------------------------------------------------
Turkey (Republic of) Treasury Bills, Zero Coupon,
86.946%, 9/30/98(9)TRL 3,011,000,000,000 9,710,925
- -----------------------------------------------------------------------------------------------------
United Mexican States Bonds:
11.375%, 9/15/16 1,360,000 1,506,200
11.50%, 5/15/26 8,520,000 9,691,500
- -----------------------------------------------------------------------------------------------------
Venezuela (Republic of):
Bonds, 9.25%, 9/15/27 1,220,000 951,600
Disc. Bonds, Series DL, 6.625%, 12/18/07(3) 453,514 371,882
Front-Loaded Interest Reduction Bonds, Series A,
6.625%, 3/31/07(3) 2,571,424 2,134,283
-----------
Total Foreign Government Obligations (Cost $75,640,120) 70,334,155
</TABLE>
11 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
===============================================================================================
<S> <C> <C>
Loan Participations--0.1%
- -----------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation:
Tranche 1, 6.688%, 9/4/06(3) $ 1,179,272 $ 901,407
Tranche A, 7.375%, 3/4/00(3) 786,181 742,942
- -----------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.563%, 1/1/09(2)(3) 1,140,000 974,700
-----------
Total Loan Participations (Cost $2,601,293) 2,619,049
===============================================================================================
Corporate Bonds and Notes--70.6%
- -----------------------------------------------------------------------------------------------
Aerospace--1.8%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04 5,600,000 5,922,000
- -----------------------------------------------------------------------------------------------
Atlas Air, Inc.:
10.75% Sr. Nts., 8/1/05 115,000 122,475
12.25% Pass-Through Certificates, 12/1/02 6,425,000 7,099,625
- -----------------------------------------------------------------------------------------------
Constellation Finance LLC, 9.80% Airline Receivable
Asset-Backed Nts., Series 1997-1, 1/1/01(2) 3,000,000 3,045,000
- -----------------------------------------------------------------------------------------------
Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts.,
Cl. B, 6/15/04(2) 2,351,673 2,428,103
- -----------------------------------------------------------------------------------------------
Trans World Airlines Lease, 14% Equipment Trust, 7/2/08(2) 2,029,721 2,171,802
- -----------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 11,400,000 12,027,000
-----------
32,816,005
- -----------------------------------------------------------------------------------------------
Chemicals--2.0%
ClimaChem, Inc., 10.75% Gtd. Sr. Unsec. Nts., Series B, 12/1/07 2,880,000 3,016,800
- -----------------------------------------------------------------------------------------------
ICO, Inc., 10.375% Sr. Nts., 6/1/07 1,400,000 1,435,000
- -----------------------------------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B, 9/15/07 2,890,000 2,832,200
- -----------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03(10) 11,325,000 12,528,281
- -----------------------------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25% Gtd. Nts., 10/15/07 1,950,000 1,915,875
- -----------------------------------------------------------------------------------------------
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 3,245,000 3,228,775
- -----------------------------------------------------------------------------------------------
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07 7,145,000 7,323,625
- -----------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 2,260,000 2,248,700
11.75% Sr. Unsec. Sub. Nts., 8/15/06(10) 3,505,000 3,522,525
-----------
38,051,781
- -----------------------------------------------------------------------------------------------
Consumer Durables--0.2%
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., Series B, 7/15/02 510,000 530,400
- -----------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(2) 2,695,000 3,162,475
-----------
3,692,875
</TABLE>
12 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Non-Durables--1.5%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs., 7/1/09(6)(11) $ 2,520,000 $ 1,335,600
10.50% Sr. Nts., 7/1/08(6) 2,380,000 2,403,800
- -----------------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 4,462,000 4,528,930
- -----------------------------------------------------------------------------------------------
Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B, 10/1/03 5,600,000 5,936,000
- -----------------------------------------------------------------------------------------------
Phillips-Van Heusen Corp., 9.50% Sr. Sub. Nts., 5/1/08(6) 1,525,000 1,530,719
- -----------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc., 7% Sr. Nts., 5/15/98(2)(12)(13)(14) 5,955,189 --
- -----------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08 4,335,000 4,362,094
- -----------------------------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts.,
11.176%, 3/15/01(9) 8,840,000 6,895,200
------------
26,992,343
- -----------------------------------------------------------------------------------------------
Energy--6.4%
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 4,200,000 4,126,500
- -----------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
9.125% Sr. Unsec. Nts., 4/15/06 3,227,000 3,186,662
9.625% Sr. Nts., 5/1/05(6) 7,000,000 7,052,500
- -----------------------------------------------------------------------------------------------
Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 5,450,000 5,463,625
- -----------------------------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 3,175,000 3,468,687
- -----------------------------------------------------------------------------------------------
Dailey International, Inc., 9.50% Sr. Unsec. Nts., Series B, 2/15/08 2,800,000 2,744,000
- -----------------------------------------------------------------------------------------------
Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 2,500,000 2,400,000
- -----------------------------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(2) 2,800,000 2,870,000
- -----------------------------------------------------------------------------------------------
Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B, 2/15/07 5,695,000 5,438,725
9.50% Sr. Sub. Nts., 11/1/06 2,750,000 2,770,625
- -----------------------------------------------------------------------------------------------
Gothic Energy Corp., Units (each unit consists of $1,000 principal
amount of 0%/14.125% sr. disc. nts., 5/1/06 and 7.933 warrants
to purchase one share of common stock)(6)(11)(15) 14,875,000 8,701,875
- -----------------------------------------------------------------------------------------------
Gothic Production Corp., 11.125% Sr. Sec. Nts., 5/1/05(6) 9,725,000 9,360,312
- -----------------------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr. Nts., 2/15/08 4,300,000 4,289,250
- -----------------------------------------------------------------------------------------------
National Energy Group, Inc., 10.75% Sr. Nts., Series D, 11/1/06 3,390,000 3,084,900
- -----------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Gtd. Sr. Sec. Nts., 6/1/08(6) 4,980,000 4,755,900
- -----------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., 5/15/08(6) 5,000,000 5,162,500
- -----------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06 13,615,000 12,321,575
- -----------------------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub. Nts., 5/15/07 7,525,000 7,675,500
- -----------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 11,920,000 12,039,200
- -----------------------------------------------------------------------------------------------
Statia Terminals International/Statia Terminals (Canada), Inc.,
11.75% First Mtg. Nts., Series B, 11/15/03 925,000 975,875
- -----------------------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 5,710,000 5,781,375
- -----------------------------------------------------------------------------------------------
Universal Compression Holdings, Inc.:
0%/11.375% Sr. Disc. Nts., 2/15/09(6)(11) 1,680,000 999,600
0%/9.875% Sr. Disc. Nts., 2/15/08(6)(11) 4,200,000 2,667,000
- -----------------------------------------------------------------------------------------------
Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 1,500,000 1,402,500
------------
118,738,686
</TABLE>
13 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial--1.5%
AMRESCO, Inc., 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 $ 1,125,000 $
1,151,719
- ----------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 78,000 89,310
- ----------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02(2) 621,021 622,574
- ----------------------------------------------------------------------------------------------------------
Emergent Group, Inc., 10.75% Sr. Nts., Series B, 9/15/04 4,455,000 3,274,425
- ----------------------------------------------------------------------------------------------------------
European Bank Reconstruction & Development, Zero Coupon
Sr. Unsub. Nts., Series EMTN:
13.513%, 12/31/18(9)ZAR 48,120,000 547,373
14.98%, 4/7/17(9)ZAR 53,915,000 608,716
- ----------------------------------------------------------------------------------------------------------
Industrial Bank of Japan Preferred Capital Co. (The) LLC,
8.79% Bonds, 12/29/49(3)(6) 4,485,000 4,106,000
- ----------------------------------------------------------------------------------------------------------
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03(2)(14) 8,802,000 --
- ----------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 350,000 397,250
- ----------------------------------------------------------------------------------------------------------
Parametric RE Ltd., 10.206% Nts., 11/15/07(2)(3) 1,000,000 1,022,500
- ----------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa, Zero Coupon Nts., Series 2, 7/15/98(2)(5)IDR 2,464,500,000
33,304
- ----------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts.,
Series B, 4/1/08 10,180,000 10,103,650
- ----------------------------------------------------------------------------------------------------------
Veritas Capital Trust, 10% Gtd. Debs., 1/1/28(2) 2,525,000 2,657,562
- ----------------------------------------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 3,820,000 4,020,550
-----------
28,634,933
- ----------------------------------------------------------------------------------------------------------
Food & Drug--2.4%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 4,730,000 5,084,750
- ----------------------------------------------------------------------------------------------------------
Carrols Corp., 11.50% Sr. Nts., 8/15/03 7,840,000 8,212,400
- ----------------------------------------------------------------------------------------------------------
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., Series B, 12/1/04 4,665,000 4,874,925
10.625% Sr. Sub. Nts., Series B, 7/31/07 10,325,000 10,815,437
- ----------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc., 0%/10.75% Jr. Sub. Deferred Coupon Nts.,
11/1/03(11) 4,350,000 3,675,750
Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., Series B, 7/1/07 7,825,000
8,294,500
- ----------------------------------------------------------------------------------------------------------
Shoppers Food Warehouse Corp., 9.75% Sr. Nts., 6/15/04 1,065,000
1,182,150
- ----------------------------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 9% Sr. Unsec. Sub. Nts., 7/1/04 2,495,000
2,557,375
-----------
44,697,287
- ----------------------------------------------------------------------------------------------------------
Food/Tobacco--2.3%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., 7/1/08(6) 1,680,000 1,698,900
- ----------------------------------------------------------------------------------------------------------
Cott Corp., 9.375% Sr. Nts., 7/1/05 10,015,000 10,115,150
- ----------------------------------------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., 12/15/07(6)(11) 6,950,000
4,552,250
- ----------------------------------------------------------------------------------------------------------
Eagle Family Foods, Inc., 8.75% Sr. Sub. Nts., 1/15/08(6) 1,120,000 1,097,600
- ----------------------------------------------------------------------------------------------------------
Favorite Brands International, Inc., 10.75% Sr. Nts., 5/15/06(6) 2,850,000
2,892,750
- ----------------------------------------------------------------------------------------------------------
International Home Foods, Inc., 10.375% Sr. Sub. Nts., 11/1/06 6,845,000
7,461,050
- ----------------------------------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., 2/1/05(6) 4,400,000 4,488,000
- ----------------------------------------------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Sub. Nts., 3/15/10(6) 1,960,000 2,023,700
- ----------------------------------------------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr. Sub. Nts., 2/15/08(6) 2,240,000 2,273,600
</TABLE>
14 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food/Tobacco (continued)
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 $ 3,435,000 $
3,606,750
- -----------------------------------------------------------------------------------------------------
Windy Hill Pet Food, Inc., 9.75% Sr. Sub. Nts., 5/15/07 1,690,000 1,774,500
-----------
41,984,250
- -----------------------------------------------------------------------------------------------------
Forest Products/Containers--1.2%
Four M Corp., 12% Sr. Nts., Series B, 6/1/06(2) 785,000 843,875
- -----------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 4,440,000 4,639,800
10.875% Sr. Sub. Nts., 4/1/08 2,830,000 2,872,450
- -----------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 4,450,000 4,945,062
- -----------------------------------------------------------------------------------------------------
U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06 2,750,000 2,915,000
- -----------------------------------------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 5,590,000 5,813,600
-----------
22,029,787
- -----------------------------------------------------------------------------------------------------
Gaming/Leisure--4.9%
AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(6)(11) 1,400,000 854,000
- -----------------------------------------------------------------------------------------------------
Apoca, Inc., 9.25% Sr. Sub. Nts., 3/15/08(6) 3,080,000 3,072,300
- -----------------------------------------------------------------------------------------------------
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series B, 11/15/00(2)(14) 2,750,000
2,172,500
- -----------------------------------------------------------------------------------------------------
Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/95(14) 22,500 --
- -----------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A,
11/15/00(2)(14) 1,000,000 200,000
- -----------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 3,000,000
3,465,000
- -----------------------------------------------------------------------------------------------------
Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06(6) 2,940,000 2,962,050
- -----------------------------------------------------------------------------------------------------
Empress River Casino Finance Corp., 10.75% Gtd. Sr. Nts., 4/1/02 8,070,000
8,755,950
- -----------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 6,870,000 7,557,000
- -----------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05(6) 4,100,000 4,223,000
- -----------------------------------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 280,000 311,500
- -----------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 11,355,000 12,078,881
- -----------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority (Connecticut), 13.50% Sr. Sec. Nts.,
Series B, 11/15/02 5,085,000 6,432,525
- -----------------------------------------------------------------------------------------------------
Outboard Marine Corp., 10.75% Sr. Nts., 6/1/08(6) 5,135,000 5,212,025
- -----------------------------------------------------------------------------------------------------
Premier Parks, Inc., 0%/10% Sr. Disc. Nts., 4/1/08(11) 3,880,000 2,594,750
- -----------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc.:
10.625% Sr. Sub. Nts., 7/15/05 1,900,000 2,042,500
9.50% Gtd. Sr. Sub. Nts., 4/15/07 6,485,000 6,825,462
- -----------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina Finance Corp.,
13.50% First Mtg. Nts., Series B, 3/15/03 7,585,000 8,836,525
- -----------------------------------------------------------------------------------------------------
Six Flags Entertainment Corp., 8.75% Sr. Unsec. Nts., 4/1/06 3,640,000 3,726,450
- -----------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 600,000 624,000
- -----------------------------------------------------------------------------------------------------
Venetian Casino Resort LLC/Las Vegas Sands, Inc.:
10% Sr. Unsec. Sub. Nts., 11/15/05(7) 2,600,000 2,418,000
12.25% Mtg. Nts., 11/15/04 6,225,000 6,458,437
-----------
90,822,855
</TABLE>
15 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Healthcare--1.2%
Fresenius Medical Care Capital Trust II, 7.875% Gtd. Nts., 2/1/08(2) $ 5,700,000 $
5,614,500
- --------------------------------------------------------------------------------------------------
Integrated Health Services, Inc.:
10.25% Sr. Sub. Nts., 4/30/06 5,330,000 5,729,750
9.50% Sr. Sub. Nts., 9/15/07 2,805,000 2,945,250
- --------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc., 11% Sr. Nts., 5/15/05(6) 4,200,000 4,326,000
- --------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(6) 2,940,000 2,998,800
-----------
21,614,300
- --------------------------------------------------------------------------------------------------
Housing--1.2%
Engle Homes, Inc., 9.25% Sr. Nts., 2/1/08 2,160,000 2,138,400
- --------------------------------------------------------------------------------------------------
Falcon Building Products, Inc., 9.50% Sr. Sub. Nts., 6/15/07 1,320,000 1,306,800
- --------------------------------------------------------------------------------------------------
Greystone Homes, Inc., 10.75% Gtd. Sr. Nts., 3/1/04(2) 1,940,000 2,104,900
- --------------------------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Nts., Series B, 9/1/07 9,540,000 9,802,350
9.25% Sr. Nts., Series B, 3/15/07 7,545,000 7,790,212
-----------
23,142,662
- --------------------------------------------------------------------------------------------------
Information Technology--4.4%
Amazon.Com, Inc., 0%/10% Sr. Disc. Nts., 5/1/08(6)(11) 2,380,000 1,457,750
- --------------------------------------------------------------------------------------------------
Bell Technology Group Ltd., Units (each unit consists of
$1,000 principal amount of 13% sr. nts., 5/1/05 and one warrant
to purchase one share of common stock)(6)(15) 6,510,000 6,607,650
- --------------------------------------------------------------------------------------------------
Businessland, Inc., 5.50% Sub. Debs., 3/1/07(2) 3,780,000 2,702,700
- --------------------------------------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 2,765,000 2,937,812
- --------------------------------------------------------------------------------------------------
Covad Communications Group, Inc., Units (each unit consists
of $1,000 principal amount of 0%/13.50% sr. disc. nts., 3/15/08
and one warrant to purchase 6.4792 common shares)(6)(11)(15) 10,970,000 5,759,250
- --------------------------------------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 5,250,000 5,250,000
- --------------------------------------------------------------------------------------------------
Dialog Corp. plc, 11% Sr. Sub. Nts., Series B, 11/15/07 3,250,000 3,550,625
- --------------------------------------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07 2,355,000 2,319,675
- --------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 2,805,000 2,903,175
- --------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08(6) 3,300,000 3,314,437
- --------------------------------------------------------------------------------------------------
ICG Services, Inc., 0%/10% Sr. Disc. Nts., 2/15/08(6)(11) 6,650,000 3,973,375
- --------------------------------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05 15,730,000 16,123,250
- --------------------------------------------------------------------------------------------------
Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 4,375,000 4,768,750
- --------------------------------------------------------------------------------------------------
Unisys Corp.:
11.75% Sr. Nts., 10/15/04 5,200,000 6,025,500
7.875% Sr. Nts., 4/1/08 1,400,000 1,435,000
- --------------------------------------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Nts., 4/1/05(6) 2,800,000 2,891,000
13.50% Sr. Nts., 6/15/04(6) 725,000 833,750
- --------------------------------------------------------------------------------------------------
WAM!Net, Inc., Units (each unit consists of $1,000 principal amount
of 0%/13.25% sr. disc. nts., 3/1/05 and three warrants to purchase
6.03 shares of common stock)(6)(11)(15) 10,160,000 6,451,600
</TABLE>
16 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Information Technology (continued)
Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 $ 3,360,000 $ 3,511,200
-----------
82,816,499
- ----------------------------------------------------------------------------------------------------
Manufacturing--2.7%
Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 2,150,000 2,171,500
- ----------------------------------------------------------------------------------------------------
Clark-Schwebel, Inc., 12.50% Debs., Series B, 7/15/07(2)(13) 3,271,093 3,483,714
- ----------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr. Sub. Nts.,
Series B, 8/1/05 350,000 393,750
- ----------------------------------------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr. Sub. Nts., 3/1/08(6) 2,800,000 2,842,000
- ----------------------------------------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08(6) 2,250,000 2,250,000
- ----------------------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 4,225,000 4,351,750
- ----------------------------------------------------------------------------------------------------
Insilco Corp., 10.25% Sr. Unsec. Sub. Nts., 8/15/07 7,845,000 8,237,250
- ----------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 6,055,000 6,668,069
- ----------------------------------------------------------------------------------------------------
Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03(11) 735,000 773,587
- ----------------------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12% Bonds, 2/15/02(2) 700,000 670,250
- ----------------------------------------------------------------------------------------------------
Moll Industries, Inc., 10.50% Sr. Sub. Nts., 7/1/08(6) 1,960,000 2,009,000
- ----------------------------------------------------------------------------------------------------
Paragon Corp. Holdings, Inc., 9.625% Sr. Nts., 4/1/08(6) 1,000,000 930,000
- ----------------------------------------------------------------------------------------------------
Park-Ohio Industries, Inc., 9.25% Sr. Sub. Nts., 12/1/07 3,900,000 3,978,000
- ----------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 2,240,000 2,276,400
- ----------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Gtd. Sr. Sub. Nts.,
Series B, 6/15/07 4,480,000 4,603,200
- ----------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Sub. Nts., 4/1/08(6) 1,960,000 1,935,500
- ----------------------------------------------------------------------------------------------------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03(2) 2,800,000 2,954,000
-----------
50,527,970
- ----------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--1.5%
Allbritton Communications Co., 8.875% Sr. Sub. Nts., Series B, 2/1/08 1,625,000
1,763,125
- ----------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 2,660,000 2,806,300
- ----------------------------------------------------------------------------------------------------
Chancellor Media Corp., 8.75% Gtd. Sr. Unsec. Sub. Nts.,
Series B, 6/15/07 1,400,000 1,463,000
- ----------------------------------------------------------------------------------------------------
Jacor Communications Co.:
8% Sr. Sub. Nts., 2/15/10 2,520,000 2,557,800
8.75% Gtd. Sr. Sub. Nts., Series B, 6/15/07 1,745,000 1,823,525
- ----------------------------------------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(7) 1,800,000 1,845,000
- ----------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
10% Sr. Sub. Nts., 9/30/05 1,175,000 1,266,062
9% Gtd. Sr. Sub. Nts., 7/15/07 8,700,000 9,091,500
- ----------------------------------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.:
11% Sr. Nts., 3/15/04 1,520,000 1,649,200
12.50% Sr. Nts., 6/15/02 700,000 794,500
- ----------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 8.75% Sr. Sub. Debs., 6/15/07 2,850,000 2,971,125
-----------
28,031,137
</TABLE>
17 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Entertainment: Cable/Wireless Video--3.1%
Adelphia Communications Corp.:
8.375% Sr. Nts., Series B, 2/1/08 $ 4,100,000 $ 4,100,000
9.875% Sr. Nts., Series B, 3/1/07 3,545,000 3,846,325
- --------------------------------------------------------------------------------------------------------
Cablevision Systems Corp. Holdings, Inc., 9.875% Sr. Sub. Debs.:
2/15/13(10) 600,000 667,500
4/1/23 2,050,000 2,270,375
- --------------------------------------------------------------------------------------------------------
Cablevision Systems Corp. Holdings, Inc., 9.875% Sr. Sub. Nts.,
5/15/06(10) 3,000,000 3,292,500
- --------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Gtd. Sr. Nts., 7/1/02 8,250,000 9,219,375
- --------------------------------------------------------------------------------------------------------
EchoStar I, 8.25% Bonds, 2/26/01(2) 2,842,290 2,828,079
- --------------------------------------------------------------------------------------------------------
EchoStar II, 8.25% Bonds, 11/9/01(2) 2,753,442 2,739,675
- --------------------------------------------------------------------------------------------------------
EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec
Disc. Nts., 3/15/04(11) 8,600,000 7,933,500
- --------------------------------------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., 4/15/10(6)(11) 6,125,000
3,996,562
- --------------------------------------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 9,200,000 10,166,000
- --------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07 CAD 3,030,000
2,090,012
- --------------------------------------------------------------------------------------------------------
TCI Satellite Entertainment, Inc.:
0%/12.25% Sr. Sub. Disc. Nts., 2/15/07(11) 455,000 309,400
10.875% Sr. Sub. Nts., 2/15/07 1,650,000 1,650,000
- --------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts.,
Series B, 2/15/08(11) 5,110,000 3,168,200
-----------
58,277,503
- --------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--1.4%
Chancellor Media Corp., 10.50% Sr. Sub. Nts., Series B, 1/15/07 1,240,000
1,385,700
- --------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 2/1/06 4,950,000
5,209,875
- --------------------------------------------------------------------------------------------------------
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07 1,300,000 1,352,000
- --------------------------------------------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 3,300,000 3,394,875
9.625% Sr. Sub. Nts., 12/1/06 5,065,000 5,444,875
- --------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr. Sub. Nts., 2/1/08(6) 9,175,000 9,037,375
-----------
25,824,700
- --------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--9.9%
Call-Net Enterprises, Inc., 0%/9.27% Sr. Disc. Nts., 8/15/07(11) 2,885,000
2,033,925
- --------------------------------------------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts., 12/15/06(11) 850,000 680,000
10.125% Sr. Nts., 11/30/07 GBP 3,275,000 5,897,949
8.875% Sr. Nts., 11/30/07 DEM 2,295,000 1,398,829
Units (each unit consists of $1,000 principal amount of
0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase
7.8 ordinary shares)(11)(15) 7,055,000 7,019,725
- --------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(11) 5,570,000
4,664,875
</TABLE>
18 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Entertainment: Telecommunications (continued)
Convergent Communications, Inc., Units (each unit consists of
$1,000 principal amount of 13% sr. nts., 4/1/08 and four warrants
to purchase 10.8 shares of common stock)(6)(15) $ 2,800,000 $ 2,702,000
- ----------------------------------------------------------------------------------------------------
Diamond Cable Communications plc:
0%/10.75% Sr. Disc. Nts., 2/15/07(11) 700,000 519,750
0%/11.75% Sr. Disc. Nts., 12/15/05(11) 15,425,000 12,802,750
- ----------------------------------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08(6) 1,400,000 1,459,500
- ----------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 13.75% Sr. Nts., 7/15/07(13) 4,320,000 4,946,400
- ----------------------------------------------------------------------------------------------------
FaciliCom International, Inc., 10.50% Sr. Nts., 1/15/08(6) 5,095,000 5,044,050
- ----------------------------------------------------------------------------------------------------
Firstworld Communications, Inc., Units (each unit consists of
$1,000 principal amount of 0%/13% sr. disc. nts., 4/15/08 and one
warrant to purchase 7.9002 shares of series B common stock)(6)(11)(15) 8,120,000
3,613,400
- ----------------------------------------------------------------------------------------------------
Focal Communications Corp., 0%/12.125% Sr. Disc. Nts., 2/15/08(6)(11) 9,450,000
5,681,812
- ----------------------------------------------------------------------------------------------------
Global Crossing Holdings Ltd., 9.625% Sr. Nts., 5/15/08(6) 4,245,000 4,441,331
- ----------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc
Nts., 12/15/05(6)(11) 1,400,000 1,135,750
- ----------------------------------------------------------------------------------------------------
GST Telecommunications, Inc./GST Network Funding Corp., Inc.,
0%/10.50% Sr. Disc. Nts., 5/1/08(6)(11) 4,480,000 2,710,400
- ----------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(11) 6,960,000 5,672,400
- ----------------------------------------------------------------------------------------------------
ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(11) 800,000 628,000
0%/13.50% Sr. Disc. Nts., 9/15/05(11) 7,520,000 6,392,000
- ----------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.:
0%/11.25% Sr. Disc. Nts., Series B, 7/15/07(11) 3,470,000 2,554,788
8.50% Sr. Nts., Series B, 1/15/08 8,135,000 8,175,675
8.60% Sr. Nts., 6/1/08(6) 9,000,000 9,157,500
8.875% Sr. Nts., 11/1/07 4,995,000 5,132,363
- ----------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc., Units (each unit consists of
$1,000 principal amount of 0%/12.50% sr. disc. nts., 2/15/08 and
one warrant to purchase .21785 ordinary shares)(6)(11)(15) 12,340,000 7,218,900
- ----------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 9.125% Sr. Nts., 5/1/08(6) 5,900,000 5,774,625
- ----------------------------------------------------------------------------------------------------
Long Distance International, Inc., Units (each unit consists of
$1,000 principal amount of 12.25% sr. nts., 4/15/08 and one warrant
to purchase 15.0874 shares of common stock)(6)(15) 2,800,000 2,786,000
- ----------------------------------------------------------------------------------------------------
Metronet Communications Corp., 0%/9.95% Sr. Disc.Nts., 6/15/08(6)(11) 1,680,000
1,047,900
- ----------------------------------------------------------------------------------------------------
Netia Holdings BV:
0%/11% Gtd. Sr. Disc. Nts., 11/1/07(11)DEM 2,800,000 1,041,598
0%/11.25% Sr. Disc. Nts., Series B, 11/1/07(11) 1,400,000 927,500
- ----------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
0%/9.45% Sr. Disc. Nts., 4/15/08(6)(11) 6,000,000 3,697,500
9.625% Sr. Nts., 10/1/07 9,070,000 9,342,100
- ----------------------------------------------------------------------------------------------------
NTL, Inc.:
0%/10.75% Sr. Unsec. Unsub. Nts., Series REGS, 4/1/08(11)GBP 5,000,000
5,002,501
0%/9.75% Sr. Nts., 4/1/08(6)(11) 4,900,000 3,209,500
10% Sr. Nts., 2/15/07 3,360,000 3,612,000
</TABLE>
19 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Entertainment: Telecommunications (continued)
Onepoint Communications Corp., Units (each unit consists of
$1,000 principal amount of 14.50% sr. nts., 6/1/08 and one warrant
to purchase one share of common stock @ $.01 per share)(6)(15) $ 8,260,000 $
7,805,700
- ---------------------------------------------------------------------------------------------------------------
Petersburg Long Distance, Inc., 9% Cv. Sub. Nts., 6/1/06(6) 630,000
661,500
- ---------------------------------------------------------------------------------------------------------------
Pratama Datakom Asia BV, 12.75% Gtd. Nts., 7/15/05(6) 4,000,000
1,395,000
- ---------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc.:
0%/8.29% Sr. Disc. Nts., 2/1/08(6)(11) 8,550,000 6,198,750
0%/9.47% Sr. Disc. Nts., 10/15/07(11) 13,940,000 10,489,850
- ---------------------------------------------------------------------------------------------------------------
RSL Communications plc:
0%/10% Bonds, Series REGS, 3/15/08(6)(11)DEM 4,775,000
1,543,528
0%/10.125% Sr. Disc. Nts., 3/1/08(6)(11) 3,365,000 2,019,000
- ---------------------------------------------------------------------------------------------------------------
Viatel, Inc.:
Units (each unit consists of $1,000 principal amount of 0%/12.50% sr.
disc. nts., 4/15/08 and .49 shares of series A preferred stock)(6)(11)(15) 7,000,000
4,270,000
Units (each unit consists of $1,000 principal amount of
11.25% sr. nts., and .483 shares of series A preferred stock)(6)(15) 1,925,000
2,021,250
------------
184,529,874
- ---------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--8.1% American Mobile Satellite
Corp./AMSC Acquisition Co., Inc., Units (each unit consists of $1,000 principal
amount of 12.25% sr. nts., 4/1/08 and one warrant to purchase 3.75749 shares of
common stock)(6)(15) 2,360,000 2,230,200
- ---------------------------------------------------------------------------------------------------------------
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07(6) 2,800,000
2,831,500
- ---------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(11) 11,650,000
6,524,000
- ---------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc.:
0%/9.50% Bonds, 4/1/05(6)(11)XEU 11,500,000 9,122,294
6% Cv. Sub. Nts., 4/1/05(6) 1,400,000 1,991,500
- ---------------------------------------------------------------------------------------------------------------
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(11) 2,280,000
1,920,900
- ---------------------------------------------------------------------------------------------------------------
Crown Castle International Corp., 0%/10.625% Sr. Unsec.
Disc. Nts., 11/15/07(11) 8,290,000 5,699,375
- ---------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07(13) 560,000
602,000
- ---------------------------------------------------------------------------------------------------------------
Iridium LLC/Iridium Capital Corp.:
11.25% Sr. Nts., Series C/EN, 7/15/05 1,240,000 1,249,300
13% Sr. Nts., Series A, 7/15/05 5,240,000 5,646,100
- ---------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., Series B, 10/15/07(11)CAD 6,405,000
2,765,766
0%/14% Sr. Disc. Nts., Series B, 6/1/06(11) 1,015,000 758,713
- ---------------------------------------------------------------------------------------------------------------
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(11) 760,000
590,900
</TABLE>
20 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Entertainment: Wireless Communications (continued)
Nextel Communications, Inc.:
0%/10.65% Sr. Disc. Nts., 9/15/07(11) $ 16,435,000 $ 11,134,713
0%/9.75% Sr. Disc. Nts., 10/31/07(11) 11,125,000 7,286,875
0%/9.95% Sr. Disc. Nts., 2/15/08(6)(11) 6,250,000 4,023,438
- -------------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 5,900,000 6,239,250
11.625% Sr. Nts., Series A, 8/15/06 6,265,000 6,625,238
- -------------------------------------------------------------------------------------------------------
Optel, Inc., 11.50% Sr. Nts., 7/1/08(6)(8) 2,000,000 2,000,000
- -------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 4,750,000
5,403,125
- -------------------------------------------------------------------------------------------------------
Orbital Imaging Corp., 11.625% Sr. Nts., 3/1/05(6) 2,435,000 2,514,138
- -------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(11) 5,310,000
4,062,150
- -------------------------------------------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr. Disc. Nts., 3/15/08(6)(11) 7,065,000
4,662,900
- -------------------------------------------------------------------------------------------------------
Price Communications Cellular Holdings, Inc., 0%/13.50%
Sr. Disc. Nts., Series B, 8/1/07(11) 9,220,000 6,477,050
- -------------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc.:
11.75% Sr. Sub. Nts., 7/15/07 4,225,000 4,668,625
9.125% Sr. Sec. Nts., 12/15/06(6) 10,625,000 10,664,844
- -------------------------------------------------------------------------------------------------------
Rogers Cantel, Inc., 8.80% Sr. Sub. Nts., 10/1/07 5,000,000 4,975,000
- -------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., 5/15/08(6) 7,000,000 7,035,000
- -------------------------------------------------------------------------------------------------------
Satelites Mexicanos SA, 10.125% Sr. Nts., 11/1/04(6) 4,160,000 4,061,200
- -------------------------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Disc. Nts., 3/1/08(6)(11) 17,120,000
10,785,600
- -------------------------------------------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(6)(11) 7,550,000
4,228,000
- -------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 0%/12.50%
Sr. Disc. Nts., 8/15/06(11) 2,865,000 2,456,738
------------
151,236,432
- -------------------------------------------------------------------------------------------------------
Metals/Minerals--2.8%
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 10,295,000 11,581,875
- -------------------------------------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 2,265,000 2,440,538
- -------------------------------------------------------------------------------------------------------
Centaur Mining & Exploration Ltd., 11% Gtd. Sr. Nts., 12/1/07(6) 5,025,000
5,150,625
- -------------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., 5/15/08(6) 4,540,000 4,653,500
- -------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08(6) 1,400,000 1,435,000
- -------------------------------------------------------------------------------------------------------
Keystone Consolidated Industries, Inc., 9.625% Sr. Sec. Nts., 8/1/07 825,000
847,688
- -------------------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 10,585,000 11,114,250
- -------------------------------------------------------------------------------------------------------
Republic Engineered Steels, Inc., 9.875% First Mtg. Nts., 12/15/01 2,990,000
2,990,000
- -------------------------------------------------------------------------------------------------------
WHX Corp., 10.50% Sr. Nts., 4/15/05 11,000,000 11,220,000
------------
51,433,476
</TABLE>
21 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail--1.0%
Boyds Collection Ltd., 9% Sr. Sub. Nts., 5/15/08(6) $ 5,435,000 $ 5,462,175
- ----------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc.:
12% Sr. Nts., 10/1/03 2,100,000 2,268,000
9.125% Sr. Sub. Nts., 5/1/08(6) 3,435,000 3,435,000
- ----------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs., 5/1/08 1,680,000 1,692,600
- ----------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 2,100,000 2,118,375
- ----------------------------------------------------------------------------------------------------
Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08(6) 2,750,000 2,822,188
- ----------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 1,600,000 1,640,000
-----------
19,438,338
- ----------------------------------------------------------------------------------------------------
Service--3.5%
Borg-Warner Security Corp.:
9.125% Sr. Sub. Nts., 5/1/03(2)(16) 8,050,000 8,417,241
9.625% Sr. Sub. Nts., 3/15/07 10,425,000 11,728,125
- ----------------------------------------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(11) 5,475,000 4,462,125
- ----------------------------------------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 3,000,000 3,225,000
- ----------------------------------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr. Nts., 4/15/08(6)(11) 4,650,000 2,604,000
- ----------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 8,425,000 8,403,938
- ----------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 10,570,000 10,702,125
- ----------------------------------------------------------------------------------------------------
Kinetic Concepts, Inc., 9.625% Gtd. Unsec. Nts., Series B, 11/1/07 85,000 86,275
- ----------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05(11) 8,545,000 9,655,850
6.75% Cv. Gtd. Sr. Sub. Nts., 9/15/03 2,432,000 2,839,360
- ----------------------------------------------------------------------------------------------------
SF Holdings Group, Inc., Units (each unit consists of $1,000 principal
amount of 0%/12.75% sr. disc. nts., 3/15/08 and one warrant to
purchase two shares of cl. C common stock)(6)(11)(15) 1,500,000 810,000
- ----------------------------------------------------------------------------------------------------
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05 1,685,000 1,929,325
-----------
64,863,364
</TABLE>
22 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation--4.7%
American Communication Lines LLC, 10.25% Bonds, 6/30/08(6) $ 2,000,000 $
2,035,000
- -----------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 3,760,000
3,816,400
- -----------------------------------------------------------------------------------------------------------
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., Series B, 7/1/07 3,495,000
3,652,275
- -----------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 10,970,000
12,204,125
- -----------------------------------------------------------------------------------------------------------
Golden Ocean Group Ltd., 10% Gtd. Sr. Unsec. Nts., 8/31/01(6) 560,000
434,000
- -----------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc.:
11% Sr. Sub. Nts., 7/15/06 8,625,000 9,703,125
9.125% Sr. Sub. Nts., 7/15/07 6,000,000 6,330,000
- -----------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 2,845,000 2,973,025
- -----------------------------------------------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(6) 6,935,000 7,264,413
Units (each unit consists of $1,000 principal amount of 12% second
priority ship mtg. nts., 6/30/07 and 7.66 warrants)(6)(15) 4,620,000 5,243,700
- -----------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., 6/15/07 1,150,000
1,190,250
- -----------------------------------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 11.50% First Preferred
Ship Mtg. Nts., 5/30/08(6) 4,000,000 3,780,000
- -----------------------------------------------------------------------------------------------------------
Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd.
Unsec. Unsub. Bonds, 7/15/07(2) 300,000 223,590
- -----------------------------------------------------------------------------------------------------------
TFM SA de CV, 10.25% Gtd. Sr. Nts., 6/15/07 560,000 544,600
- -----------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts.,
Series B, 12/15/03(11) 25,515,000 23,856,525
- -----------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(2) 4,465,936
3,494,595
- -----------------------------------------------------------------------------------------------------------
Trico Marine Services, Inc., 8.50% Gtd. Sr. Nts., Series D, 8/1/05 870,000
850,425
------------
87,596,048
- -----------------------------------------------------------------------------------------------------------
Utilities--0.9%
Calpine Corp., 10.50% Sr. Nts., 5/15/06 2,990,000 3,274,050
- -----------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 5,550,000
6,354,750
- -----------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp.:
7.75% Sr. Unsec. Nts., Series G, 10/1/08 2,500,000 2,578,125
0%/8.50% Sr. Unsec. Nts., Series H, 7/1/10(11) 3,000,000 2,070,000
- -----------------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec. Nts., 12/28/08(6) 25,964 24,367
- -----------------------------------------------------------------------------------------------------------
US Xchange LLC, 15% Sr. Nts., 7/1/08(6) 2,800,000 2,870,000
--------------
17,171,292
--------------
Total Corporate Bonds and Notes (Cost $1,290,301,419) 1,314,964,397
</TABLE>
23 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
=====================================================================================================
<S> <C> <C>
Preferred Stocks--7.3%
- -----------------------------------------------------------------------------------------------------
American Radio Systems Corp., 11.375% Cum. Exchangeable
Preferred, Series B(2) 20,483 $2,437,477
- -----------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable Preferred Stock,
Non-Vtg.(2) 67,762 1,778,752
- -----------------------------------------------------------------------------------------------------
Cablevision Systems Corp. Holdings, Inc.,
8.50% Preferred Stock, Series I 142,500 9,111,094
- -----------------------------------------------------------------------------------------------------
California Federal Bank, 11.50% Non-Cum., Non-Vtg. 42,000 4,735,500
- -----------------------------------------------------------------------------------------------------
CGA Group Ltd., Preferred Stock, Series A(2)(12)(17) 130,000 3,250,000
- -----------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7% Cv. Cum. Preferred Stock(6) 91,000 3,856,125
- -----------------------------------------------------------------------------------------------------
Clark USA, Inc., 11.50% Sr. Cum. Exchangeable
Preferred Stock(2)(13) 2,844 3,007,530
- -----------------------------------------------------------------------------------------------------
Concentric Network Corp., 13.50% Exchangeable
Preferred Stock(6)(13) 4,425 4,391,817
- -----------------------------------------------------------------------------------------------------
Doane Products Co., 14.25% Sr. Exchangeable Preferred Stock,
Non-Vtg.(2)(17) 140,000 5,635,000
- -----------------------------------------------------------------------------------------------------
Dobson Communications Corp., 12.25% Preferred Stock(6)(13) 4,678
4,876,815
- -----------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable Preferred Stock 4,622
5,188,195
- -----------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., Preferred Stock(2)(17) 28,000 1,631,000
- -----------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C(2)(13) 390,000 682,500
- -----------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 12.125% Sr. Redeemable
Exchangeable Preferred Stock, Series B(2)(13) 5,452 6,092,610
- -----------------------------------------------------------------------------------------------------
El Paso Electric Co., 11.40% Preferred Stock, Series A(13) 22,633 2,483,972
- -----------------------------------------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale California, l2% Non-Cum.
Exchangeable Perpetual Preferred Stock, Series A(2) 30 817
- -----------------------------------------------------------------------------------------------------
Golden State Bancorp, 8.75% Cv. Preferred Stock, Series A 44,800 3,883,600
- -----------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable Preferred Stock(2)(13) 2,712 3,301,860
- -----------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.:
13.50% Exchangeable Preferred Stock, Series B(2)(13) 2,698 3,180,267
Depositary Shares Representing one one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series E, Non-Vtg.(6) 84,480 3,136,320
- -----------------------------------------------------------------------------------------------------
International Utility Structures, Inc., Units (each unit consists of
$1,000 principal amount of 13% sr. exchangeable preferred stock
and one warrant to purchase 30 shares of common stock)(2)(13)(15) 560 613,200
- -----------------------------------------------------------------------------------------------------
Nebco Evans Holdings Co., 11.25% Nts., 3/1/08(2)(13) 82,123 8,397,077
- -----------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 11.125% Preferred Stock(6) 3,027 3,125,377
- -----------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14% Sr. Exchangeable Preferred(13) 101,601
5,969,059
- -----------------------------------------------------------------------------------------------------
Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable
Preferred Stock(6)(13) 400 3,930,000
- -----------------------------------------------------------------------------------------------------
Prime Retail, Inc.:
10.50% Cum. Preferred Stock, Series A, Non-Vtg.(2) 22,500 593,438
8.50% Cv. Preferred Stock, Series B 66,815 1,369,708
</TABLE>
24 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
===================================================================================================
<S> <C> <C>
Preferred Stocks (continued)
PRIMEDIA, Inc.:
8.625% Preferred Stock 101,200 $ 9,867,000
9.20% Preferred Stock, Series F 22,500 2,289,375
- ---------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Sr. Exchangeable Preferred Stock(2)(13) 6,850
6,884,250
- ---------------------------------------------------------------------------------------------------
SD Warren Co., 14% Cum. Exchangeable Preferred Stock,
Series B, Non-Vtg 213,500 10,728,375
- ---------------------------------------------------------------------------------------------------
SF Holdings Group, Inc., Units (each unit consists of one share of
preferred stock and 37 cl. C shares of common stock)(2)(13)(15) 84 749,700
- ---------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 12.625% Cum., Series E, Non-Vtg.(13) 13,820 1,565,115
- ---------------------------------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc., 14.25% Cum. Sr. Exchangeable
Preferred Stock, Non-Vtg.(2)(13) 2,727 2,876,985
- ---------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc.:
9.16% Cv. Preferred Stock, Series B 4,650 132,525
9.20% Sr. Preferred Stock 158,950 4,043,291
------------
Total Preferred Stocks (Cost $129,696,101) 135,795,726
===================================================================================================
Common Stocks--1.4%
- ---------------------------------------------------------------------------------------------------
BayCorp Holdings Ltd.(17) 16,133 113,939
- ---------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc.(17) 16,000 155,000
- ---------------------------------------------------------------------------------------------------
Coinstar, Inc. 38,325 354,506
- ---------------------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A(17) 32,100 772,406
- ---------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.(2) 1,350 1,194,750
- ---------------------------------------------------------------------------------------------------
El Paso Electric Co. 60,400 554,925
- ---------------------------------------------------------------------------------------------------
Equitable Bag, Inc.(2)(17) 39,357 157,428
- ---------------------------------------------------------------------------------------------------
Globix Corp.(17) 10,000 99,375
- ---------------------------------------------------------------------------------------------------
Grand Union Co.(17) 144,928 27,174
- ---------------------------------------------------------------------------------------------------
Greate Bay Casino Corp.(17) 15,247 7,623
- ---------------------------------------------------------------------------------------------------
Hollinger International, Inc. 200,000 3,400,000
- ---------------------------------------------------------------------------------------------------
Hollywood Casino Corp., Cl. A(17) 90,836 170,317
- ---------------------------------------------------------------------------------------------------
Horizon Group Properties, Inc.(17) 3,995 26,342
- ---------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.(17) 2,114 88,656
- ---------------------------------------------------------------------------------------------------
News Corp. Ltd., Sponsored ADR, Preference 166,271 4,697,156
- ---------------------------------------------------------------------------------------------------
Omnipoint Corp.(2)(17) 200,000 4,358,125
- ---------------------------------------------------------------------------------------------------
Optel, Inc.(2)(17) 6,890 69
- ---------------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc.(2)(12)(17) 1,688,400 --
- ---------------------------------------------------------------------------------------------------
Resorts International, Inc.(17) 187,187 --
- ---------------------------------------------------------------------------------------------------
Siena Holdings, Inc.(2)(12)(17) 239,111 343,723
- ---------------------------------------------------------------------------------------------------
Southwest Airlines Co. 185,550 5,496,919
- ---------------------------------------------------------------------------------------------------
Station Casinos, Inc.(17) 37,000 543,438
- ---------------------------------------------------------------------------------------------------
Walter Industries, Inc.(17) 544 10,302
- ---------------------------------------------------------------------------------------------------
WorldCom, Inc.(17) 59,300 2,872,344
------------
Total Common Stocks (Cost $18,130,524) 25,444,517
</TABLE>
25 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Units See Note 1
===================================================================================================
<S> <C> <C>
Rights, Warrants and Certificates--0.7%
- ---------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99(2) 40,000 $ 400
- ---------------------------------------------------------------------------------------------------
Ames Department Stores, Inc., Litigation Trust(2) 1,045,990 10,460
- ---------------------------------------------------------------------------------------------------
Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp. 5/00(2) 825 5
- ---------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00(2) 125,000 31,250
- ---------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc. Wts., Exp. 10/07(2) 5,837 32,833
- ---------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(2)(12) 130,000 65,000
- ---------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/07 3,330 449,550
- ---------------------------------------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp. 11/05(2) 2,575 501,601
- ---------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.:
Cl. C Wts., Exp. 12/99 69,654 2,041,733
Cl. D Wts., Exp. 12/01 69,654 1,976,432
- ---------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/02 163,894 1,229,205
- ---------------------------------------------------------------------------------------------------
Gothic Energy Corp. Wts.:
Exp. 1/03(2) 137,280 1,373
Exp. 9/04(2) 168,000 189,000
- ---------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(2) 1,090 105,730
- ---------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/05(2) 50,820 1,499,851
- ---------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 6,000 --
- ---------------------------------------------------------------------------------------------------
Jewel Recovery LP, Participation Units of Limited Partners' Interest 10,113 --
- ---------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00(2) 32,000 697,300
- ---------------------------------------------------------------------------------------------------
Orbital Imaging Corp. Wts., Exp. 3/05(2) 2,435 109,575
- ---------------------------------------------------------------------------------------------------
Orion Network Systems, Inc. Wts., Exp. 1/07(2) 3,910 59,139
- ---------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/07(2) 31,716 479,716
- ---------------------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03(2) 182,000 2,275,000
Exp. 6/05(2) 49,120 491,200
- ---------------------------------------------------------------------------------------------------
Republic Health Corp. Wts., Exp. 4/00 3,763 --
- ---------------------------------------------------------------------------------------------------
Trizec Hahn Corp. Wts., Exp. 7/99 16,277 50,916
- ---------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts.,
Exp. 4/20 24,990 --
- ---------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc. Wts., Exp. 1/02(2) 114,400 128,700
-----------
Total Rights, Warrants and Certificates (Cost $2,209,007) 12,425,969
</TABLE>
26 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
============================================================================================================
<S> <C> <C>
Structured Instruments--8.5%
- ------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, Morgan Guaranty Trust Co.
of New York, Leveraged Nts. on The Emerging Markets Bond Index,
9.50%, 9/2/98 $ 17,534,845 $ 16,762,172
- ------------------------------------------------------------------------------------------------------------
Bear Stearns High Yield Composite Index Linked Nts., 9%, 2/5/99 25,000,000
25,010,000
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., Zero Coupon, 9.225%, 9/28/98(9) 840,000
818,076
- ------------------------------------------------------------------------------------------------------------
Commercial Bank International SA, Energy Linked Nts., 7/1/99(8) 3,000,000
3,528,600
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs Group LP, High Yield Index Nts., 8%, 3/4/99 10,000,000
9,950,000
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.:
Chilean Peso/Japanese Yen Linked Nts., 17.50%, 7/28/98 1,300,000
1,334,554
Chilean Peso/Japanese Yen Linked Nts., 18%, 7/28/98 1,300,000
1,349,634
Greek Drachma/Swiss Franc Linked Nts., Zero Coupon, 4/21/99 3,000,000
3,175,200
- ------------------------------------------------------------------------------------------------------------
Lehman High Yield Index Nts.:
7.96%, 8/5/98 5,000,000 4,942,000
8.50%, 2/8/99(8) 26,000,000 26,000,000
9%, 7/8/98 13,400,000 13,852,250
- ------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, The Emerging Markets
Bond Index, U.S. Dollar/Super National Linked Nts.,
Zero Coupon, 9/30/98 13,500,000 13,728,285
- ------------------------------------------------------------------------------------------------------------
Rabobank, Lehman High Yield Index Nts., 7.988%, 7/6/98 10,600,000
10,533,220
- ------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., Korean Development Bank
U.S. Dollar/Korean Won Linked Nts., Zero Coupon, 16.903%, 4/27/99(9) 3,568,879
3,148,466
- ------------------------------------------------------------------------------------------------------------
Shoshone Partners Loan Trust Sr. Nts.:
5/31/02 (representing a basket of reference loans and a total return
swap between Chase Manhattan Bank and the Trust)(2)(8) 10,000,000
10,000,000
9.719%, 4/28/02 (representing a basket of reference loans and a total return
swap between Chase Manhattan Bank and the Trust)(2)(3) 12,000,000
13,288,269
------------
Total Structured Instruments (Cost $156,281,101) 157,420,726
<CAPTION>
Date Strike Contracts
============================================================================================================
<S> <C> <C> <C> <C>
Call Options Purchased--0.0%
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Futures, 20 yr., Call Opt.
(Cost $143,750) 8/98 124% 100 126,563
</TABLE>
27 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
====================================================================================================
<S> <C> <C>
Repurchase Agreements--6.0%
- ----------------------------------------------------------------------------------------------------
Repurchase agreement with Salomon Smith Barney Holdings, Inc.,
5.90%, dated 6/30/98, to be repurchased at $112,218,388 on 7/1/98,
collateralized by U.S. Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of $115,183,251 (Cost $112,200,000) $112,200,000 $
112,200,000
- ----------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,841,393,205) 101.2% 1,884,340,956
- ----------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.2) (22,965,081)
------------ --------------
Net Assets 100.0% $1,861,375,875
============ ==============
</TABLE>
(1) Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
CAD -- Canadian Dollar MXP -- Mexican Peso
DEM -- German Mark TRL -- Turkish Lira
GBP -- British Pound Sterling XEU -- European Currency Units
IDR -- Indonesian Rupiah ZAR -- South African Rand
(2) Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
(3) Represents the current interest rate for a variable rate security.
(4) Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
(5) Issuer is in default.
(6) Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $376,503,296 or 20.23% of the Fund's net
assets as of June 30, 1998.
(7) Represents the current interest rate for an increasing rate security.
(8) When-issued security to be delivered and settled after June 30, 1998.
(9) For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
(10) Securities with an aggregate market value of $20,010,806 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
(11) Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
28 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. 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, 1998. The
aggregate fair value of all securities of affiliated companies held by the Fund
as of June 30, 1998 amounts to $3,658,723. Transactions during the period in
which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Shares/Face Gross Gross Shares/Face
June 30, 1997 Additions Reductions June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stocks and Warrants
- -------------------
CGA Group Ltd., Preferred
Stock, Series A 130,000 -- -- 130,000
CGA Group Ltd. Wts., Exp 12/49 130,000 -- -- 130,000
Pope, Evans & Robbins, Inc. 1,688,400 -- -- 1,688,400
Siena Holdings, Inc. -- 239,111 -- 239,111
Bonds and Notes
- ---------------
Pope, Evans, & Robbins, Inc.,
7% Sr. Nts., 5/15/98 $5,955,189 -- -- $5,955,189
</TABLE>
13. Interest or dividend is paid in kind.
14. Non-income producing--issuer is in default of interest payment.
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. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
17. Non-income producing security.
See accompanying Notes to Financial Statements.
29 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1998
- --------------------------------------------------------------------------------
===============================================================================
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,832,097,400) $1,880,682,233
Affiliated companies (cost $9,295,805) 3,658,723
- -------------------------------------------------------------------------------
Cash 2,889,428
- -------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 548,108
- -------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns 29,037,528
Investments sold 6,852,292
Shares of beneficial interest sold 4,211,292
Daily variation on futures contracts--Note 6 340,705
Closed forward foreign currency exchange contracts 279,403
- -------------------------------------------------------------------------------
Other 36,935
--------------
Total assets 1,928,536,647
===============================================================================
Liabilities
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 23,888
- -------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $38,000,000 purchased
on a when-issued basis)--Note 1 58,606,440
Dividends 5,177,983
Shares of beneficial interest redeemed 1,397,963
Distribution and service plan fees 993,597
Transfer and shareholder servicing agent fees 327,346
Closed forward foreign currency exchange contracts 267,557
Trustees' fees 3,383
Other 362,615
--------------
Total liabilities 67,160,772
===============================================================================
Net Assets $1,861,375,875
==============
===============================================================================
Composition of Net Assets
Paid-in capital $1,954,180,354
- -------------------------------------------------------------------------------
Overdistributed net investment income (2,352,456)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (132,960,175)
- -------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 42,508,152
--------------
Net assets $1,861,375,875
==============
30 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,257,099,660 and 87,028,798 shares of beneficial interest outstanding) $14.44
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $15.16
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of
$527,515,913 and 36,817,257 shares of beneficial interest outstanding) $14.33
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$65,506,359 and 4,542,235 shares of beneficial interest outstanding) $14.42
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $11,253,943 and 780,688 shares of beneficial
interest outstanding) $14.42
See accompanying Notes to Financial Statements.
31 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended June 30, 1998
- --------------------------------------------------------------------------------
===============================================================================
Investment Income
Interest (net of foreign withholding taxes of $102,538) $160,779,640
- -------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $5,282) 7,338,652
------------
Total income 168,118,292
===============================================================================
Expenses
Management fees--Note 4 10,551,830
- -------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,557,141
Class B 4,641,344
Class C 479,818
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 2,053,529
- -------------------------------------------------------------------------------
Custodian fees and expenses 468,289
- -------------------------------------------------------------------------------
Shareholder reports 446,789
- -------------------------------------------------------------------------------
Legal, auditing and other professional fees 87,522
- -------------------------------------------------------------------------------
Trustees' fees and expenses 73,200
- -------------------------------------------------------------------------------
Registration and filing fees 27,990
- -------------------------------------------------------------------------------
Other 58,147
------------
Total expenses 21,445,599
===============================================================================
Net Investment Income 146,672,693
===============================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (excluding premiums on options exercised) 47,077,343
Closing of futures contracts--Note 6 2,678,781
Closing and expiration of options written--Note 7 267,763
Foreign currency transactions (5,897,682)
------------
Net realized gain 44,126,205
- -------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 4,889,019
Translation of assets and liabilities denominated in
foreign currencies (114,638)
------------
Net change 4,774,381
------------
Net realized and unrealized gain 48,900,586
===============================================================================
Net Increase in Net Assets Resulting from Operations $195,573,279
============
See accompanying Notes to Financial Statements.
32 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997
================================================================================================
<S> <C> <C>
Operations
Net investment income $ 146,672,693 $ 133,588,094
- ------------------------------------------------------------------------------------------------
Net realized gain 44,126,205 21,958,042
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,774,381 23,877,931
--------------- ---------------
Net increase in net assets resulting from operations 195,573,279 179,424,067
================================================================================================
Dividends to Shareholders
Dividends from net investment income:
Class A (103,411,688) (100,736,506)
Class B (35,809,231) (27,545,181)
Class C (3,671,943) (1,429,353)
Class Y (345,783) --
================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 51,643,094 44,730,912
Class B 117,957,555 106,093,196
Class C 33,959,979 22,308,284
Class Y 11,285,065 --
================================================================================================
Net Assets
Total increase 267,180,327 222,845,419
- ------------------------------------------------------------------------------------------------
Beginning of period 1,594,195,548 1,371,350,129
--------------- ---------------
End of period [including undistributed (overdistributed) net
investment income of $(2,352,456) and $276,928, respectively] $ 1,861,375,875 $
1,594,195,548
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
33 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------
Year Ended June 30,
1998 1997 1996 1995
==================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.98 $13.51 $13.22 $13.63
- ----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.24 1.27 1.29 1.30
Net realized and unrealized gain (loss) .43 .43 .27 (.40)
------ ------ ------ ------
Total income from investment operations 1.67 1.70 1.56 .90
- ----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.21) (1.23) (1.27) (1.30)
Tax return of capital distribution -- -- -- (.01)
------ ------ ------ ------
Total dividends and distributions
to shareholders (1.21) (1.23) (1.27) (1.31)
- ----------------------------------------------------------------------------------
Net asset value, end of period $14.44 $13.98 $13.51 $13.22
====== ====== ====== ======
==================================================================================
Total Return, at Net Asset Value(3) 12.34% 13.10% 12.25% 7.09%
==================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,257 $1,167 $1,084 $1,061
- ----------------------------------------------------------------------------------
Average net assets (in millions) $1,227 $1,128 $1,092 $1,006
- ----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.64% 9.22% 9.59% 9.81%
Expenses 1.00% 1.00% 1.03% 1.03%
- ----------------------------------------------------------------------------------
Portfolio turnover rate(5) 116.8% 125.8% 104.9% 93.7%
</TABLE>
(1) For the period from October 15, 1997 (inception of offering) to June 30,
1998.
(2) For the period from November 1, 1995 (inception of offering) to June 30,
1996.
(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.
34 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------ ----------------------------------------------
Year Ended June 30,
1994 1998 1997 1996 1995 1994
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $14.16 $13.88 $13.43 $13.15 $13.57 $14.12
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.42 1.11 1.15 1.18 1.20 1.35
Net realized and unrealized gain (loss) (.54) .44 .43 .27 (.42) (.60)
------ ------ ------ ------ ------ ------
Total income from investment operations .88 1.55 1.58 1.45 .78 .75
- ------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.41) (1.10) (1.13) (1.17) (1.19) (1.30)
Tax return of capital distribution -- -- -- -- (.01) --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.41) (1.10) (1.13) (1.17) (1.20) (1.30)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.63 $14.33 $13.88 $13.43 $13.15 $13.57
====== ====== ====== ====== ====== ======
======================================================================================================
Total Return, at Net Asset Value(3) 6.27% 11.50% 12.18% 11.40% 6.21%
5.31%
======================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,049 $528 $397 $280 $192 $88
- ------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,111 $464 $335 $236 $135 $52
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 10.10% 7.86% 8.41% 8.75% 8.95% 8.98%
Expenses 0.96% 1.79% 1.80% 1.84% 1.84% 1.88%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 96.7% 116.8% 125.8% 104.9% 93.7% 96.7%
</TABLE>
(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, 1998 were $2,037,376,437 and $1,860,877,727, respectively.
35 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Y
-------------------------- -------
Period
Ended
Year Ended June 30, June 30,
1998 1997 1996(2) 1998(1)
=====================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $13.97 $13.50 $13.30 $14.48
- -------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.22 1.14 .77 .90
Net realized and unrealized gain (loss) .33 .45 .19 (.08)
------ ------ ------ ------
Total income from investment operations 1.55 1.59 .96 .82
- -------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.10) (1.12) (.76) (.88)
Tax return of capital distribution -- -- -- --
------ ------ ------ ------
Total dividends and distributions
to shareholders (1.10) (1.12) (.76) (.88)
- -------------------------------------------------------------------------------------
Net asset value, end of period $14.42 $13.97 $13.50 $14.42
====== ====== ====== ======
=====================================================================================
Total Return, at Net Asset Value(3) 11.42% 12.23% 7.36% 5.81%
=====================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $66 $30 $8 $11
- -------------------------------------------------------------------------------------
Average net assets (in millions) $48 $18 $3 $ 6
- -------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.87% 8.40% 8.41%(4) 9.14%(4)
Expenses 1.78% 1.82% 1.90%(4) 0.81%(4)
- -------------------------------------------------------------------------------------
Portfolio turnover rate(5) 116.8% 125.8% 104.9% 116.8%
</TABLE>
(1) For the period from October 15, 1997 (inception of offering) to June 30,
1998.
(2) For the period from November 1, 1995 (inception of offering) to June 30,
1996.
(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, 1998 were $2,037,376,437 and $1,860,877,727, respectively.
See accompanying Notes to Financial Statements.
36 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 by investing in a diversified portfolio of high yield,
lower-rated, fixed income securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C
and Class Y 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
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own expenses directly attributable to
that class and exclusive voting rights with respect to matters affecting that
class. Classes A, B and C have separate distribution and/or service plans. No
such plan has been adopted for Class Y shares. 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
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 an
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 is used.
37 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Structured Notes. The Fund invests in foreign currency-linked structured notes
whereby the market value and redemption price are linked to foreign currency
exchange rates. The structured notes may be leveraged, which increases the
notes' volatility relative to the face of the security. Fluctuations in values
of the securities are recorded as unrealized gains and losses in the
accompanying financial statements. During the year ended June 30, 1998, the
market value of these securities comprised an average of 6.52% of the Fund's net
assets, and resulted in realized and unrealized gains of $1,159,873.
- --------------------------------------------------------------------------------
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, 1998, the
Fund had entered into outstanding when-issued or forward commitments of
$38,000,000.
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, 1998, securities with an
aggregate market value of $2,473,371, representing 0.13% of the Fund's net
assets, were in default.
38 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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 foreign 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.
- --------------------------------------------------------------------------------
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, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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, 1998, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $126,400,000, which expires between 1999 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.
39 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
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 its 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 fiscal year in which
the income or realized gain was recorded by the Fund.
During the year ended June 30, 1998, the Fund adjusted the
classification of net investment income and net realized gain (loss) to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. Accordingly,
during the year ended June 30, 1998, amounts have been reclassified to reflect
an increase in overdistributed net investment income of $6,063,432. 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.
40 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, 1998(1) Year Ended June 30, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 20,518,863 $ 295,681,300 20,692,314 $ 285,257,249
Dividends reinvested 4,392,564 63,310,546 4,327,859 59,845,032
Redeemed (21,336,980) (307,348,752) (21,776,775) (300,371,369)
----------- ------------- ----------- -------------
Net increase 3,574,447 $ 51,643,094 3,243,398 $ 44,730,912
=========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class B:
Sold 14,865,015 $ 212,496,036 14,179,293 $ 194,365,424
Dividends reinvested 1,246,353 17,834,997 951,852 13,080,795
Redeemed (7,867,469) (112,373,478) (7,393,386) (101,353,023)
----------- ------------- ----------- -------------
Net increase 8,243,899 $ 117,957,555 7,737,759 $ 106,093,196
=========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class C:
Sold 3,414,708 $ 49,159,490 2,112,964 $ 29,194,779
Dividends reinvested 164,692 2,373,237 66,911 925,795
Redeemed (1,218,195) (17,572,748) (565,170) (7,812,290)
----------- ------------- ----------- -------------
Net increase 2,361,205 $ 33,959,979 1,614,705 $ 22,308,284
=========== ============= =========== =============
- -----------------------------------------------------------------------------------------
Class Y:
Sold 846,505 $ 12,239,429 -- $ --
Dividends reinvested 23,836 345,872 -- --
Redeemed (89,653) (1,300,236) -- --
----------- ------------- ----------- -------------
Net increase 780,688 $ 11,285,065 -- $ --
=========== ============= =========== =============
</TABLE>
(1) For the year ended June 30, 1998 for Class A, Class B and Class C shares and
for the period from October 15, 1997 (inception of offering) to June 30, 1998
for Class Y shares.
================================================================================
3. Unrealized Gains and Losses on Investments
At June 30, 1998, net unrealized appreciation on investments and options written
of $42,947,751 was composed of gross appreciation of $79,675,332, and gross
depreciation of $36,727,581.
41 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
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% of the first
$200 million of average annual net assets, 0.72% of the next $200 million, 0.69%
of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200
million, and 0.50% of average annual net assets over $1 billion.
For the year ended June 30, 1998, commissions (sales charges paid by
investors) on sales of Class A shares totaled $3,002,481, of which $771,821 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 $5,537,254 and $389,939, respectively, of which $143,401
and $7,481 was paid to an affiliated broker/dealer for Class B and Class C
shares, respectively. During the year ended June 30, 1998, OFDI received
contingent deferred sales charges of $1,047,304 and $40,452, respectively, upon
redemption of Class B and Class C 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 shareholder 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 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. 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, 1998, OFDI paid $47,665 to
an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
42 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The Fund has adopted a Distribution and Service Plan for Class B shares to
reimburse OFDI for its 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 for its services rendered in distributing
Class B shares. 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.
Each fee is computed on the average annual assets of Class B shares, determined
as of the close of each regular business day. During the year ended June 30,
1998, OFDI paid $9,654 to an affiliated broker/dealer as reimbursement for Class
B personal service and maintenance expenses and retained $3,815,695 as
reimbursement for Class B sales commissions and service fee advances, as well as
financing costs. 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 distributing shares before the Plan was terminated. As of June 30, 1998,
OFDI had incurred excess distribution and servicing costs of $14,583,100 for
Class B.
The Fund has adopted a Distribution and Service Plan for Class C
shares to compensate OFDI for its 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 for its services rendered in
distributing 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. Each fee is computed on the average annual net assets of Class C
shares, determined as of the close of each regular business day. During the year
ended June 30, 1998, OFDI paid $1,436 to an affiliated broker/dealer as
reimbursement for Class C personal service and maintenance expenses and retained
$319,384 as compensation for Class C sales commissions and service fee advances,
as well as financing costs. 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 distributing shares before the Plan was terminated. As of June 30,
1998, OFDI had incurred excess distribution and servicing costs of $825,815 for
Class C.
43 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
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 held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments where
applicable. 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, 1998, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Contract
Expiration Amount Valuation as of Unrealized Unrealized
Date (000s) June 30, 1998 Appreciation Depreciation
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contracts to Sell
- -----------------
Canadian Dollar
(CAD) 7/15/98 6,585 CAD $4,482,582 $200,584 $ --
Greek Drachma
(GRD) 7/20/98 928,000 GRD 3,036,875 -- 23,888
South African Rand
(ZAR) 7/2/98 23,122 ZAR 3,925,623 347,524 --
-------- -------
Total Unrealized Appreciation and Depreciation $548,108 $23,888
======== =======
</TABLE>
44 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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 (initial margin) in an amount 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.
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, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Date Contracts June 30,1998 Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Sell
- -----------------
Dow Jones Industrial Average 9/98 120 $10,836,000 $118,720
National Association of Security
Dealers Automated Quotation 100 9/98 12 1,624,800 135,000
Standard & Poor's 500 9/98 120 34,290,000 677,625
--------
$931,345
========
</TABLE>
45 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
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, 1998 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
---------------------- --------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at June 30, 1997 -- $ -- -- $ --
Options written 3,612,272 490,928 1,630 112,950
Options closed or expired (3,604,997) (314,990) (1,630) (112,950)
Options exercised (7,275) (175,938) -- --
---------- --------- ------ ---------
Options outstanding at June 30, 1998 -- $ -- -- $ --
========== ========= ====== =========
</TABLE>
46 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
8. Illiquid and Restricted Securities
At June 30, 1998, investments in securities included issues that are illiquid or
restricted. Restricted 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 be considered
illiquid if it lacks a readily available market or 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
periodically) in illiquid and restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at June 30, 1998 was $178,202,962, which represents
9.57% of the Fund's net assets, of which $14,763,301 is considered restricted.
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation
Per Unit as of
Security Acquisition Dates Cost Per Unit June 30, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds
- -----
Arizona Charlie's, Inc., 12% First Mtg. Nts.,
Series B, 11/15/00 11/18/93 100.00% 79.00%
- ---------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 11/18/93-
12/15/95 95.74 20.00
- ---------------------------------------------------------------------------------------------------
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02 4/14/92-
3/3/93 100.00 100.25
- ---------------------------------------------------------------------------------------------------
Trans World Airlines Lease, 14% Equipment
Trust, 7/2/08 3/19/98 101.00 107.00
Stocks and Warrants
- -------------------
Becker Gaming, Inc. Wts., Exp. 11/00 11/18/93 $ 2.00 $ .25
- ---------------------------------------------------------------------------------------------------
CGA Group Ltd., Preferred Stock, Series A 6/17/97 25.00 25.00
- ---------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49 6/17/97 -- .50
- ---------------------------------------------------------------------------------------------------
ECM Fund, L.P.I. 4/14/92 1,000.00 885.00
- ---------------------------------------------------------------------------------------------------
Omnipoint Corp. 1/26/96 16.00 21.79
- ---------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00 11/29/95 -- 21.79
</TABLE>
47 Oppenheimer High Yield Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
9. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended June
30, 1998.
<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.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated June 24, 1997:
Previously filed with Registrant=s Post-Effective Amendment No.
38 (8/13/97) 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
<PAGE>
(4) (i) Specimen Class A Share Certificate:
Previously filed with Registrant=s
Post-Effective Amendment No. 38 (8/13/97) and
incorporated herein by reference.
(ii) Specimen Class B Share Certificate:Previously filed with
Registrant=s Post-Effective Amendment No. 38 (8/13/97) and
incorporated herein by reference.
(iii)Specimen Class C Share Certificate:Previously
filed with Registrant=s Post-Effective
Amendment No. 38 (8/13/97) and incorporated
herein by reference.
(iv) Specimen Class Y Share Certificate:Previously filed with
Registrant=s Post-Effective Amendment No. 38 (8/13/97) 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 OppenheimerFunds
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 OppenheimerFunds 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.
<PAGE>
(d) Form of OppenheimerFunds 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 Growth
Fund (Reg. No. 2-45272), 11/1/86, refiled
with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272),
8/30/94, pursuant to Item 102 of Regulation
S-T and incorporated herein by reference.
(7) Form of Trustee Deferred Compensation Agreement: Filed herewith.
(8) (i) 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.
(ii) Form of Foreign custody Manager
Agreement dated October 9, 1997: Filed with
Pre-Effective Amendment No. 2 to the
Registration statement of Oppenheimer World
Bond Fund (Reg. No. 333-48973), 4/23/98, 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.
<PAGE>
(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. 42 of
Oppenheimer Strategic Income and Growth Fund
(Reg. No. 33-47378), 9/28/95, and
incorporated herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension
IRA: Filed with Post-Effective Amendment No.
19 to the Registration Statement for
Oppenheimer Integrity Funds (File No.
2-76547), 3/1/94, and incorporated herein by
reference.
(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 Filed with Registrant's
Post-Effective Amendment No. 33, 8/30/95, and
incorporated herein by reference.
<PAGE>
(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.
(iv) Financial Data Schedule for Class Y Shares:
Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 as
updated through 8/25/98: Filed with Post-Effective Amendment
No.70 to the Registration Statement of Oppenheimer Global Fund
(Reg. No. 2-31661), 9/14/98, and incorporated herein by
reference.
-- Powers of Attorney (including Certified Board
resolutions): for Bridget A. Macaskill and Sam
Freedman, filed with Registrant's Post-Effective
Amendment No. 36,9/26/96, and all others filed with
Registrant's Post-Effective Amendment No. 30, 8/25/94,
and incorporated herein by reference. Powers of
attorney (including Certified Board resolutions) for
George C. Bowen: Filed herewith.
Item 25. Persons Controlled by or Under Common Control with
Registrant
- ---------------------------------------------------------
None
Item 26. Number of Holders of Securities
Not applicable.
<PAGE>
Item 27. Indemnification
--------------------------
Reference is made to the provisions of Article Seventh of Registrant's
Amended and Restated 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.
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.("OFI") During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services, the
investment management subsidiary of The
Guardian Life Insurance Company (since 1972).
Edward Amberber,
Assistant Vice President
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly, Vice
President of Equity Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President of
HarbourView Asset Management Corporation
("HarbourView"); prior to March, 1996 he was
the senior equity portfolio manager for the
Panorama Series Fund, Inc. (the "Company")
and other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment
adviser, which was a subsidiary of
Connecticut Mutual Life Insurance Company;
was also responsible for managing the common
stock department and common stock
investments of Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds. Formerly, a Vice
President and Senior Portfolio Manager at First
of America Investment Corp.
George Batejan,
Executive Vice President
John R. Blomfield, Formerly, Senior Product Manager (November,
1996
Vice President - August, 1997) of International Home Foods
and American Home Products (March, 1994 -
October, 1996).
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January
1992 - February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President of Mutual Fund Accounting (since May
1996); an officer of other Oppenheimer funds;
formerly, an Assistant Vice President of
OFI/Mutual Fund Accounting (April 1994-May
1996), and a Fund
Controller for OFI.
George C. Bowen,
Senior Vice President, Treasurer
and Director Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President
(since February 1992), Treasurer (since July
1991)and a director (since December 1991) of
Centennial; President, Treasurer and a
director of Centennial Capital Corporation
(since June 1989); Vice President and
Treasurer (since August 1978) and Secretary
(since April 1981) of Shareholder Services,
Inc. ("SSI"); Vice President, Treasurer and
Secretary of Shareholder Financial Services,
Inc. ("SFSI") (since November 1989);
Assistant Treasurer of Oppenheimer
Acquisition Corp. ("OAC") (since March,
1998); Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989); Vice
President and Treasurer of ORAMI (since
July 1996); an officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President of
Centennial.
John Cardillo,
Assistant Vice President None.
Erin Cawley,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia College
- Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President
of Human Resources for Fidelity
Investments-Retail Division (January, 1995 -
January, 1996), Fidelity Investments FMR Co.
(January, 1996 - June, 1997) and Fidelity
Investments FTPG (June, 1997 - January, 1998).
Robert Doll, Jr.,
Executive Vice President & Director An officer and/or
portfolio manager of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since
September 1993), and a director (since
January 1992) of the Distributor;
Executive Vice President, General
Counsel and a director of HarbourView,
SSI, SFSI and Oppenheimer Partnership
Holdings, Inc. since (September 1995);
President and a director of Centennial
(since September 1995); President and a
director of ORAMI (since July 1996);
General Counsel (since May 1996) and
of OAC; Vice President and Director of OppenheimerFunds International, Ltd.
("OFIL") and Oppenheimer Millennium Funds
plc (since October 1997); an officer of
other Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
George Evans,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Millennium Funds plc (since October 1997); an officer of
other Oppenheimer funds; formerly, an Assistant
Vice President of OFI/Mutual Fund Accounting
(April 1994-May 1996), and a Fund Controller
for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and
Secretary of the Distributor; Secretary of
HarbourView, and Centennial; Secretary, Vice
President and Director of Centennial Capital
Corporation; Vice President and Secretary of
ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since
1994) of St. John's College; Director (since
1994 - present) of International Museum of
Photography at George Eastman House.
Formerly, he held the following positions:
formerly, Chairman of the Board and Director
of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President
and Director of Rochester Capital Advisors,
Inc. ("RCAI"); Managing Partner of Rochester
Capital Advisors, L.P., President and
Director of Rochester Fund Services, Inc.
("RFS"); President and Director of Rochester
Tax Managed Fund, Inc.; Director (1993 -
1997) of VehiCare Corp.; Director (1993 -
1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly, she held the following positions:
An officer of certain former Rochester funds
(May, 1993 - January, 1996); Secretary of
Rochester Capital Advisors, Inc. and General
Counsel (June, 1993 - January 1996) of
Rochester Capital Advisors, L.P.
Jennifer Foxson,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for
Schroder Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Chief Financial Officer and
Treasurer (since March, 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of the
Institute of Chartered Accountants; formerly,
an accountant for Arthur Young (London, U.K.).
Robert Grill,
Vice President Formerly, Marketing Vice President for
Bankers Trust Company (1993-1996); Steering
Committee Member, Subcommittee Chairman for
American Savings Education Council
(1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989 -
January, 1997) of Bankers Trust Company.
Glenna Hale,
Vice President Formerly, Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust Company
(January, 1991 - November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director
of SFSI; President and Chief executive Officer
of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President and
Portfolio Manager for Warburg, Pincus
Counsellors, Inc. (1993-1997), Co-manager of
Warburg, Pincus Emerging Markets Fund (12/94
- 10/97), Co-manager Warburg, Pincus
Institutional Emerging Markets Fund -
Emerging Markets Portfolio (8/96 - 10/97),
Warburg Pincus Japan OTC Fund, Associate
Portfolio Manager of Warburg Pincus
International Equity Fund, Warburg Pincus
Institutional Fund - Intermediate Equity
Portfolio, and Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None
Frank Jennings,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Thomas W. Keffer,
Senior Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President
An officer and/or portfolio manager for certain
OppenheimerFunds; formerly, Managing Director
and Senior Portfolio Manager at Prudential
Global Advisors (1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the senior
bond portfolio manager for Panorama Series
Fund Inc., other mutual funds and pension
accounts managed by G.R. Phelps; also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September
1995); President and director (since June
1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and
SFSI (September 1995); President (since
September 1995) and a director (since
October 1990) of OAC; President (since
September 1995) and a director (since
November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company
subsidiary of OFI; a director of ORAMI
(since July 1996) ; President and a director
(since October 1997) of OFIL, an offshore
fund manager subsidiary of OFI and
Oppenheimer Millennium Funds plc (since
October 1997); President and a director of
other Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food
company); formerly, an Executive Vice
President of OFI.
Wesley Mayer,
Vice President Formerly, Vice President (January, 1995 -
June, 1996) of Manufacturers Life Insurance
Company.
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June 1995- October,
1997) of Merrill Lynch Pierce Fenner & Smith.
Beth Michnowski, Formerly, Senior Marketing Manager (May,
1996 -
Assistant Vice President June, 1997) and Director of Product
Marketing (August, 1992 - May, 1996) with
Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager of
certain Oppenheimer funds (since April
1998); a Certified Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services, the
management subsidiary of The Guardian Life
Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase Investment
Services Corp.
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.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Phillips
Assistant Vice President None.
Caitlin Pincus, Formerly, Manager (June, 1995 - December,
1997)
Vice President of McKinsey & Co.
Jane Putnam,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice President (April,
1995 - January, 1998) of Van Kampen American
Capital.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President; President,
Rochester Division 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.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Scott Scharer
Assistant Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
None.President
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Stuart J. Speckman
Vice President Formerly, Vice President and Wholesaler for
Prudential Securities (December, 1990 -
July, 1997).
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee
of the New York-based Oppenheimer Funds;
formerly, Chairman of the Manager and the
Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans None.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView.
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.
Susan Switzer,
Assistant Vice President
James Tobin,
Vice President None.
Susan Torrisi,
Assistant Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed
income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView.
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; Point of Contact: Finance
Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May
1985), SFSI (since November 1989), OFIL (since
1998), Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer
funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation
Fund Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund Oppenheimer Global Fund Oppenheimer Global
Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Growth Fund Oppenheimer International Growth Fund Oppenheimer
International Small Company Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Municipal
Trust Oppenheimer Multiple Strategies Fund Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P. Centennial California Tax Exempt Trust
Centennial Government Trust Centennial Money Market Trust Centennial New
York Tax Exempt Trust Centennial Tax Exempt Trust Oppenheimer Cash
Reserves Oppenheimer Champion Income Fund Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund Oppenheimer Integrity Funds Oppenheimer
International Bond Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc. Oppenheimer Municipal Fund Oppenheimer
Real Asset Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return
Fund, Inc. Oppenheimer Variable Account Funds Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management, Inc.
is 6803
Englewood, Colorado 80112.
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 the 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:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
110 W. Grant Street, #25A
Minneapolis, MN 55403
Rhonda Dixon-Gunner(1) Assistant Vice PresidentNone
therew John Donohue(2) Executive Vice Secretary of
President & Director Oppenheimer funds.
And General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
412 Commons Way
Doylestown, PA 18901
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656
C. Webb Heidinger Vice President None
28 Cable Road
Rye, NH 03870
Byron Ingram(1) Assistant Vice PresidentNone
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
10499 Lake Vista Circle
Boca Raton, FL 33498
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
4628 Colfax Avenue So.
Minneapolis, MN 55408
John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice PresidentNone
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
LuAnn Mascia(2) Assistant Vice PresidentNone
Theresa-Marie Maynier Vice President None
4411 Spicewood Springs, #811
Austin, TX 78759
Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212
John McDonough Vice President None
6010 Ocean Front Avenue
Virginia Beach, VA 23451
Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Tanya Mrva(2) Assistant Vice PresidentNone
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
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
Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
MI 48230ointe Park,
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
28214 Rey de Copas Lane
Malibu, CA 90265
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
Timothy Stegman Vice President None
749 Jackson Street
Denver, CO 80206
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
Blvd. #123gon
Falls Church, VA 22042
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Mark Stephen Vandehey(1) Vice President None
James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1)6803 South Tuscon Way, Englewood, CO 80112
(2)Two World Trade Center, New York, NY 10048
(3)350 Linden Oaks, Rochester, NY 14623
(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 OppenheimerFunds, Inc. at its
offices at 3410 South Galena Street, Denver, Colorado 80231.
<PAGE>
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 the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 23rd day of October, 1998.
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:
Signatures Title Date
- ---------- ----- ----
/s/ James C. Swain* Chairman of the
- ------------------ Board of Trustees
James C. Swain and Chief Executive
Officer October 23, 1998
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting
George C. Bowen Officer, Treasurer
and Trustee October 23, 1998
/s/ Bridget A. Macaskill* President
- ------------------------ and Trustee October 23, 1998
Bridget A. Macaskill
/s/ Robert G. Avis* Trustee October 23, 1998
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee October 23, 1998
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee October 23, 1998
- -----------------------
Charles Conrad, Jr.
<PAGE>
/s/ Jon S. Fossel* Trustee October 23, 1998
- -----------------
Jon S. Fossel
/s/ Sam Freedman* Trustee October 23, 1998
- ----------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee October 23, 1998
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee October 23, 1998
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee October 23, 1998
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee October 23, 1998
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER HIGH YIELD FUND
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
24(b)(7) Form of Trustee Deferred Compensation Agreement
24(b)(11) Independent Auditors Consent
24(b)(16) Performance Data Computation Schedule
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
24(b)(17)(iv) Financial Data Schedule for Class Y shares
OPPENHEIMER FUNDS
DEFERRED COMPENSATION AGREEMENT
AGREEMENT, made on this __ day of _______________, by and between the
registered management investment companies listed on Schedule A attached hereto
and made a part hereof, each of which has its principal offices at 6803 South
Tucson Way, Englewood, CO 80112 (each a "Fund" and collectively, the "Funds")
and ______________________ (the "Director") residing at
- ---------------------------.
WHEREAS, (i) the Director is currently serving as a Director of the Funds
and is receiving compensation for his or her services as such, or (ii) the Funds
and the Director have entered into an agreement pursuant to which the Director
will serve as a director of the Funds; and
WHEREAS, the Funds and the Director desire to enter into an agreement
whereby the Funds will provide to the Director a vehicle under which the
Director can defer receipt of all or a portion the fees payable by the Funds.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the Funds and the Director hereby agree as follows:
1. DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions. Unless a different meaning is plainly implied by the
context, the following terms as used in this Agreement shall have the
following meanings:
(a) "Beneficiary" shall mean such person or persons designated
pursuant to Section 4.3 hereof to receive benefits after the
death of the Director.
(b) "Board of Directors" shall mean the Board of Directors of the
Funds.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of directors' fees paid by
the Funds to the Director during a Deferral Year prior to
reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or amounts of the
Director's Compensation deferred under the provisions of Section
3 of this Agreement.
(f) "Deferral Account" shall mean the account maintained to reflect
the Director's Compensation Deferrals made pursuant to Section 3
hereof and any other credits or debits thereto.
(g) "Deferral Year" shall mean each calendar year during which the
Director makes, or is entitled to make, Compensation Deferrals
under Section 3, hereof.
(i) "Valuation Date" shall mean the last business day of each
calendar year and any other day upon which a Fund makes a
valuation of the Deferral Account.
1.2 Plurals and Gender. Where appearing in this Agreement the singular
shall include the plural and the masculine shall include the
feminine, and vice versa, unless the context clearly indicates a
different meaning.
1.3 Directors and Trustees. Where appearing in this Agreement, "Director"
shall also refer the "Trustee" and "General Partner" and "Board of
Directors" shall also refer to "Board of Trustees" and "General
Partners".
1.4 Headings. The headings and sub,,headings in this Agreement are
inserted for the convenience of reference only and are to be ignored
in any construction of the provisions hereof.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
2.1 Commencement of Compensation Deferrals. The Director may elect, on a
form provided by, and submitted to, the President or Secretary of the
Funds, to commence Compensation Deferrals under Section 3 hereof for the
period beginning on the later of (i) the date this Agreement is executed
or (ii) the date such form is submitted to the President or Secretary of
the Funds.
2.2 Termination of Deferrals. The Director shall not be eligible to make
Compensation Deferrals with respect to a Fund or Funds after the earliest
of the following dates:
(a) The date on which he ceases to serve as a Director
of that Fund or Funds; or
(b) The effective date of the termination of this Agreement.
3. COMPENSATION DEFERRALS
3.1 Compensation Deferral Elections.
(a) On or prior to the first day of any Deferral Year,
the Director may elect, on the form described in
Section 2.1 hereof, to defer the receipt of all or
a portion of his Compensation for such Deferral
Year. Such writing shall set forth the amount of
such Compensation Deferral (in whole percentage
amounts). Such election shall continue in effect
for all subsequent Deferral Years unless it is
canceled or modified as provided below.
(b) Compensation Deferrals shall be withheld from each payment of
Compensation by the Funds to the Director based upon the
percentage Amount elected by the Director under Section 3.1(a)
hereof.
(c) The Director may cancel or modify the amount of
his Compensation Deferrals on a prospective basis
by submitting to the President or Secretary of the
Fund a revised Compensation Deferral election
form. Such change will be effective as of the
first day of the Deferral Year following the date
such revision is submitted to the President or
Secretary of the Fund.
3.2 Valuation of Deferral Account.
(a) The Funds shall establish a bookkeeping Deferral
Account to which will be credited an amount equal
to the Director's Compensation Deferrals under
this Agreement. Compensation Deferrals shall be
allocated to the Deferral Account on the first
business day following the date such Compensation
Deferrals are withheld from the Director's
Compensation. As of the date of this Agreement,
the Deferral Account also shall be credited with
the amount credited to the Director under each
other outstanding elective deferred compensation
agreement entered into by and between the Fund and
the Director which is superseded by the Agreement
pursuant to Section 6.11 hereof. The Deferral
Account shall be debited to reflect any
distributions from such Account. Such debits
shall be allocated to the Deferral Account as of
the date such distributions are made.
(b) As of each Valuation Date, income, gain and loss equivalents
(determined as if the Deferral Account is invested in the manner
set forth under Section 3.3, below) attributable to the period
following the next preceding Valuation Date shall be credited to
and/or deducted from the Director's Deferral Account.
3.3 Investment of Deferral Account Balance.
(a) (1) The Director may select, from various options made available
by the Funds, the investment media in which all or part of his
Deferral Account shall be deemed to be invested.
(2) The Director shall make an investment designation on a form
provided by the President or Secretary of the Fund which shall
remain effective until another valid direction has been made by
the Director as herein provided. The Director may amend his
investment designation as of the end of each calendar quarter by
giving written direction to the President or Secretary of the
Fund at least [30] days prior to the end of such calendar
quarter. A timely change to a Director's investment designation
shall become effective on the first day of the calendar quarter
following receipt by the President of the Fund.
(3) The investment media deemed to be made available to the
Director, and any limitation on the maximum or minimum
percentages of the Director's Deferral Account that may be
invested any particular medium, shall be the same as from
time,,to,,time communicated to the Director by the President or
Secretary of the Fund.
(b) Except as provided below, the Director's Deferral Account shall
be deemed to be invested in accordance with his investment
designations, provided such designations conform to the
provisions of the Section. If -
(1) the Director does not furnish the President of the Fund with
written investment instructions, (2) the written investment
instructions from the Director are unclear, or
(3) less than all of the Director's Deferral Account is covered
by such written investment instructions,
then the Director's Deferral Account shall be
deemed to be invested in the
_________________________________ Fund made available for deemed
investment hereunder until such time as the Director shall
provide the President of the Fund with complete investment
instructions. Notwithstanding the above, the Board of Directors,
in its sole discretion, may disregard the Director's election
and determine that all Compensation Deferrals shall be deemed to
be invested in the ________________________________ Fund.
The Fund shall provide an annual statement to the Director
showing such information as is appropriate, including the
aggregate amount in the Deferral Account, as of a reasonably
current date.
4. DISTRIBUTIONS FROM DEFERRAL ACCOUNT.
4.1 In General. Distributions from the Director's Deferral Account shall
be paid in cash, in generally equal annual installments over a period
of five (5) years beginning on the earlier to occur of (a) the
Director attaining the age of 72 years; or (b) the date the Director
actually retires or becomes disabled, except that the Board of
Directors, in its sole discretion, may accelerate or extend the
distribution of such Deferral Account. Notwithstanding the foregoing,
in the event of the liquidation, dissolution or winding up of any
Fund or the distribution of all or substantially all of any Fund's
assets and property relating to one or more series of its shares to
the shareholders of such series (for this purpose a sale, conveyance
or transfer of the Fund's assets to a trust, partnership, association
or corporation in exchange for cash, shares or other securities with
the transfer being made subject to, or with the assumption by the
transferee of, the liabilities of the Fund shall not be deemed a
termination of the Fund or such a distribution), all unpaid amounts
in the Deferral Account as of the effective date thereof shall be
paid in a lump sum on such effective date.
4.2 Death Prior to Complete Distribution of Deferral
Account. Upon the death of the
Director prior to the commencement of the distribution of the amounts
credited to his Deferral Account, the balance of such Account shall
be distributed to his Beneficiary in a lump sum as soon as
practicable after the Director's death. In the event of the death of
the Director after the commencement of such distribution, but prior
to the complete distribution of his Deferral Account, the balance of
the amounts credited to his Deferral Account shall be distributed to
his Beneficiary over the remaining period during which such amounts
were distributable to the Director under Section 4.1 hereof.
Notwithstanding the above, the Board of Directors, in its sole
discretion, may accelerate or extend the distribution of the Deferral
Account.
4.3 Designation of Beneficiary. For purposes of Section 4.2 hereof, the
Director's Beneficiary shall be the person or persons so designated
by the Director in a written instrument submitted to the President or
Secretary of the Fund. In the event the Director fails to properly
designate a Beneficiary, his Beneficiary shall be the person or
persons in the first of the following classes of successive
preference Beneficiaries surviving at the death of the Director: the
Director's (1) surviving spouse or (2) estate.
4.4 Payments Due Missing Persons. The Funds shall make a reasonable
effort to locate all persons entitled to benefits under this
Agreement. However, notwithstanding any provisions of this Agreement
to the contrary, if, after a period of five (5) years from the date
such benefit shall be due, any such persons entitled to benefits have
not been located, their rights under this Agreement shall stand
suspended. Before this provision becomes operative, the Fund shall
send a certified letter to all such persons to their last known
address advising them that their benefits under this Agreement shall
be suspended. Any such suspended amounts shall be held by the Fund
for a period of three (3) additional years (or a total of eight (8)
years from the time the benefits first become payable) and
thereafter, if unclaimed, such amounts shall be forfeited.
5. AMENDMENTS AND TERMINATION
5.1 Amendments
(a) The Funds and the Director may, by a written instrument signed
by both such parties, amend this Agreement at any time and in
any manner provided that no such amendment may accelerate the
distribution from the Director's Deferral Account of amounts
previously deferred.
(b) The Funds reserve the right to amend, in whole or in part, and
in any manner, any or all of the provisions of this Agreement by
action of their respective Boards of Directors for the purposes
of complying with any provision of the Code or any other
technical or legal requirements, provided that:
(1) No such amendment shall make it possible for any part of the
Director's Deferral Account to be used for, or diverted to,
purposes other than for the exclusive benefit of the Director or
his Beneficiaries, except to the extent otherwise provided in
this Agreement; and
(2) No such amendment may reduce the amount of the Director's
Deferral Account as of the effective date of such amendment.
5.2 Termination. The Director and the Funds may, by written instrument
signed by all such parties, terminate this Agreement at any time. The
rights of the Director to his Deferral Account shall become payable
as of the Valuation Date next following the effective date of the
termination of this Agreement.
6. MISCELLANEOUS
6.1 Rights of Creditors.
(a) This Agreement is unfunded and is not creating a
Trust. Neither the Director not any other persons
shall have any interest in any specific asset or
assets of any Fund by reason of any Deferral
Account hereunder, nor any rights to receive
distribution of his Deferral Account except, and
as to the extent, expressly provided hereunder.
The Funds shall not be required to purchase, hold
or dispose of any investments pursuant to this
Agreement; however, if in order to cover its
obligation hereunder a Fund elects to purchase any
investments the same shall continue for all
purposes to be a part of the general assets and
property that Fund, subject to the claims of its
general creditors and no person other than that
Fund shall be virtue of the provisions of this
Agreement have any interest in such assets other
than an interest as a general creditor.
(b) The rights of the Director and the Beneficiaries to the amounts
held in the
Deferral Account are unsecured and shall be subject to the
claims of creditors of the Funds. With respect to the payment of
amounts held under the Deferral Account, the Director and his
Beneficiaries have the status of unsecured creditors of the
Funds. This Agreement is executed on behalf of the Funds by an
officer of the Fund as such and not individually. Any obligation
of the Fund hereunder shall be an unsecured obligation of the
Fund and not of any other person.
6.2 Agents. The Funds may employ agents and provide for such clerical,
legal, actuarial, accounting, advisory or other services as they deem
necessary to perform their duties under this Agreement. The Funds
shall bear the cost of such services and all other expenses incurred
in connection with the administration of this Agreement.
6.3 Liability and Indemnification. Except for its own gross negligence,
willful misconduct or willful breach of the terms of this Agreement,
the Funds shall be indemnified and held harmless by the Director
against liability or losses occurring be reason of any act or
omission of the Funds or any other person.
6.4 Incapacity. If the Funds shall receive evidence satisfactory to them
that the Director or any Beneficiary entitled to receive any benefit
under the Agreement is, at the time when such benefit becomes
payable, a minor, or is physically or mentally incompetent to receive
such benefit and to give a valid release therefor, and that another
person or an institution is then maintaining or has custody of the
Director or Beneficiary and that no guardian, committee or other
representative of the estate of the Director or Beneficiary shall
have been duly appointed, the Funds may make payment of such benefit
otherwise payable to the Director or Beneficiary to such other person
or institution, including a custodian under a Uniform Gifts to Minors
Act, or corresponding legislation (who shall be an adult, a guardian
of the minor or a trust company), and the release of such other
person or institution shall be a valid and complete discharge for the
payment of such benefit.
6.5 Cooperation of Parties. All parties to this Agreement and any person
claiming any interest hereunder agree to perform any and all acts and
execute any and all documents and papers which are necessary or
desirable for carrying out this Agreement or any of its provisions.
6.6 Governing Law. This Agreement is made and entered into in the State
of New York and all matters concerning its validity, construction and
administration shall be governed by the laws of the State of New
York.
6.7 No guarantee of Directorship. Nothing contained in this Agreement
shall be construed as a contract or guarantee of the right of the
Director to be, or remain as, a director of any Fund or to receive
any, or any particular rate of, Compensation from any Fund.
6.8 Counsel. The Funds may consult with legal counsel with respect to the
meaning or construction of the Agreement, their respective
obligations or duties hereunder or with respect to any action or
proceeding or any question of law, and they shall be fully protected
with respect to any action taken or omitted by it in good faith
pursuant to the advice of legal counsel.
6.9 Spendthrift Provision. The Director's and Beneficiaries' interests in
the Deferral Account may not be anticipated, sold, encumbered,
pledged, mortgaged, charged, transferred, alienated, assigned nor
become subject to execution, garnishment or attachment and any
attempt to do so by any person shall render the Deferral Amount
immediately forfeitable.
6.10 Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or by nationally recognized overnight
delivery service providing for a signed return receipt, addressed to
the Director at the home address set forth in the Funds' records and
to the Funds at the address set forth on the first page of this
Agreement, provided that all notices to the Fund shall be directed to
the attention of the President or Secretary of the Fund or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
6.11 Entire Agreement. This Agreement contains the entire understanding
between the Funds and the Director with respect to the payment of
non,,qualified elective deferred compensation by the Funds to the
Director. Effective as of the date hereof, this Agreement replaces,
and supersedes, all other non,,qualified elective deferred
compensation agreements by and between the Director and the Funds.
6.12 Interpretation of Agreement. Interpretations of, and determinations
related to, this Agreement made by the Funds in good faith, including
any determinations of the amounts of the Deferral Account, shall be
conclusive and binding upon all parties; and the Fund shall not incur
any liability to the Director for any such interpretation or
determination so made or for any other action taken by it in
connection with this Agreement in good faith.
6.13 Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the Funds and their respective
successors and assigns and to the Director and his or her heirs,
executors, administrators and personal representatives.
6.14 Severability. In the event any one or more provisions of this
Agreement are held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of
the other provisions hereof and such other provisions shall remain in
full force and effect unaffected by such invalidity or
unenforceability.
6.15 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
6.16 Disclaimer of Shareholder and Director Liability. The Director
understands and agrees that the obligation of the Funds under this
Agreement are not binding upon any Director, Trustee, General Partner
or Shareholder of the Fund personally, but bind only the Fund and the
Fund's property. If any of the Funds is a Massachusetts business
trust, the Director represents that he or she has notice of the
provisions of such Fund's or Funds' Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
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
Government Securities Portfolio (Panorama Series Fund, Inc.)
Growth Portfolio (Panorama Series Fund, Inc.)
International Equity Portfolio (Panorama Series Fund, Inc.)
LifeSpan Balanced Portfolio (Panorama Series Fund, Inc.)
LifeSpan Capital Appreciation Portfolio (Panorama Series Fund,
Inc.)
LifeSpan Diversified Income Portfolio (Panorama Series Fund, Inc.)
Oppenheimer Bond Fund (Oppenheimer Integrity Funds)
Oppenheimer Bond Fund (Oppenheimer Variable Account Funds)
Oppenheimer Capital Appreciation Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Securities Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Growth Fund (Oppenheimer Variable Account Funds)
Oppenheimer Growth & Income Fund (Oppenheimer Variable Account
Funds)
Oppenheimer High Income Fund (Oppenheimer Variable Account Funds)
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund (Oppenheimer Municipal Fund)
Oppenheimer Intermediate Municipal Fund (Oppenheimer Municipal
Fund)
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund (Oppenheimer
Main Street Funds, Inc.)
Oppenheimer Main Street Income & Growth Fund (Oppenheimer Main
Street Fund, Inc.)
Oppenheimer Money Fund (Oppenheimer Variable Account Funds)
Oppenheimer Multiple Strategies Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Real Asset Fund
Oppenheimer Small Cap Growth Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Bond Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Total Return Portfolio (Panorama Series Fund, Inc.)
By: ______________________________________
- --------------------------------------
Andrew J. Donohue, Secretary Director
- ----------------------------------------------------------------
Witness Witness
--------------------------------
- --------------------------------
(Print Name) (Print Name)
DCOMPDV-All.DOC
<PAGE>
OPPENHEIMER FUNDS
DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
TO: President or Secretary of the management investment
companies listed on Schedule A attached hereto
[Name of Director]
DATE: ___________________________
With respect to the Deferred Compensation Agreement (the "Agreement")
dated as of ____________________ by and between the undersigned and the
management investment companies listed on Schedule A attached hereto I hereby
make the following beneficiary designations:
I. Primary Beneficiary
I hereby appoint the following as my Primary Beneficiary(ies) to receive
at my death the amounts held in my Deferral Account under the Agreement. In the
event I am survived by more than one Primary Beneficiary, such Primary
Beneficiaries shall share equally in such amounts unless I indicate otherwise on
an attachment to this form:
Name Relationship
Address
City State Zip
II. Secondary Beneficiary
In the event I am not survived by any Primary Beneficiary, I hereby
appoint the following as Secondary Beneficiary(ies) to receive death benefits
under the Agreement. In the event I am survived by more than one Secondary
Beneficiary, such Secondary Beneficiaries shall share equally unless I indicate
otherwise on an attachment to this form:
Name Relationship
Address
City State Zip
I understand that I may revoke or amend the above designations at any
time. I further understand that if I am not survived by any Primary or Secondary
Beneficiary, my Beneficiary shall be as set forth under the Agreement.
WITNESS: DIRECTOR:
WITNESS: RECEIVED BY:
Date: _______________
<PAGE>
SCHEDULE A
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
Government Securities Portfolio (Panorama Series Fund, Inc.)
Growth Portfolio (Panorama Series Fund, Inc.)
International Equity Portfolio (Panorama Series Fund, Inc.)
LifeSpan Balanced Portfolio (Panorama Series Fund, Inc.)
LifeSpan Capital Appreciation Portfolio (Panorama Series Fund,
Inc.)
LifeSpan Diversified Income Portfolio (Panorama Series Fund, Inc.)
Oppenheimer Bond Fund (Oppenheimer Integrity Funds)
Oppenheimer Bond Fund (Oppenheimer Variable Account Funds)
Oppenheimer Capital Appreciation Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Securities Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Growth Fund (Oppenheimer Variable Account Funds)
Oppenheimer Growth & Income Fund (Oppenheimer Variable Account
Funds)
Oppenheimer High Income Fund (Oppenheimer Variable Account Funds)
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund (Oppenheimer Municipal Fund)
Oppenheimer Intermediate Municipal Fund (Oppenheimer Municipal
Fund)
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund (Oppenheimer
Main Street Funds, Inc.)
Oppenheimer Main Street Income & Growth Fund (Oppenheimer Main
Street Fund, Inc.)
Oppenheimer Money Fund (Oppenheimer Variable Account Funds)
Oppenheimer Multiple Strategies Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Real Asset Fund
Oppenheimer Small Cap Growth Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Bond Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Total Return Portfolio (Panorama Series Fund, Inc.)
<PAGE>
OPPENHEIMER FUNDS
OPPENHEIMER FUNDS
DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
TO: President or Secretary of the registered management
investment companies listed on Schedule A attached
hereto (collectively, the "Funds")
FROM:
[Name of Director]
DATE: ___________________________
With respect to the Deferred Compensation Agreement (the "Agreement")
dated as of ____________________ by and between the undersigned and the Funds, I
hereby make the following election:
Deferral of Compensation
Starting with ____________________________________ and for each year
thereafter (unless subsequently amended by way of a new election form), I hereby
elect that _____________________ percent (_____ %) of my Compensation from the
Funds (as defined under the Agreement) be reduced and that the Funds establish a
bookkeeping account credited with amounts equal to the amount so reduced (the
"Deferral Account"). The Deferral Account shall be further credited with income
equivalents as provided under the Agreement.
I understand that the amounts held in the Deferral Account shall remain
the general assets of the Funds and that, with respect to the payment of such
amounts, I am merely a general creditor of the Funds. I may not sell, encumber,
pledge, assign or otherwise alienate the amounts held under the Deferral
Account.
I hereby agree that the terms of the Agreement are incorporated herein and
are made a part hereof. Dated as of the day and year first above written.
WITNESS: DIRECTOR:
WITNESS: RECEIVED BY:
Date: _________________
<PAGE>
SCHEDULE A
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
Government Securities Portfolio (Panorama Series Fund, Inc.)
Growth Portfolio (Panorama Series Fund, Inc.)
International Equity Portfolio (Panorama Series Fund, Inc.)
LifeSpan Balanced Portfolio (Panorama Series Fund, Inc.)
LifeSpan Capital Appreciation Portfolio (Panorama Series Fund,
Inc.)
LifeSpan Diversified Income Portfolio (Panorama Series Fund, Inc.)
Oppenheimer Bond Fund (Oppenheimer Integrity Funds)
Oppenheimer Bond Fund (Oppenheimer Variable Account Funds)
Oppenheimer Capital Appreciation Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Securities Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Growth Fund (Oppenheimer Variable Account Funds)
Oppenheimer Growth & Income Fund (Oppenheimer Variable Account
Funds)
Oppenheimer High Income Fund (Oppenheimer Variable Account Funds)
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund (Oppenheimer Municipal Fund)
Oppenheimer Intermediate Municipal Fund (Oppenheimer Municipal
Fund)
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund (Oppenheimer
Main Street Funds, Inc.)
Oppenheimer Main Street Income & Growth Fund (Oppenheimer Main
Street Fund, Inc.)
Oppenheimer Money Fund (Oppenheimer Variable Account Funds)
Oppenheimer Multiple Strategies Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Real Asset Fund
Oppenheimer Small Cap Growth Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Bond Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Total Return Portfolio (Panorama Series Fund, Inc.)
<PAGE>
DEFERRED COMPENSATION AGREEMENT
INVESTMENT DIRECTION FORM
TO: President or Secretary of the management investment
companies listed on Schedule A attached hereto
[Name of Director]
DATE: ___________________________
With respect to the Deferred Compensation Agreement (the "Agreement")
dated as of ____________________ by and between the undersigned and the
management investment companies listed on Schedule A attached hereto I hereby
elect that my Deferral Account under the Agreement be considered to be invested
as follows (in multiples of [25%]):
_______________________________ Fund _______________%
_______________________________ Fund _______________%
_______________________________ Fund _______________%
_______________________________ Fund _______________%
I acknowledge that I may amend this Investment Agreement in the manner,
and at such time, as permitted under the Agreement. Furthermore, I acknowledge
that, pursuant to Section 3.3(b) of the Agreement, the Funds have reserved the
right to disregard the elections made above and to consider my Deferral Account
to be deemed to be invested in the ____________________________ Fund.
WITNESS: DIRECTOR:
WITNESS: RECEIVED BY:
Date: _______________
<PAGE>
SCHEDULE A
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
Government Securities Portfolio (Panorama Series Fund, Inc.)
Growth Portfolio (Panorama Series Fund, Inc.)
International Equity Portfolio (Panorama Series Fund, Inc.)
LifeSpan Balanced Portfolio (Panorama Series Fund, Inc.)
LifeSpan Capital Appreciation Portfolio (Panorama Series Fund,
Inc.)
LifeSpan Diversified Income Portfolio (Panorama Series Fund, Inc.)
Oppenheimer Bond Fund (Oppenheimer Integrity Funds)
Oppenheimer Bond Fund (Oppenheimer Variable Account Funds)
Oppenheimer Capital Appreciation Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Securities Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Growth Fund (Oppenheimer Variable Account Funds)
Oppenheimer Growth & Income Fund (Oppenheimer Variable Account
Funds)
Oppenheimer High Income Fund (Oppenheimer Variable Account Funds)
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund (Oppenheimer Municipal Fund)
Oppenheimer Intermediate Municipal Fund (Oppenheimer Municipal
Fund)
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street California Municipal Fund (Oppenheimer
Main Street Funds, Inc.)
Oppenheimer Main Street Income & Growth Fund (Oppenheimer Main
Street Fund, Inc.)
Oppenheimer Money Fund (Oppenheimer Variable Account Funds)
Oppenheimer Multiple Strategies Fund (Oppenheimer Variable
Account Funds)
Oppenheimer Real Asset Fund
Oppenheimer Small Cap Growth Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Bond Fund (Oppenheimer Variable Account
Funds)
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Total Return Portfolio (Panorama Series Fund, Inc.)
INDEPENDENT AUDITORS' CONSENT
Oppenheimer High Yield Fund:
We consent to the use in this Post-Effective Amendment No. 40 to
Registration Statement No.
2-62076 of our report dated July 22, 1998 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
October 23, 1998
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:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
07/22/87 0.1800000 0.0000000 16.960
08/19/87 0.1800000 0.0000000 17.000
09/17/87 0.1800000 0.0000000 16.800
10/21/87 0.1800000 0.0000000 15.880
11/18/87 0.1800000 0.0000000 15.870
12/22/87 0.1800000 0.0000000 15.600
01/20/88 0.1800000 0.0000000 15.890
02/16/88 0.1800000 0.0000000 15.960
03/16/88 0.1800000 0.0000000 15.710
04/20/88 0.1800000 0.0000000 15.770
05/18/88 0.1600000 0.0000000 15.720
06/15/88 0.1600000 0.0000000 15.830
07/20/88 0.1600000 0.0000000 15.810
08/17/88 0.1600000 0.0000000 15.730
09/21/88 0.1600000 0.0000000 15.780
10/19/88 0.1600000 0.0000000 15.750
11/16/88 0.1600000 0.0000000 15.620
12/21/88 0.1600000 0.0000000 15.530
01/18/89 0.1600000 0.0000000 15.470
02/15/89 0.1600000 0.0000000 15.500
03/15/89 0.1600000 0.0000000 15.430
04/19/89 0.1600000 0.0000000 15.310
05/17/89 0.1600000 0.0000000 15.340
06/21/89 0.1600000 0.0000000 15.350
07/19/89 0.1600000 0.0000000 15.310
08/16/89 0.1600000 0.0000000 15.290
09/20/89 0.1600000 0.0000000 15.090
10/18/89 0.1600000 0.0000000 14.810
11/15/89 0.1600000 0.0000000 14.530
12/20/89 0.1600000 0.0000000 14.360
01/24/90 0.1600000 0.0000000 14.070
02/21/90 0.1600000 0.0000000 13.610
03/21/90 0.1600000 0.0000000 13.560
04/18/90 0.1600000 0.0000000 13.600
05/23/90 0.1600000 0.0000000 13.510
06/20/90 0.1600000 0.0000000 13.550
07/18/90 0.1600000 0.0000000 13.540
08/22/90 0.1600000 0.0000000 13.080
09/19/90 0.1600000 0.0000000 12.810
10/24/90 0.1600000 0.0000000 12.200
11/21/90 0.1600000 0.0000000 12.010
12/19/90 0.1600000 0.0000000 11.900
01/23/91 0.1600000 0.0000000 11.900
02/20/91 0.1600000 0.0000000 12.220
03/20/91 0.1600000 0.0000000 12.800
04/24/91 0.1600000 0.0000000 13.080
05/22/91 0.1600000 0.0000000 12.900
06/26/91 0.1600000 0.0000000 13.020
07/24/91 0.1600000 0.0000000 13.260
08/21/91 0.1600000 0.0000000 13.150
09/18/91 0.1600000 0.0000000 13.250
<PAGE>
Oppenheimer High Yield Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (continued)
10/16/91 0.1600000 0.0000000 13.260
11/20/91 0.1600000 0.0000000 13.310
12/18/91 0.1450000 0.0000000 13.120
01/15/92 0.1450000 0.0000000 13.410
02/19/92 0.1450000 0.0000000 13.700
03/18/92 0.1450000 0.0000000 13.770
04/15/92 0.1450000 0.0000000 13.690
05/20/92 0.1300000 0.0000000 13.730
06/17/92 0.1300000 0.0000000 13.740
07/15/92 0.1300000 0.0000000 13.680
08/19/92 0.1300000 0.0000000 13.790
09/16/92 0.1300000 0.0000000 13.700
10/21/92 0.1300000 0.0000000 13.410
11/18/92 0.1300000 0.0000000 13.370
12/16/92 0.1300000 0.0000000 13.350
01/20/93 0.1300000 0.0000000 13.430
02/17/93 0.1300000 0.0000000 13.610
03/17/93 0.1300000 0.0000000 13.750
04/21/93 0.1300000 0.0000000 13.820
05/19/93 0.1300000 0.0000000 13.840
06/16/93 0.1300000 0.0000000 14.010
07/21/93 0.1300000 0.0000000 14.210
08/18/93 0.1300000 0.0000000 14.130
09/30/93 0.1300000 0.0000000 14.060
10/29/93 0.1130000 0.0000000 14.300
11/30/93 0.1130000 0.0000000 14.330
12/31/93 0.1130000 0.0000000 14.500
01/31/94 0.1130000 0.0000000 14.760
02/28/94 0.1130000 0.0000000 14.590
03/31/94 0.1130000 0.0000000 13.980
04/29/94 0.1130000 0.0000000 13.720
05/31/94 0.1130000 0.0000000 13.770
06/30/94 0.1130000 0.0000000 13.630
07/29/94 0.1130000 0.0000000 13.530
08/31/94 0.1130000 0.0000000 13.400
09/30/94 0.1130000 0.0000000 13.400
10/31/94 0.1130000 0.0000000 13.260
11/30/94 0.1130000 0.0000000 13.030
12/30/94 0.1060000 0.0000000 12.830
01/31/95 0.1060000 0.0000000 12.800
02/28/95 0.1060000 0.0000000 13.000
03/31/95 0.1060000 0.0000000 12.920
04/28/95 0.1060000 0.0000000 13.090
05/31/95 0.1060000 0.0000000 13.270
06/30/95 0.1060000 0.0000000 13.220
07/31/95 0.1060000 0.0000000 13.320
08/31/95 0.1060000 0.0000000 13.230
09/29/95 0.1060000 0.0000000 13.290
10/31/95 0.1060000 0.0000000 13.300
11/30/95 0.1060000 0.0000000 13.320
12/29/95 0.1060000 0.0000000 13.410
01/31/96 0.1060000 0.0000000 13.600
02/29/96 0.1060000 0.0000000 13.680
<PAGE>
Oppenheimer High Yield Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (continued):
03/29/96 0.1060000 0.0000000 13.570
04/30/96 0.1060000 0.0000000 13.570
05/31/96 0.1060000 0.0000000 13.600
06/28/96 0.1010000 0.0000000 13.510
07/31/96 0.1010000 0.0000000 13.480
08/30/96 0.1010000 0.0000000 13.590
09/30/96 0.1010000 0.0000000 13.800
10/31/96 0.1010000 0.0000000 13.820
11/29/96 0.1010000 0.0000000 13.970
12/31/96 0.1229185 0.0000000 13.980
01/31/97 0.1010000 0.0000000 13.980
02/28/97 0.1010000 0.0000000 14.070
03/31/97 0.1010000 0.0000000 13.670
04/30/97 0.1010000 0.0000000 13.660
05/30/97 0.1010000 0.0000000 13.890
06/30/97 0.1010000 0.0000000 13.980
07/31/97 0.1010000 0.0000000 14.220
08/29/97 0.1010000 0.0000000 14.150
09/30/97 0.1010000 0.0000000 14.390
10/31/97 0.1010000 0.0000000 14.240
11/28/97 0.1010000 0.0000000 14.250
12/31/97 0.1010000 0.0000000 14.360
01/30/98 0.1010000 0.0000000 14.550
02/27/98 0.1010000 0.0000000 14.570
03/31/98 0.1010000 0.0000000 14.680
04/30/98 0.1010000 0.0000000 14.590
05/29/98 0.1010000 0.0000000 14.490
06/30/98 0.1038000 0.0000000 14.440
Class B Shares
05/19/93 0.1250000 0.0000000 13.820
06/16/93 0.1220000 0.0000000 13.990
07/21/93 0.1200000 0.0000000 14.170
08/18/93 0.1210000 0.0000000 14.090
09/30/93 0.1170000 0.0000000 14.020
10/29/93 0.1029000 0.0000000 14.260
11/30/93 0.1034000 0.0000000 14.290
12/31/93 0.1055000 0.0000000 14.460
01/31/94 0.1047088 0.0000000 14.710
02/28/94 0.1045156 0.0000000 14.540
03/31/94 0.1023219 0.0000000 13.920
04/29/94 0.1052254 0.0000000 13.660
05/31/94 0.1045249 0.0000000 13.710
06/30/94 0.1042104 0.0000000 13.570
07/29/94 0.1038277 0.0000000 13.470
08/31/94 0.1037366 0.0000000 13.340
09/30/94 0.1040179 0.0000000 13.340
10/31/94 0.1049057 0.0000000 13.200
11/30/94 0.1046802 0.0000000 12.970
12/30/94 0.0974841 0.0000000 12.770
01/31/95 0.0976358 0.0000000 12.740
02/28/95 0.0981620 0.0000000 12.940
<PAGE>
Oppenheimer High Yield Fund
Page 4
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (continued)
03/31/95 0.0969173 0.0000000 12.860
04/28/95 0.0982434 0.0000000 13.030
05/31/95 0.0973587 0.0000000 13.200
06/30/95 0.0971290 0.0000000 13.150
07/31/95 0.0979365 0.0000000 13.250
08/31/95 0.0974590 0.0000000 13.160
09/29/95 0.0972084 0.0000000 13.210
10/31/95 0.0975811 0.0000000 13.220
11/30/95 0.0977194 0.0000000 13.250
12/29/95 0.0974431 0.0000000 13.330
01/31/96 0.0973255 0.0000000 13.520
02/29/96 0.0978804 0.0000000 13.600
03/29/96 0.0973830 0.0000000 13.490
04/30/96 0.0976144 0.0000000 13.480
05/31/96 0.0965921 0.0000000 13.510
06/28/96 0.0932411 0.0000000 13.430
07/31/96 0.0923017 0.0000000 13.400
08/30/96 0.0916899 0.0000000 13.500
09/30/96 0.0930708 0.0000000 13.710
10/31/96 0.0922575 0.0000000 13.730
11/29/96 0.0920393 0.0000000 13.880
12/31/96 0.1141807 0.0000000 13.890
01/31/97 0.0914272 0.0000000 13.880
02/28/97 0.0928306 0.0000000 13.970
03/31/97 0.0927941 0.0000000 13.580
04/30/97 0.0925591 0.0000000 13.560
05/30/97 0.0917924 0.0000000 13.790
06/30/97 0.0925784 0.0000000 13.880
07/31/97 0.0920641 0.0000000 14.120
08/29/97 0.0920423 0.0000000 14.050
09/30/97 0.0925791 0.0000000 14.280
10/31/97 0.0909710 0.0000000 14.130
11/28/97 0.0924101 0.0000000 14.140
12/31/97 0.0914638 0.0000000 14.250
01/30/98 0.0910702 0.0000000 14.440
02/27/98 0.0922225 0.0000000 14.460
03/31/98 0.0916051 0.0000000 14.560
04/30/98 0.0915681 0.0000000 14.470
05/29/98 0.0913510 0.0000000 14.370
06/30/98 0.0945087 0.0000000 14.330
Class C Shares
11/30/95 0.0961821 0.0000000 13.320
12/29/95 0.0927145 0.0000000 13.400
01/31/96 0.0951545 0.0000000 13.600
02/29/96 0.0966887 0.0000000 13.670
03/29/96 0.0965869 0.0000000 13.560
04/30/96 0.0959581 0.0000000 13.560
05/31/96 0.0951296 0.0000000 13.590
06/28/96 0.0928403 0.0000000 13.500
07/31/96 0.0916501 0.0000000 13.470
08/30/96 0.0911393 0.0000000 13.580
<PAGE>
Oppenheimer High Yield Fund
Page 5
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class C Shares (continued)
09/30/96 0.0926055 0.0000000 13.780
10/31/96 0.0916208 0.0000000 13.810
11/29/96 0.0916656 0.0000000 13.960
12/31/96 0.1138798 0.0000000 13.970
01/31/97 0.0906760 0.0000000 13.960
02/28/97 0.0924469 0.0000000 14.050
03/31/97 0.0922878 0.0000000 13.660
04/30/97 0.0921034 0.0000000 13.640
05/30/97 0.0916255 0.0000000 13.870
06/30/97 0.0923908 0.0000000 13.970
07/31/97 0.0919878 0.0000000 14.210
08/29/97 0.0919757 0.0000000 14.130
09/30/97 0.0924986 0.0000000 14.360
10/31/97 0.0908861 0.0000000 14.220
11/28/97 0.0923353 0.0000000 14.230
12/31/97 0.0913424 0.0000000 14.340
01/30/98 0.0909534 0.0000000 14.530
02/27/98 0.0921135 0.0000000 14.550
03/31/98 0.0915151 0.0000000 14.660
04/30/98 0.0914592 0.0000000 14.560
05/29/98 0.0912430 0.0000000 14.460
06/30/98 0.0944084 0.0000000 14.420
Class Y Shares
10/31/97 0.0597043 0.0000000 14.220
11/28/97 0.0921471 0.0000000 14.240
12/31/97 0.0990876 0.0000000 14.340
01/30/98 0.1030280 0.0000000 14.530
02/27/98 0.1037888 0.0000000 14.550
03/31/98 0.1048305 0.0000000 14.650
04/30/98 0.1048216 0.0000000 14.560
05/29/98 0.1048982 0.0000000 14.460
06/30/98 0.1075430 0.0000000 14.420
Oppenheimer High Yield Fund
Page 6
1. Average Annual Total Returns for the Periods Ended 06/30/98:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total
return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
{($1,070.06/$1,000)^ 1} - 1 = 7.0{($1,123.43/$1,000)^ 1} - 1 = 12.34%
Five Year Five Year
{($1,546.00/$1,000)^.2} - 1 = 9.1{($1,623.17/$1,000)^.2} - 1 = 10.17%
Ten Year Ten Year
{($2,632.22/$1,000)^.1} - 1 = 10.1{($2,763.54/$1,000)^.1} - 1 = 10.70%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
1.00% for the inception year:
One Year One Year
{($1,065.01/$1,000)^ 1 } - 1 = 6.{($1,115.00/$1,000)^ 1 } - 1 = 11.50%
Five Year Five Year
{($1,538.38/$1,000)^.2} - 1 = 9.{($1,558.39/$1,000)^.2} - 1 = 9.28%
Inception Year Inception Year
{($1,603.70/$1,000)^.1939} - 1 = 9.{($1,613.70/$1,000)^.1939} - 1 = 9.72%
Oppenheimer High Yield Fund
Page 7
1. Average Annual Total Returns for the Periods Ended 06/30/98:
(Continued)
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year.
One Year One Year
{($1,104.17/$1,000)^ 1 } - 1 = 10{($1,114.16/$1,000)^ 1 } - 1 = 11.42%
Inception Year Inception Year
{($1,342.39/$1,000)^.3754} - 1 = 11{($1,342.39/$1,000)^.3754} - 1 = 11.69%
Oppenheimer High Yield Fund
Page 8
2. Cumulative Total Returns for he Periods Ended 06/30/98:
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 One Year
$1,070.06 - $1,000 /$1,000 = 7.01$1,123.43 - $1,000 /$1,000 = 12.34%
Five Year Five Year
$1,546.00 - $1,000 /$1,000 = 54.60$1,623.17 - $1,000 /$1,000 = 62.32%
Ten Year Ten Year
$2,632.22 - $1,000 /$1,000 = 163.22$2,763.54 - $1,000 /$1,000 = 176.35%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
1.00% for the inception year:
One Year One Year
$1,065.01 - $1,000 /$1,000 = 6.50%$1,115.00 - $1,000 /$1,000 = 11.50%
Five Year Five Year
$1,538.38 - $1,000 /$1,000 = 53.84%$1,558.39 - $1,000 /$1,000 = 55.84%
Inception Year Inception Year
$1,603.70 - $1,000 /$1,000 = 60.37%$1,613.70 - $1,000 /$1,000 = 61.37%
Oppenheimer High Yield Fund
Page 9
2. Cumulative Total Returns for he Periods Ended 06/30/98: (Continued)
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year.
One Year One Year
$1,104.17 - $1,000 /$1,000 = 10.42%$1,114.16 - $1,000 /$1,000 = 11.42%
Inception Year Inception Year
$1,342.39 - $1,000 /$1,000 = 34.24%$1,342.39 - $1,000 /$1,000 = 34.24%
Class Y Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 0.00%:
Inception Year Inception Year
$1,058.14 - $1,000 /$1,000 = 5.81%$1,058.14 - $1,000 /$1,000 = 5.81%
Oppenheimer High Yield Fund
Page 10
3. Standardized Yield for the 30-Day Period Ended 06/30/98:
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%:
$9,657,867.59 - $935,673.68 6
2{(--------------------------- + 1) - 1} = 8.10%
86,621,617 x $15.16
Class B Shares
Example at NAV:
$4,018,920.07 - $728,085.09 6
2{(--------------------------- + 1) - 1} = 7.71%
36,335,538 x $14.33
Class C Shares
Example at NAV:
$ 489,352.28 - $ 88,749.68 6
2{(--------------------------- + 1) - 1} = 7.71%
4,394,511 x $14.42
Class Y Shares
Example at NAV:
$ 79,944.63 - $ 6,362.88 6
2{(--------------------------- + 1) - 1} = 8.68%
718,069 x $14.42
Oppenheimer High Yield Fund
Page 11
4. DIVIDEND YIELDS FOR THE PERIOD ENDED 06/30/98:
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 last dividend earned during the period. b = The Fund's maximum
offering price (including sales charge)
per share on dividend payable date.
c = The Fund's net asset value (excluding sales charge) per share on
dividend payable date.
Examples :
Class A Shares
Dividend Yield ($0.1038000 * 12 ) / $14.44 = 8.63%
at Maximum Offer:
Dividend Yield ($0.1038000 * 12 ) / $15.16 = 8.22%
at Net Asset Value:
Class B Shares
Dividend Yield ($0.0945087 * 12 ) / $14.33 = 7.91%
at Net Asset Value:
Class C Shares
Dividend Yield ($0.0944084 * 12 ) / $14.42 = 7.86%
at Net Asset Value:
Class Y Shares
Dividend Yield ($0.1075430 * 12 ) / $14.42 = 8.95%
at Net Asset Value:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 276195
<NAME> Oppenheimer High Yield Fund - Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
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<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 276195
<NAME> Oppenheimer High Yield Fund - Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
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<DISTRIBUTIONS-OF-INCOME> 35,809,231
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 14,865,015
<NUMBER-OF-SHARES-REDEEMED> 7,867,469
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 276195
<NAME> Oppenheimer High Yield Fund - Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,841,393,205
<INVESTMENTS-AT-VALUE> 1,884,340,956
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<OTHER-ITEMS-ASSETS> 3,437,536
<TOTAL-ASSETS> 1,928,536,647
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<OTHER-ITEMS-LIABILITIES> 8,554,332
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,954,180,354
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<GROSS-EXPENSE> 21,445,599
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<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 276195
<NAME> Oppenheimer High Yield Fund - Class Y
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-15-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,841,393,205
<INVESTMENTS-AT-VALUE> 1,884,340,956
<RECEIVABLES> 40,721,220
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<OTHER-ITEMS-ASSETS> 3,437,536
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<OTHER-ITEMS-LIABILITIES> 8,554,332
<TOTAL-LIABILITIES> 67,160,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,954,180,354
<SHARES-COMMON-STOCK> 780,688
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,352,456
<ACCUMULATED-NET-GAINS> (132,960,175)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,508,152
<NET-ASSETS> 11,253,943
<DIVIDEND-INCOME> 7,338,652
<INTEREST-INCOME> 160,779,640
<OTHER-INCOME> 0
<EXPENSES-NET> 21,445,599
<NET-INVESTMENT-INCOME> 146,672,693
<REALIZED-GAINS-CURRENT> 44,126,205
<APPREC-INCREASE-CURRENT> 4,774,381
<NET-CHANGE-FROM-OPS> 195,573,279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 345,783
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 846,505
<NUMBER-OF-SHARES-REDEEMED> 89,653
<SHARES-REINVESTED> 23,836
<NET-CHANGE-IN-ASSETS> 267,180,327
<ACCUMULATED-NII-PRIOR> 276,928
<ACCUMULATED-GAINS-PRIOR> (183,149,812)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,551,830
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,445,599
<AVERAGE-NET-ASSETS> 6,000,000
<PER-SHARE-NAV-BEGIN> 14.48
<PER-SHARE-NII> 0.90
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> 0.88
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.42
<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
